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Morning Market Review for Jan. 17, 2020

Grains seek to regain losses. (Comments are updated by 7:30 a.m. Central Time.)

Commodity markets begin recovery from Wednesday’s Phase 1 signing ceremon

  • Corn up 3-4 cents
  • Soybeans up and down less than a cent, soyoil down $0.14, soybean meal up $0.7
  • Wheat up 1-3 cents

*Prices as of 5:55am CST.

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Corn: Corn futures prices rebounded overnight as traders adjusted their positions following the selloff of the past couple days. Nearby March and May futures prices each rose $0.35 cents as the March contract was on pace to open at $3.79 and May contract hit $3.86.

Cash prices were largely unchanged across the Corn Belt yesterday. Basis dropped $0.02 at a central Illinois processor to end the day at $0.16 ahead of nearby futures prices. There were a few corn sales booked early in the day, ultimately slowing to a halt as the futures market dropped. Sales will likely continue to be few and far between today.

The CFTC will release their weekly Commitment of Traders report this afternoon for the week ending January 14. Money managers will likely remain net sellers of corn, though they may trim their short positions as a reflection of higher prices earlier in the week.

Export demand from South Korea increased last night after the Korean Feed Association (KFA) issued a tender for 2.6 million bushels of feed corn to be purchased. Including unloading costs, the potential sale was priced at $5.49/bushel. The longer the tender remains open, the more likely the U.S. will take the sale, which is open to optional sources worldwide.

A simple moving average chart for March corn futures, as shown by the blue line in the graphic below, reflects a year-to-date downturn in prices, as shown by the black line, despite a slight rally earlier this week.

1.17.20 Graphic 1 - Corn MA.PNG

Soybeans: Futures prices traded fractionally sideways overnight as sentiments over the Phase 1 trade deal began to ease. March soybean futures grabbed a quarter cent gain to $9.2425 at last glance, though the contract had traded about a quarter cent lower earlier in the morning.

Cash prices for soybeans were largely unchanged across the Midwest yesterday. Sales were relatively non-existent following the previous two days’ price drop in the futures market.

Speculators will likely remain net buyers of soybeans in today’s Commitment of Traders report due in large part to the March futures rally leading up to the signing of the Phase 1 trade agreement.

International demand warmed slightly yesterday, as the Philippines purchased a 180,000-ton shipment of soybean meal for shipment in the 2019/20 marketing year. An increase in buying following sub $300-ton soybean meal brought March futures prices for soybean meal $0.7 higher to $301.3/ton.

Palm oil prices fell as news of reduced imports by India and an increased Malaysian export tax lowered futures prices overnight. India is the world’s largest consumer of edible oils and Malaysia is the world’s second-largest producer of palm oil. The competing soybean oil March futures contract continued its one-week downward price spiral, falling $0.14 to $32.89 on the news.

Wheat:

011720Wheat.png

Wheat sought to reverse yesterday’s selloff overnight as strong international demand and short position adjusting raised futures $0.01-$0.03 higher. Any further upward movement may likely be capped by a strengthening dollar. The ICE Dollar Index was up 0.15% in premarket trading, limiting the attractiveness of wheat on the global market.

Cash wheat prices held steady yesterday with increased export demand offsetting losses in the futures markets. Farmers were reluctant to sell their wheat on the spot market after yesterday morning’s futures price decreases. Protein premiums on cash wheat delivered to or through Kansas City by rail weakened, as shown below:

011720ProteinContent.png

Look for money managers to continue their net long positions on wheat in the Commitment of Traders report. Report data as of January 14 should reflect the upswing in wheat prices over the first couple weeks of the year. Next week’s report may be slightly more bullish across all grains as price adjustments due to trade sentiments factor into prices.

French wheat acreage was reported a record low overnight, declining 10% from 2019 acreage. Heavy rain delayed planting, ultimately pushing soft wheat acreage to a 19-year low to 11 million acres. France is the European Union’s largest grain producer.

Taiwan issued a tender to purchase 3.6 million bushels of U.S. wheat yesterday. Japan also issued a regular tender to purchase 4.3 million bushels of wheat from the U.S., Canada, and Australia.

The Relative Strength Index (RSI) for March futures on soft red winter wheat out of Chicago backed off overbought levels after price declines over the past two days, but still remains in overbought territory at 63.336%, as shown in by the green line in the graph below. The black line represents March SRW wheat futures prices.

1.17.20 Graphic 2 - SRW.PNG

A simple moving average of March Kansas City wheat futures prices, as shown by the blue line below, suggests that recent price declines may not fully reverse upward price movement for March hard red winter wheat futures movement, as shown by the black line in the graph below.

1.17.20 Graphic 3 - HRW.PNG

Weather:  Snow and ice will move northeast through the Central Plains this morning and into the Upper Mississippi Valley by this evening, dropping over five inches of snow in some areas in addition to ice. A winter storm system developing in the Northern Rockies today will collide with the aforementioned storm in the Northern Plains and Northern Lake States tomorrow morning. Snowstorms should clear out of the Midwest by Sunday afternoon per NOAA's short range forecast.

Financials:  The Dow continued its ascent into record territory through the night, aided in part by strong industrial production growth from China. Output grew 6.9% through December in China, the largest gain in nine months as Dow futures added 82 points or 0.28% to a record 29,321 points on the news. Energy futures added strength on the sentiment as well, with nearby light crude futures prices rising $0.26 to $58.78 in afterhours trading.

Holiday retail sales increased 0.3% in December according to data released by the U.S. Department of Commerce yesterday, alleviating concerns about an economic slowdown.

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