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Morning Market Review for Jan. 28, 2020

Grains ease following yesterday’s coronavirus selloff. (Comments are updated by 7:30 a.m. Central Time.)

Grain markets show little recovery amidst global coronavirus fears

  • Corn up 1 cent
  • Soybeans down 3-4 cents, soyoil down $0. 5, soybean meal up $0.7
  • Wheat down 1-4 cents

*Prices as of 6:50am CST.

Corn: March futures prices backed off yesterday’s losses on fears over the coronavirus to add half a penny over night to $3.81. May futures prices were unchanged at $3.8675.

Changes to corn basis were mixed across the Midwest on Monday. Basis dropped $0.02-$0.04 at river locations in Illinois and Iowa to close at $0.04-$0.05 below nearby futures prices. Processors and elevators saw prices range from weakening $0.02 to strengthening $0.03 across the interior. The slight run up in futures prices last week stimulated cash sales in some areas, increasing processor and elevator supplies. However, other facilities are still in search of grain amidst slow farmer sales.

Corn emerged as the winner from yesterday’s grain inspection report from USDA for the week ending January 23. Exports rose almost 70% higher than the previous week to 26.3 million bushels. Increased shipment activity at Gulf ports, primarily to Central and South American customers, helped nearby futures prices level off following yesterday’s price declines due to the coronavirus outbreak in China.

Soybeans: March futures prices danced with a 7-week low on Monday and continued lower overnight, falling $0.0375 to $8.935. Price declines for March soybean meal futures prices backed off yesterday’s downward pace, adding $0.7 to $298.5.

Cash movements were mixed at Illinois and Iowa river locations on Monday, rising $0.02 in Illinois and falling $0.02 in Iowa. A central Indiana processor strengthened basis by $0.05 to $0.15 ahead of nearby futures prices. Farmer sales were relatively slow as futures prices continue to decline amid concerns of an economic slowdown due to the coronavirus.

Malaysian palm oil prices recorded their largest price decline in over 11 years amidst reduced demand prospects from top palm oil purchases due to fallout from the coronavirus in China and a trade dispute with India. Palm oil prices have declined 15.6% in January. Soybean oil futures followed the edible oil lower by $0.5 to $31.02.

The Brazilian soybean harvest continues to lag behind 2019 pace. Rains in Mato Grosso have slowed harvest progress as 4.2% of planted acreage has been collected from the fields as of January 23. Planting delays were the root cause of a decelerated harvest, which was 13% complete the same time a year ago. Dry and warmer than average weather this week will not be beneficial for late-stage pod development in Brazil’s central region but increased rainfall in the southern part of the country bodes well for crop prospects.

Soybean volume continued to dwarf all other grain exports, according to Monday’s USDA grains inspected for exports report. Despite a 6.1 million-bushel decline from the previous week, soybean volumes for the current marketing year to date outpaced the 2018/19 marketing year by 23%. Chinese shipments dominated sales, with a total of 17.9 million bushels inspected for export to the Chinese mainland. For a closer look at yesterday’s grain inspections report, check out Ben Potter’s full analysis here.

Wheat:

Wheat contracts price changes

A higher dollar backed wheat futures prices off yesterday’s gains in overnight trading. The ICE Dollar Index rose 0.12% overnight on coronavirus concerns as Minneapolis March wheat futures led all wheat futures prices lower by almost four cents.

Cash sales of hard red winter wheat slowed yesterday following last week’s futures price uptick. Basis for HRW wheat was largely unchanged across the Southern Plains. Protein premiums on hard red winter cash wheat delivered to or through Kansas City by rail were unchanged from Friday, as shown below:

wheat protein content, basis range, change

Export inspections for wheat reported yesterday dropped significantly from last week. Wheat export inspections fell 10.7 million bushels to 8.2 million bushels for the week ending January 23. Trade estimates had placed last week’s range around 18.4 million bushels. Despite the week-over-week decrease, current market year exports to date remained comfortably ahead of 2018/19 figures by 67.6 million bushels.

Syria requested a wheat tender from Russia overnight for 7.3 million bushels of soft wheat for bread-making. Syria has not made purchases following its previous two tenders issued December 18 and January 20, so any price impacts due to the trade will likely not be seen until the tender is accepted.

Weather: A snow system will leave an inch or two of snow in the Northern Plains down to Kansas today, while the Southern Plains may see up to an inch of rainfall. The system will lose momentum as it moves through the Mississippi Valley on Wednesday and clear out of the Midwest by Thursday according to NOAA's short range forecast.

Financials:  Global stocks eased overnight following yesterday’s sell off amid concerns over an economic hiccup due to the coronavirus outbreak in China. Over 100 people have died and another 4,500 are infected in China, as the disease has spread via travelers to the U.S., Australia, and now Germany and Japan. The virus scare caused the 10-year Treasury bill yield to briefly invert below the three-month T-bill yesterday. Dow futures rose 164 points or 0.58% this morning.

Markets will pay close attention to meetings at the Federal Reserve this week discussing volatility in the repo market.

Diesel prices continued their downward spiral through the night, driven by reduced Chinese demand following the coronavirus outbreak. February ULSD futures dropped 0.73% to $1.6672/gallon to start out a fourth straight week of price declines. Producers looking to lock in input prices for the 2020 season have arrived at the optimal time to finalize input decisions, Bryce Knorr writes in Ag Marketing IQ column.

The second-largest food consumption holiday is rapidly approaching – the Super Bowl. In fact, Super Bowl Sunday marks the single day of the year on which the most avocados will be consumed as 8 million pounds of guacamole will be devoured. Avo aficionados concerned about a repeat of last year’s shortage need not fret in 2020 as January imports of avocados from Mexico were on pace to set monthly records, up 16% from 2019.

Charts:

1.28.20 Graphic 1 - Corn.PNG

1.28.20 Graphic 2 - SB.PNG

1.28.20 Graphic 3 - SRW.PNG

1.28.20 Graphic 4 - HRW.PNG

1.28.20 Graphic 5 - MN Wheat.PNG

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