CORRECTION ON PRICES IN CORN GRAPH BELOW.
Corn: Steady to down a penny
Wheat: Steady to down 2 cents.
GENERAL COMMENTS: Soybean and grain futures traded both sides of unchanged in narrow ranges. The markets were left to sort out how China is going to buy $36.5 billion of ag goods in 2020 after few changes in USDA’s monthly supply and demand update, its first since the signing of the trade deal. The only market USDA specifically noted any change in 2019-20 export demand was soybeans. The government raised its export estimate despite China remaining mostly absent from the market, and likely for quite some time yet. Domestic and global supplies are still quite ample throughout world for all three markets. USDA's first Phase 1 trade deal forecasts for 2020-21 season will be released during the Ag Outlook Forum on Feb. 20-21.
The USDA daily export sales reporting service said private exporters did not report any new large U.S. grain or soybean sales this morning. While not unexpected, that will be a mildly negative factor when futures reopen.
The markets are likely to continue to find support from light farmer sales, some concerns about saturated U.S. soils that may once again create a planting season of problems and Chinese and U.S. officials saying they can meet their commitments despite the outbreak of the coronavirus.
However, it’s becoming increasingly likely that Chinese officials by the end of the first quarter will seek consultations with their U.S. counterparts to delay previously promised purchases of U.S. farm products as part of the U.S./China trade deal, according to White House National Security Adviser Robert O’Brien in a speech last night in Washington. “We expect the Phase 1 deal will allow China to import more food and open those markets to American farmers, but certainly as we watch this coronavirus outbreak unfold in China, it could have an impact on how big, at least in this current year, the purchases are.”
President Xi Jinping said that China has the ability to accomplish its economic growth and social development goals and will “defeat the epidemic.” China on Wednesday reported its lowest number of new coronavirus cases since January, lending weight to a prediction by its top medical adviser for the outbreak to end by April, even as the death toll in the country rose to more than 1,100 people. Xi’s optimism is not shared by economists outside the country who have cut their growth forecasts as the effects from the outbreak are worse than first thought.
Manufacturing in the euro area ended 2019 with the deepest slump in almost four years, with industrial production dropping 2.1% in December from a year earlier. Worryingly for policymakers, the dismal numbers came in the period ahead of the COVID-19 outbreak, which means any quick turnaround is unlikely. Those same fears are also starting to edge up for the U.S., with Bloomberg Economics’ recession prediction model showing an increase in the chances of a reversal in growth.
Virus fears and manufacturing slowdowns are not enough to derail the continuing good run for global equities. Overnight the MSCI Asia Pacific Index climbed 0.5% while Japan’s Topix index closed broadly unchanged. In Europe the Stoxx 600 Index was 0.5% higher with cyclical stocks posting the biggest gains. S&P 500 futures pointed to more green at the open, hitting new records for a third straight session. The 10-year U.S. Treasury yield was at 1.61%. The dollar is slightly higher after rising to four-month top yesterday but closing lower. The strong dollar to start 2020 continues to curb the competitiveness of U.S. commodities in world markets.
Rains favored central/northern Brazil again over the past 24 hours, with action going forward heaviest in the northern half of the country as well, but drier in southern Brazil. The biggest soybean harvest delays and corn planting delays will occur from Mato Grosso through Mato Gross do Sul to southern Minas Gerais where drier weather is needed soon. Argentina is running a bit drier in both the extended time frames out two weeks, but overall conditions have improved after recent rain.
Corn: March corn traded a narrow 2-cent range from $3.78 ¼ to $3.80 ¼ overnight. The market needs a fourth week of good export sales in tomorrow mornings weekly USDA update to make another run at the upside.
Soybeans: Futures were stuck in narrow nickel range overnight and inside of Tuesday’s range. Daily momentum turned up on Tuesday after USDA did raise its Chinese import outlook by 3 MMT from its January estimate.
Wheat: Futures are set for a third straight decline with prices touching a two-month low, pressured by USDA forecasting larger-than-expected global wheat inventories on Tuesday. Egypt bought 360,000 MT of wheat for late March shipment yesterday, including 180,000 MT each from Romania and Russia. Prices were down from purchases in January. Russian farmers will start their 2020 spring grain sowing campaign earlier than usual because of warm winter in the country, the agriculture ministry said today. Warm winter weather has some farmers in Russia's Southern and North-Caucasus districts planning to enter fields in the next few days. Russian farmers plan to sow spring grains on 29.2 million hectares this year, down 181,000 hectares from a year ago.
Cattle: Mixed to weak
Hogs: Steady to lower
Cattle: Cattle seen weak to start on few signs of a seasonal low in cash markets or wholesale beef prices. A few hundred head of cattle traded in the Kansas market between $119 and $120 yesterday, with some unconfirmed reports of trade in Colorado around the $120 mark. This would be a $1 to $2 retreat from action the week prior and in line with levels futures have indicated. The product market has been struggling, with prices sliding and lower prices failing to spark demand. Choice fell $1.08 on Tuesday and Select strengthened 83 cents, but movement was lackluster at 112 loads. USDA’s WASDE report did not include any major changes to the beef balance sheet for 2020.
Hogs: Futures will open under pressure after the weak close Tuesday and weaker wholesale pork prices. Cash hogs were more mixed despite the continue big slaughter numbers. And while USDA did hike its 2020 pork export forecast by 275 million lbs., it did not specifically attribute an uptick to China. China's pork prices are hovering near last year's record after measures to battle a coronavirus epidemic hit transport of pigs and delayed the restart of slaughtering plants, crimping already tight supplies of the meat. The department also slashed its average cash hog price projection for 2020 by $5.50. USDA raised its 2020 pork production estimate by 240 million lbs. and its beginning stocks projection by 94 million lbs., which more than offset the increase in exports.