Good morning!
Grain futures firmer overnight… As of 6:00 a.m. CST, March corn was up 1 1/4 cents. March soybeans were up 3 cents, while March SRW and HRW wheat futures were up 4 1/4 to 4 3/4 cents. More short covering was featured in the grain markets overnight. A bearish flag or pennant pattern appears to be forming on the daily bar chart for March corn futures. However, soybean bulls are touting the potential for a bullish double-bottom reversal pattern on the daily chart for March beans. Winter wheat bulls are hoping recent sideways and choppy price action at lower levels is “basing” that will set off an uptrend at some point soon. The key outside markets today see the U.S. dollar index slightly down. Nymex crude oil futures prices are firmer and trading around $59.750 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently 4.17 percent.
Snow squalls, high winds in northern, central Plains and Midwest... The National Weather Service today said snow squalls and strong winds are expected today across the northern and central high Plains, with wind gusts above 60 mph possible. High wind warnings and wind advisories are in effect for much of the Great Plains. A critical fire weather area is in effect for eastern Oklahoma/Texas panhandles as well as western Oklahoma due to the combination of gusty winds and dry conditions. Meantime, an arctic cold front will bring below-average temperatures to the Plains beginning tonight. High temperatures in the teens and single digits over portions of the northern/central Plains and upper Midwest will be 20-30 degrees below average on Saturday. This frigid airmass will spread eastward into the Midwest and east coast Saturday night into Sunday. Snow showers and snow squalls are likely to spread south-southeast into the upper Midwest today and then as far east as the Ohio Valley tonight. Snow squalls may become widespread, leading to some areas receiving multiple rounds during this event. Snow squalls create an extremely dangerous combination of heavy snow rates and strong, gusty winds, leading to icy roads and near-zero visibility.
U.S. dollar index headed for third straight weekly gain… The U.S. dollar index on Thursday hit a six-week high and is holding around steady in early trading today. The USDX is poised for a third consecutive weekly gain as strong U.S. economic data has tempered expectations for additional Federal Reserve interest rate cuts. Weekly jobless claims came in well below forecasts, signaling a resilient labor market, while some manufacturing surveys also exceeded expectations. Several Fed officials also highlighted signs of labor market stability and cautioned against potential inflationary risks.
Kansas City Fed chief: keep interest rates steady… Federal Reserve Bank of Kansas City President Jeff Schmid said U.S. interest rates should stay at a level where they continue to put some pressure on the economy so that inflation can cool further. Schmid on Thursday said he does not think further cuts in interest rates will do much to patch over any cracks in the labor market, which he believes are driven by structural factors. Schmid also spoke about the Fed’s independence and its federalized structure, saying that the decentralized system allows for differing views on the correct course of monetary policy, which he considers a strength.
Canada sees China reducing tariffs on its rapeseed… Canada expects China to cut tariffs on its rapeseed by March 1, which would be a significant thaw in a trade rift that has disrupted crop flows and tested bilateral relations, Bloomberg reports. The move was announced by Canadian Prime Minister Mark Carney during his visit to China on Friday, and is part of a deal reached after months of talks to mend ties between the nations. Carney said Beijing will lower tariffs on Canadian rapeseed to about 15%, from more than 80%, as well as suspending anti-discrimination duties on imports of some other farm products including canola meal and lobsters. In tandem, Canada will allow 49,000 Chinese electric vehicles into its market at a tariff rate of about 6%, down from the current rate of 100%.
U.S., Taiwan reach trade deal… The U.S. and Taiwan agreed to a trade pact that would lower tariffs on goods imported from Taiwan to 15% and see Taiwanese semiconductor companies increase financing for American operations by $500 billion. Taiwan’s technology industry would commit to making at least $250 billion in direct investments to expand advanced semiconductor, energy and artificial intelligence operations in the U.S. Taiwan also agreed to provide an additional $250 billion in credit guarantees for further investment in the American semiconductor supply chain.
China clamps down on high-frequency traders… China’s government is removing computer servers dedicated to high-frequency traders from local exchanges’ data centers, a move led by regulators that will affect both domestic and global firms, said a Bloomberg report. The change will impact the speed advantage that high-frequency traders have used to beat rivals, as they will no longer be able to get slightly quicker execution by using servers located in the exchanges’ own data centers. Futures exchanges have made preliminary plans to add latency to any servers that connect from third-party computer rooms, which will further reduce the speed advantage of high-frequency traders. Commodities futures exchanges in Shanghai and Guangzhou are among those that have ordered local brokers to shift servers for their clients out of data centers run by the bourses, according to the people, who said the move was led by regulators.
Malaysian palm oil futures rally to end the trading week… Malaysian palm oil futures rose about 1.5% to around MYR 4,050 per MT on Friday, snapping three sessions of losses as bargain hunters stepped in after recent declines. Firmer edible oils in Dalian and Chicago markets added support, while exports gained momentum, with cargo surveyors noting January 1–15 shipments surged 17.5%–18.6% from the prior month. Demand from India, the largest consumer, is also expected to recover in January after hitting an eight-month low in December. Gains were capped, however, by elevated Malaysian inventories, which remain near multi-year highs despite seasonal demand ahead of the Lunar New Year and Ramadan. In Indonesia, authorities scrapped plans for a mandatory B50 biodiesel blend this year, citing technical and funding hurdles, keeping the B40 mandate in place. The top producer also said it will raise its crude palm oil export levy to 12.5% from 10% starting March 1. Contracts are on track for a second weekly rise, albeit a modest one of around 0.3%.
Cattle futures bulls looking to extend rallies… February live cattle on Thursday rose 90 cents to $236.05. March feeder cattle rose $4.87 to $364.55 and hit a 2.5-month high. The cattle futures markets saw the bulls step in to buy the mid-week dip as technical charts and fundamentals remain overall bullish. USDA Thursday reported very light cash cattle trading so far this week, with steers averaging $232.70 and heifers $233.00. Cash cattle trading last week averaged $231.86. World Weather Inc. said there is some concern remaining for impressive bitter cold air in the Northern Plains late next week that may stress livestock more significantly.
Lean hog futures bulls in high gear… February lean hog futures on Thursday rose $2.10 to $87.80 and hit a three-month high. Hog futures saw more technical buying as buy stops were likely triggered just above last week’s high. Bulls brushed aside concerns about a weakening cash hog market and CME lean hog index recently. The big premium futures hold to the cash hog and CME index suggest futures traders look for a rebounding cash hog market in the coming weeks. The latest CME lean hog index is down 11 cents to $80.39. Today’s projected cash index price is up 11 cents at $80.50. Thursday’s national direct 5-day rolling average cash hog price quote is $68.56.