Corn: Down 4 to 6 cents
Soybeans: Down 8 to 12 cents
Wheat: Down 6 to 10 cents.
GENERAL COMMENTS: Wheat and corn futures dropped to lowest in more than a week overnight and soybeans touched new seven-week lows as the China coronavirus continues to spread with the death toll rising. Global financial markets are down more than 1% to 2% on fears the virus will curb global growth as it spreads faster than most expected. Demand spiked for safe-haven assets such as the Japanese yen and Treasury notes.
The death toll from the new coronavirus in China grew to more than 80 on Monday as residents of Hubei province, where the disease originated, were banned from entering Hong Kong amid global efforts to halt the rapid spread of the outbreak. The total number of confirmed cases in China had risen about 30% to 2,744 and the virus has been found in 10 other nations, including the U.S. While most are noting the potential overall impact on China's economy. If the virus continues to spread, “the economic impact for China — and potentially elsewhere — will be significant,” according to a study by the Economist Intelligence Unit, which said up to one percentage point could be shaved off the country’s 2020 real GDP growth rate. Meanwhile, investors are waiting to see what, if any, stimulus measures are rolled out for various sectors once the disease is better understood and contained.
USDA’s daily export sales reporting service said private exporters sold 111,252 metric tons (MT) of corn for delivery to Japan during the 2020-21 marketing year.
Traders and farmers continued to wait for signs of increased Chinese buying of U.S. farm goods after Beijing pledged to significantly increase imports in an initial trade deal the countries signed earlier this month. The agreement is meant to reduce tensions after nearly two years of a tit-for-tat tariff war. Brazil, a rival soybean supplier, is expected to harvest a record crop, providing stiff competition for sales to China.
The grains had significant decline on Friday on realization that the Chinese did not buy any grains in front of the Lunar New Year celebrations. Based on the Phase 1 signing of Jan 15, China must implement its pork import program 10 days after the signing, with the grain import program becoming active 30 days after or Feb 15. Traders will be sensitive to China’s release of duty-free import tariffs for U.S. ag goods. This price drop is exactly what the Chinese want so they can buy up some cheap U.S. grain. So, between the cash market strength, and the Chinese buying potential, the grain markets should find a low early this week.
The weather is wet for Brazil and dry for the south of Argentina. The South American percent of normal rainfall map since Jan 1st and outlook into Feb. 9 shows a mixed and varied rainfall pattern across ag areas. Yet, none of the rain shortages are severe enough to produce acute stress and substantial yield loss –except for Buenos Aires. The dryness for Argentina’s Buenos Aires province has been pronounced and lasting and without needed rain by mid-February, crop yield cuts are likely.
Brazil’s IMEA is reporting that Mato Grosso’s soy harvest reached 14.4% as of Friday. The harvest has gained speed in the past week and is slightly above the 5-year average. Corn seeding is following immediately following the soybean harvest.
Friday’s weekly CFTC Commitment of Traders report showed that funds were holding both soybean and corn short positions and holding larger net-longs in wheat than expected.In the week ended Jan. 21, money managers increased their net long position in SRW wheat futures and options to 41,671 contracts from 29,787 a week earlier, according to data from the U.S. Commodity Futures Trading Commission. That is most bullish stance since August 2018, and last week’s move was produced strictly by the addition of outright longs. Gross wheat longs totaled 129,816 contracts as of Jan. 21, the ninth largest for any week since records began in 2006. In the week ended Jan. 21, money managers flipped to a net short in CBOT soybean futures and options of 13,735 contracts from their net long of 6,290 a week earlier. Funds also expanded their net short in soybean meal for the fourth week in a row, this time to 36,696 futures and options contracts from 31,720 a week earlier. Trade estimates suggest that commodity funds continued selling in the soy products late last week. Money managers bought CBOT corn futures and options for the sixth week in a row through Jan. 21, and the latest move was the largest since mid-December. They cut their net short to 67,804 contracts from 78,442 contracts a week earlier.
U.S. soymeal and soyoil exports are improving in response to financing problems for Argentina's top exporter soybean crusher. Vicentin is in talks over a potential takeover deal with firms including European grains giant Glencore to help resolve a debt crisis, according to two sources close to the negotiations. The near 90-year-old firm, which defaulted on payments to suppliers late last year, has also told grains farmers it owes money to that it will make a debt restructuring offer in the days ahead, the sources said on Friday.
Corn: March futures gapped lower last night and quickly extended losses. The markets fell below the 20-day, 40-day and 100-day moving average, triggering both new selling and long liquidation. The cash markets remain firm and should help the futures find some support early this week.
Soybeans: Futures also gapped lower, extending the recent decline to seven-week lows. The market has been in retreat amid the lack of Chinese purchases of U.S. soybeans after the signing of the new China trade deal earlier this month and rising Brazilian crop forecasts.
Wheat: Futures strength was reversed last week, and the selling continues this morning on disappointment China recently bought Australian wheat, potentially reducing demand for U.S. supplies. China has booked 150,000 MT of wheat from Western Australia for December 2019 and January 2020 loading, Andrew Woodhouse, an advisor at Advance Trading, a commodity brokerage firm, told S&P Global Platts Friday. This compares with the 170,000 MT China had imported over October 2018-September 2019, Woodhouse said. Market sources said that state-owned China Oil and Foodstuffs Corporation was potentially the buyer of the cargoes, but COFCO declined to comment.
Cattle: Steady to weak
Hogs: Steady to weak
Cattle: Futures seen opening weaker. Deferred live cattle contracts broke out to the bottom of their consolidated trading range late last week, amid concern that feedlots are falling behind on marketing, which could cause problems come spring. Packers paid mostly steady prices for cash cattle last week, with a few locations seeing a slight increase, as rising beef prices improved packer profit margins. This gave them incentive to push last week’s kill up 2.5% from the week prior and 6.4% from year-ago. After the close on Friday, USDA Cattle on Feed Report was basically in line with market expectations. With the down move last week in futures offset by stronger cash cattle market, and packers needing cattle, expect futures to recover. The report wasn’t bearish
Hogs: Futures seen on the defensive after Friday’s retreat after weekly export sales were not as strong as expected for new Chinese pork sales. The market is also concerned the coronavirus spreading across China and into other countries could curb economic growth and possibly Chinese pork imports. Cash hogs were stronger last week and that is a positive sign heading into February. The key remains renewed strength in wholesale pork prices and a slower slaughter pace.