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Morning Market Review for Jan. 24, 2020

Slow Chinese demand drags grains lower. (Comments are updated by 7:30 a.m. Central Time.)

Commodity prices drop ahead of the weekly Export Sales report

  • Corn down 2-4 cents
  • Soybeans down 4-5 cents, soyoil down $0.22, soybean meal down $0.8
  • Wheat down 2-6 cents

*Prices as of 6:45am CST.

Corn: March futures traded $0.0325 lower overnight to $3.905 after matching three-month highs yesterday. May futures lost $0.0275 to $3.9575. Lower barge freight added strength to the cash markets on Thursday.

USDA releases their weekly export data today. Monday’s grain inspection for export report showed a decrease of over 5.4 million bushels in corn going through export facilities from the previous week. At over 13.6 million bushels, inspections were 30.8 million bushels lower than the same week last year. Export demand will likely not significantly deviate from this trend for the week ending January 16, though an uptick in South Korean demand this week may support stronger numbers on next week’s weekly export summary. Trade estimates project a range of 28.6 million – 47.2 million bushels.

A White House official confirmed President Trump will complete the United States-Mexico-Canada Agreement (USMCA) trade deal in a signing ceremony to take place at the White House next Wednesday. The Canadian government has yet to ratify the trade agreement. USMCA will provide much needed updates to NAFTA.

Ethanol stocks crept up to 1.01 billion gallons for the week ending January 17, 2020. This was a 43.1 million-gallon increase from last week despite an 81.1 million-gallon per day decrease in output.

Demand for U.S. corn found strength yesterday as USDA announced a 5.7 million-bushel corn purchase from Guatemala for delivery in the 2019/20 marketing year. A 5.6 million-bushel purchase was made by an unknown buyer in the same marketing year.

Soybeans: Lack of Chinese demand drug March soybean futures prices $0.0425 lower to $9.0525. March soybean oil futures lost $0.22 to $32.36 and March soybean meal futures continued to trade below $300/ton at $298.10.

Cash prices for river terminals in the interior of the Corn Belt strengthened a cent, though basis at river locations continues to range $0.10-$0.25 below the nearby March futures price.

Despite lack of clarity with the trade deal with China, soybeans inspected at export increased in volume by 1.8 million bushels from last week and to 44.1 million bushels. Today’s report could add support to soybean futures prices should the trend in export inspections increase USDA’s weekly total. Trade estimates predict USDA will release an export number in the range of 25.7 million bushels and 47.8 million bushels.

As March futures prices continued to decline, the Relative Strength Index (RSI) dove further into oversold territory this morning to 37.1%, as shown in the bottom chart in the graphic below. March soybean futures prices, as seen in the top chart in black, have dropped about $0.38 in the last three weeks.

1.24.20 Soybeans - Graphic 1.PNG

Wheat:

Wheat contracts price changes

A higher dollar did no favors to wheat overnight as optimism for Chinese demand waned overnight. As the ICE Dollar Index added 0.16%, Chicago wheat futures prices lost almost six cent while Kansas City wheat shed four cents despite tightening global wheat stocks.

Cash sales of soft wheat in the Eastern Corn Belt picked up yesterday as growers took advantage of recent price rallies in March Chicago SRW futures. The cash market was quieter in Kansas City even after March HRW futures backed off an 11-month high on Wednesday. Protein premiums on hard red winter cash wheat delivered to or through Kansas City by rail were unchanged again yesterday, as shown below:

wheat protein content, basis range, change

Based on Tuesday’s inspections report, wheat exports may post a downturn this week, but strong international demand should keep exports for the 2019/20 marketing year on pace to surpass 2018/19 totals. Trade estimates project the USDA figure to range between 11.0 million bushels to 20.4 million bushels today.

The Relative Strength Index (RSI) for March Chicago SRW wheat futures looks to be backing off from overbought levels as futures prices, represented by the black line below, declined this morning. The RSI, as shown in the second graph in the graphic below, landed at 62.727% prior to the opening bell.

1.24.20 Chicago SRW - Graphic 2.PNG

Weather: Steady snowfall in the Upper Mississippi Valley will continue today but should clear out of most of the Lake States by tomorrow afternoon. Rainfall in the Ohio River Valley will continue today as well, totaling over an inch in much of Ohio towards the East Coast according to NOAA's 24-hour precipitation total as the weather system moves into New England by Sunday afternoon.

Financials:  Dow futures followed European stocks higher this morning as German manufacturing posted production increases in December 2019. The Dow rose 75 points or 0.26% prior to the opening bell.

The EPA announced an updated “waters of the U.S. rule” that will provide more clarity to water management for farmers and regulators. The new rule, renamed the “Navigable Waters Protection Rule,” gives more oversight to state and local authorities to manage water resources. Agriculture Secretary Sonny Perdue hailed the proposed rule, saying, “The days are gone when the federal government can claim a small farm pond on private land as navigable waters.” For more on the Navigable Waters Protection Rule, check out the analysis of the policy by Jacqui Fatka here.

Farmers considering booking prices on ultra-low sulfur diesel (ULSD) would be wise to act quickly and lock in prices. The Relative Strength Index (RSI) for February ULSD futures has trended well below the 30% oversold mark this week. Diesel prices have steadily declined since the beginning of 2020, falling $0.27/gallon since the start of the year. As prices fall to a five-month low, now would be a good time to evaluate purchasing diesel.

1.24.20 Diesel - Graphic 3.PNG

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