The following marketing analysis is for the week ending Jan. 24.
CORN — Returning from a long holiday weekend, corn stayed in its comfort zone. By mid-week, corn rebounded and pushed through the $3.92 triple-top set in late December/early January. Demand surfaced and was confirmed by three daily export sales announcements. Two separate sales to unknown of 141,000 metric tons and 142 tmt were announced as well as 144 tmt to Guatemala (114 tmt old crop and 30 tmt new crop). It was rumored late last week that China was looking at U.S. corn. Forecasts for hotter and drier conditions in Argentina over the next few weeks were supportive to corn, as was Brazil’s wetter forecast which could delay soybean harvest and in turn, safrinha corn planting. It’s too early to say crop production is being hurt, but it bears watching and prompted some risk covering.
The headline this week was the outbreak of the “Wuhan” coronavirus in China. As of this writing, 28 people in China had died, over 800 were infected, two cases had been found in the United States, and several cities in China were on lockdown going into their huge Lunar New Year celebration. The World Health Organization has said it’s too early to call for a global emergency. There is concern in the world markets that demand for about everything could be curtailed as people and products don’t travel or mingle.
Weekly export sales were very good and the third-highest of this marketing year. Sales of 39.6 million bushels were above estimates. Commitments are still running 41 percent behind last year and we need to average 28.4 million bushels of sales per week to hit the U.S. Department of Agriculture target of 1.775 billion bushels.
The weekly ethanol report was bearish with production down slightly at 1.05 million barrels per day. Ethanol stocks were up 1 million barrels at 24 million barrels, the highest since July. Margins were lower again this week at a negative 12 cents per gallon.
The U.S. agricultural attaché in Argentina is pegging their corn crop at 48 million metric tons, 2 mmt below the USDA’s official estimate of 50 mmt. The Buenos Aires Grain Exchange put Argentina’s corn planting at 95 percent complete vs. 93 percent on average with 71 percent of the early corn silking vs. 62 percent on average. Overall corn conditions were 59 percent good/excellent. Brazil’s second corn crop, or safrinha crop, is only 1 percent planted vs. 5 percent on average. The safrinha crop accounts for roughly 75 percent of Brazil’s total corn crop.
Outlook: March corn traded to $3.94 per bushel this week, its highest level since Nov. 5. However, it closed 2 cents lower for the week at $3.87.25 per bushel after the sell-off on Jan. 24. July corn fell 3.25 cents for the week at $3.97.75 and the December contract dropped 4.5 cents to settle at $3.98.25 per bushel. Over the last two weeks, March corn is up 1.5 cents. Corn may be settling back into its recent trading range, but if underlying demand continues and/or South American weather waivers, it may test the $4.00 - $4.05 per bushel level.
SOYBEANS — Disappointment reigned supreme this week that China has not been a buyer of U.S. soybeans. March soybeans closed lower every day of the holiday-shortened trading week. In hindsight, it was a classic “buy the rumor, sell the fact” surrounding the signing of the Phase 1 trade agreement with China. I’m unsure why this comes as a surprise to some. China had pretty much said all along they would buy from the United States as market conditions and their needs warranted such purchases. U.S. soybeans are well out of the market to Brazil by 30-40 cents per bushel and China is thought to have covered most of their needs through March. China’s Commerce Ministry said this week that Phase 1 will have no impact on imports from other nations. The coronavirus outbreak in China added to the negative story for soybeans. If celebrations for the Lunar New Year are curtailed, demand may also fall.
Soybean prices dropped to their lowest level since early December, but the March contract was able to hold above the psychological point of $9.00 per bushel. If this level breaks, the next technical support is the November low at $8.82.5 per bushel. Any business or perceived problem in South America could prompt a rebound, as could profit taking from recently added short positions by funds.
Weather in Brazil has turned wetter. This may result in stalling harvest progress in some areas, which in turn can cause delays in the planting of the safrinha corn crop. The rain could be beneficial to soybeans. Early soybean yields in Mato Grosso were said to be running 10-15 percent higher than last year. Oil World and AgRural both have Brazil’s soybean crop at 124 mmt, slightly higher than the USDA. Brazil’s soybean harvest is estimated at 2 percent complete, in line with the average, but behind last year’s early 5 percent completion rate. Argentina’s weather forecast for the next few weeks turns drier and hotter which could result in crop stress. The Buenos Aires Grain Exchange put Argentina’s soybean planting at 98 percent complete with conditions up 4 percent over last week at 66 percent good/excellent. The game is not over in South America, so stayed tuned for further developments.
Weekly export sales were good at 29 million bushels and within expectations. Total commitments of 1.25 billion bushels fell to 4 percent behind last year. Sales need to average 20.1 million bushels per week to achieve the USDA forecast for 1.775 billion bushels.
Outlook: No one will be looking for much from China this week with the Lunar New Year holiday. The Phase 1 trade deal also does not take effect until Feb. 15, one month after the signing. Secretary Perdue said this week not to expect any more MFP payments, so don’t fall asleep on new crop pricing.
For the week, March soybeans plunged 27.75 cents to $9.02 for the biggest one-week loss in months. The July contract dropped 26 cents to $9.29.5, and November tumbled 21.75 cents to $9.38.75 per bushel. Over the last two weeks, March soybeans are down 44 cents.
Nystrom’s Notes: Contract changes as of the close Jan. 24: Chicago March wheat was 3 cents higher at $5.73.5 after reaching a 17- month high at $5.92.5, Kansas City fell 8.25 cents to $4.86, and Minneapolis dropped 12.5 cents to $5.47.5 per bushel. v