Ahead of the Open: Grains, Soy Rise on Reports of Possible CoronaVirus Cure Discovery

Posted on 02/05/2020 6:06 AM

Grain Calls

Corn: Steady up 1
Soybeans: Up 5 to 7
Wheat: Up 4 to 7 cents

GENERAL COMMENTS:  Grains, soybeans and livestock markets are following other commodity markets and world stock markets higher this morning on reports that scientists have developed an effective drug against the fast-spreading coronavirus that has weighed heavily on global economic activity.

China's Changjiang Daily, the official newspaper of the city of Wuhan where the virus outbreak began, reported on Tuesday that a team of researchers led by Zhejiang University professor Li Lanjuan have found that drugs Abidol and Darunavir can inhibit the virus in vitro cell experiments.

Separately, Sky News reported that a British scientist has made a significant breakthrough in the race for a vaccine by reducing part of the normal development time from two to three years to only 14 days. A vaccine will be too late for the current virus but the breakthrough will be crucial if there is another outbreak,  

Futures markets are anticipatory and favorable news in relation to potential medical solutions, or indications that we have reached a turning point in the progress of the virus outbreak, and are likely to be interpreted positively.

Stringent containment measures, alongside the billions of dollars pumped into the economy by Chinese authorities, boosted mainland China stock indexes more than 1%. The bourses have already clawed back half the $700 billion market cap wiped out during Monday's selloff.  continued to recover from a two-month low reached earlier this week while corn and wheat were also higher, buoyed partly by gains in global stock markets.Crude oil prices rose more than 3% overnight on the new as it has been hard high about daily demand falling 5% from the outbreak of the disease. 

 The grain markets remain concerns that the coronavirus may delay a surge in U.S. exports to China expected from the Phase 1 trade deal. The agreement, signed on Jan. 15 and taking effect on Feb. 15, suspended a new round of U.S. tariffs in exchange for Chinese purchases of agricultural, energy and manufactured goods and services.

The South American weather forecast for Brazil still has no changes with moderate to good rains for most of Brazil’s growing regions favoring the north over the next 6 to 10 days. The Argentine weather forecast has moderate to good rains from a stalled front for most of the growing regions through Saturday with things quieting down by the end of the weekend and through much of next week. Another front is seen moving in the very end of next week.

The USDA daily export sales reporting services said private exporters did not report any new large U.S. grain or soybean sales this morning. That will be a mild negative factor when futures reopen.

China will start selling 2.96 million metric tons (MMT) of corn from state reserves from Feb 7, to ease feed shortage at some companies in the south, National Grain Trade Center said in a notice published on its website on Tuesday. Feed producers located outside Heilongjiang, Jilin, Liaoning provinces and Inner Mongolia region – China’s northeastern corn belt – are eligible to bid, the notice said. In an effort to contain the spread of the virus, some provincial governments have imposed restrictions that have disrupted feed and live animal transports.

Meanwhile, state media continues to say that China will diversify import channels, increase imports of agricultural products that meet domestic demand and step up support for growing high-yield soybeans. The reiteration of plans to boost domestic soybean output and diversify imports is part of Beijing's efforts to guarantee food security, especially after a trade war with the United States, a major supplier of farm produce to China. In its annual agricultural policy document, the government also said it will adjust and improve a minimum-purchase-price system for rice and wheat. Beijing also said in the document that it will continue to boost pig production in the new year, after a deadly African swine fever disease decimated the country's massive herd.

International Monetary Fund Managing Director Kristalina Georgieva said on Wednesday that now was a "very important moment for Argentina" to enact policies for successful debt restructuring. Georgieva and Argentine Economy Minister Martin Guzman, who is also at the conference, held what both said were constructive talks on the Latin American country's debt crisis on Tuesday night. Argentina needs to restructure $100 billion in sovereign debt with creditors, including the IMF, amid a steep recession with inflation above 50%  Fernandez has promised to bridge social divisions and roll out a massive credit system with low rates to bolster domestic demand, and to boost spending to address hunger and poverty.  

Corn: March futures opened lower last night and rebounded. The small advance failed to push prices above Tuesday’s high and prices set back near unchanged at the morning break. Prices pausing above its January and December highs favors bears. But a quick move through $3.85 would target a run back near recent swings highs at $3.92 to $3.94 ¼.   

Soybeans: Futures are firm but lack excitement on the upside, mostly because of the weakness in soymeal futures. March futures opened steady to firm and rallied above Tuesday’s session high $8.87 but failed to hold the grains. Prices remain below stronger resistance $8.92, $9.00 and $9.03. Malaysian palm oil futures rebounded from last week's sharp fall with a 5.1% jump on Wednesday, lifted by expectations of a steep drop in January production. The contract tumbled almost 9% last week as fears of the fast-spreading coronavirus in China stoked concerns that it would disrupt supply chains and hit demand from the second-largest palm importer. Malaysian palm oil inventories likely tumbled 12% to 1.76 MMT from December, its lowest since June 2017, with production also likely falling 9% to 1.21 MMT from the month before, a Reuters surveyed showed on Wednesday. On Tuesday, Pakistan's Prime Minister Imran Khan said the country would buy more palm oil from Malaysia to offset lost sales after top buyer India imposed import curbs on the product last month.

Wheat: Futures will open stronger, led to the upside by the strength of the European wheat trad in Paris.  U.S. futures are opening near key overhead resistance that must be exceeded to trigger new buying interest.      

Cattle: Steady to weak
Hogs: Steady to weak

Cattle:  Futures seen are likely to start defensive after failing to hold Tuesday strong early gains and closing low-range. Wholesale beef was mixed with choice down 63 cents yesterday and Select up 9 cents on light sales. So far this week on the cash cattle front, there have just been some cleanup sales at softer price levels and a few dressed sales, also at slightly lower prices. The front month remains at just a modest discount to last week’s cash trade

Hogs: Futures seen mixed to weak. After recent consolidation of last week’s plunge, the market lacks some positive news. Fresh pork continues to weaken amid larger slaughter. The market likely needs some positive demand news to move higher, with slaughter tallies continuing to come in near the 500,000 head per day mark. Two days into the week the kill is already up 49,000 head 5.2% from year-ago. Bulls needs some help from the weekly export sales report on Thursday.

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