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Morning Market Review for Jan. 27, 2020

Coronavirus fears send grain prices tumbling. (Comments are updated by 7:30 a.m. Central Time.)

Economic slowdown following the global spread of the virus weighs on commodities

Corn down 6-8 cents

Soybeans down 11-12 cents, soyoil down $0.95, soybean meal down $2.1

Wheat down 7-13 cents

*Prices as of 6:50am CST.

Corn: March corn futures tumbled $0.0725 to $3.80 Monday morning, while May futures fell $0.0675 to $3.86 as fears of the global spread of the coronavirus weighed heavily on markets. Cash corn prices were unchanged on Friday. Low futures prices encouraged few, if any, cash sales to end the week.

Export demand closed last week on a high note as USDA announced a 5.6 million-bushel sale from private exporters to an unknown destination. The purchase is scheduled for delivery in the 2019/20 marketing year.

The CFTC released their weekly Commitment of Traders report on Friday for the week ending January 21. Managed money trimmed their short positions by 6,652 contracts following a nearly $0.14 rebound for March corn futures after the Phase 1 trade deal signing ceremony. Speculators ended the week as net sellers of corn to the tune of 67,804 positions.

USDA releases their weekly grain inspections for export report this morning. Last week was a good week for international corn demand as corn export sales to South Korea, Guatemala, and unknown locations were recorded. A boost from last week’s corn activity could breathe life into futures prices this morning.

Soybeans: Coronavirus concerns pushed March soybean futures $0.1225 lower Monday morning to $8.8975. Falling palm oil futures prices continue to drag soybean oil futures prices lower as India reduces their imports of Malaysian palm oil. March soyoil futures were down $0.95 ahead of the opening bell in Chicago to $31.07. Soybean meal futures were down $2.1 to $296.20.

Cash soybean prices were unchanged Friday but ended the week $0.01-$0.05 higher across the Midwest. Sales had slowed by Friday after futures prices fell for a fifth straight session.

Warmer than average weather will be offset by moderate rainfall in Brazil across the next week. The forecast for the week should prove favorable for areas of Brazil where soil moisture has been drying up. Weather will likely not influence soybean prices significantly this week.

Demand uncertainty with China following the signing of the Phase 1 trade deal led managed money to slash 10,896 long positions from soybean futures according to Friday’s Commitment of Traders report to switch back to a net short position by 13,735 contracts for the week ending January 21. Speculators held on to their net long position on soybean oil futures despite slicing off 10,542 long positions for the week as palm oil price declines carried over into soybean oil prices. The funds remained bearish on soybean meal, adding 4,018 short contracts on the week to a 36,696 net short position.

Export demand ahead of this morning’s weekly grain inspections report from USDA will likely remain quiet as few sales of soybean purchases were announced last week. The status of a 30,000-ton soybean meal shipment to Algeria remains unknown following the cancellation of corn and wheat tenders from Algeria late last week. The U.S. or Argentina is expected to supply the soybean meal shipment, provided other offers are not solicited.

Wheat:

Wheat contracts price changes

A higher dollar as a result of increased fears over the international spread of the coronavirus outbreak drug wheat futures prices down prior to the opening bell. As the ICE Dollar Index added 0.06%, Chicago wheat futures prices lost almost 13 cents while Kansas City wheat dropped eight cents as concerns of a significant economic slowdown linger over markets as health officials across China, Australia, France, and the U.S. scramble to contain the disease.

Soft wheat cash prices were unchanged Friday following flat sales due to falling futures prices. Hard red winter wheat cash prices echoed similar sentiments. Rail cars stalled at flour mills in some areas of the Plains tightened rail shipping capacities at elevators late last week. The supply chain bottleneck has potential for a negative short-term impact on cash prices if not alleviated quickly.

Protein premiums on hard red winter cash wheat delivered to or through Kansas City by rail regained strength Friday for the 12.0-12.4% protein levels, as shown below:

wheat protein content, basis range, change

Friday’s CFTC Commitment of Traders report showed money managers increasing interest in Chicago soft red winter wheat contracts. Traders added 12,761 long positions to Chicago wheat futures for the week ending January 21 as speculators increased their net long position to 41,671 positions. Kansas City hard red winter wheat prospects remained bullish as well as speculators trimmed 1,906 short positions from the previous week. Managed money remains net buyers of Kansas City wheat by 10,692 positions. Speculative sentiments on Minneapolis wheat continued to be bearish as managed money remained net sellers by 3,649 contracts.

Russian wheat export prices soared to their highest point in 11 months on Monday morning amid competitive global exports and tightened domestic supplies. The world’s largest wheat exporter saw a $0.14 price increase on wheat exported with 12.5% protein to $6.29/bushel. Russia implemented an export quota on grain shipments earlier this month in an effort to control tightening supplies.

Wheat exports saw little activity in the U.S. last week as a tender from Algeria was cancelled on Friday. A regular tender of wheat to Japan could boost exported wheat numbers for last week though the report will likely show sales at a slower pace than previous weeks.

Weather: Mostly clear weather in the Upper Midwest over the next couple days will be a welcome reprieve from the snow and ice storms of the past two weeks. A snow system developing today in the Central Rockies will push a winter precipitation system across the Central and Southern Plains on Tuesday, dropping between 2-5 inches of snow in the Central Plains and over an inch of rain in some areas of the Southern Plains according to NOAA's 24-hour precipitation total.

Financials:  Fears of the dangerous coronavirus originating in Central China have spread across the world as cases of the disease have been reported in France, Australia, and the U.S. over the weekend. Over 2,700 people have been infected in China as the death toll rose to 80. Beijing extended the Lunar New Year holiday to February 2 in hopes of limiting the spread of the disease. Global news reports show deserted streets and empty train stations as a lockdown in Wuhan is enforced to prevent the disease. Five cases have been reported in the U.S. as of Monday morning, sending Dow futures sliding down 410 points or 1.42% before the markets open. March light crude futures prices dropped $1.38/barrel to $52.81.

U.S. Treasury Secretary Steven Mnuchin was in London over the weekend, negotiating a potential bilateral trade deal with the U.K. The U.S. seeks to eliminate a digital services tax proposed by the U.K. as well as ease restrictions on U.S. agricultural products including GMO crops and hormone-treated meat. In return, the U.S. would not place tariffs on British automobile imports, as President Trump has threatened. The U.S. imported $11 billion in automotive purchases from British companies including Land Rover, Jaguar, and Mini, accounting for the largest portion of British exports in 2018. The U.S. faces an uphill battle in early trade negotiations, though the potential for entry into the U.K. food market would be a lucrative prospect for American farmers.

Happy Year of the Rat! Trading was quiet through the weekend as the Chinese markets will be closed through next Monday for New Year celebrations. The Year of the Rat began Saturday and signifies new beginnings as well as wealth in Chinese culture. If such omens hold true, 2020 could provide U.S. farmers with renewed demand from China for agricultural products. Fingers crossed for more trade and no Horses or Goats in 2020!

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