Corn is up 1 cent to 2 cents, soybeans are up 3 cents to 4 cents, and wheat is up 2 cents to 4 cents.CME Globex Recap:
Equities are beginning 2019 on a lower note with investors still rattled by the U.S. government shutdown and slowing economic data related to the trade war. Energy markets are also beginning the year with a softer tone as the Energy Information Agency confirmed U.S. crude oil output during the month of October set a new all-time record of more than 11.5 million barrels per day. Grain markets will see a hard open Wednesday at 8:30 a.m. CST with calls generally better on South American weather.
Previous closes on Monday showed the Dow Jones Industrial Average up 265.06 at 23,327.46 and the S&P 500 up 21.11 at 2,506.85 while the 10-yr Treasury yield ended at 2.686%. Early Wednesday, DJIA futures are down 356.00. Asian markets are lower with Japan's Nikkei 225 down 62.85 point (-0.31%) and China's Shanghai Composite down 28.61 points (-1.15%). European markets are lower with London's FTSE 100 down 61.94 points (-0.92%), Germany's DAX down 49.96 points (-0.47%), and France's CAC 40 down 85.77 points (-1.81%). The euro was down 0.00110 at 1.14500 and the U.S. dollar index was up 0.1470 at 96.2370. December 30-year T-Bonds were up 19/32nds while February gold was up $8.10at $1289.40 and February crude oil was down $0.40 at $45.01. Soybeans on China's Dalian Exchange closed up 0.98% while soymeal closed up 0.73%.
The U.S. dollar index violated long-term trend-line support last week, which dated back to the beginning of 2018.
March Chicago wheat put in fresh contract lows Monday to close the month and year, which will keep technical momentum on the side of bears.
Extended weather maps forecasting the next 14 days for Brazil remain problematic with above normal temperatures and below normal precipitation in most of the growing areas.
Wheat and corn should see selling by passive funds given their 6% to 17% gains in 2018 when portfolios get rebalanced in January.
After sizable losses in 2018, the entire soy complex should benefit from buying by index funds when their annual rebalance takes place this month.
Soybean and wheat export inspections missed the level needed to achieve the USDA forecast for the second week in row.
CORN Another hard open for grain markets at 8:30 a.m. CST Wednesday with calls generally coming in higher given the selling pressure Monday. Aside from the trade war, South American weather is the primary driver of price action at the moment and forecasts are not beneficial. March corn is trading below all major moving averages with little in the way of support, down to the $3.67 lows from November. Both sets of weekly demand indicators (ethanol and inspections) we are still receiving with the government shutdown are mostly bearish. In addition, with the calendar flipping to 2019, so too has some of the focus toward the new-crop balance sheet. Consensus is corn will steal acres away from soybeans, leaving the market to determine how much premium or discount from current prices it will take to accomplish that task. As noted, export inspections released on Monday showed corn at 36.0 million bushels (mb) versus the 45.2 mb needed weekly to hit the USDA forecast. Inspections are still 69.1% ahead of last year with the USDA looking for mostly unchanged exports from a year ago. Political commentary from Washington D.C. over the holiday break does not suggest the government will be re-opening quickly, casting doubt on the release of the January WASDE. This leaves us cash markets and calendar spreads, neither of which are making a case for higher flat prices.
SOYBEANS Soybeans are also expected higher on falling production estimates from Brazil, and forecasts that do not hold a lot of rain for the driest areas of the country. There seems to be a lot of estimates now centering around 117 million metric tons (MMT) of soybean production for Brazil. If that sort of estimate is plugged into the current USDA balance sheet for Brazil on a local marketing year (Feb. 1 to Jan. 31), carryout would go negative by more than three million tons. The local marketing year illustrates quite clearly Brazil exports every available bushel it can, carrying out next to nothing. If production does prove shy of the current USDA estimate of 122.0 MMT, the impact would be felt directly on exports. U.S. export inspections released on Monday showed the current shipment campaign 41.8% behind a year ago while the USDA is expecting a decline of just 12.6%. CIF and PNW basis do not indicate any large-scale demand from China since the government shutdown took place. In addition, another 470 fresh delivery receipts were registered Monday, adding to the 280 registered Friday. There are now 1,927 outstanding registrations with 1,109 delivered overnight. March soybeans continue to respect the trend-line support dating back to September, which has now held three separate times.
WHEAT Wheat markets are called higher after the concentrated selling pressure Monday that saw new contract lows in Chicago, while Minneapolis is bobbing just above contract lows made last week. While the government has been shut down, price has made U.S. wheat competitive with major importers. Cash traders suggest hard red winter wheat was sold to private Egyptian buyers in the last week and if Algeria tenders soon, the business would likely go to the U.S. Adding support has been 194 delivery registrations being canceled out of Wichita, and Hutchinson, Kansas, last week. The weekly stocks of grain report should show movement out of delivery warehouses as the cash carry finally gets tight enough to encourage commercials to move wheat. One of the more anticipated numbers on the January WASDE report is the first look from the government on winter wheat plantings. If the government shut down remains in effect, we might not see an update to that data set until the end of March. Most in the trade believe winter wheat acres will be unchanged to down 5% from last year while spring wheat acres are set to rise as Northern Plains producers shift out of soybeans. Current cash market action and the expectation for the aforementioned acreage shift should pressure the MW/KW intermarket spread. New-crop September Minneapolis wheat is trading 58 cents per bushel below the same date a year ago.
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Tregg Cronin can be reached at firstname.lastname@example.org
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