March corn up 1/4 cent, March soybeans up 2 1/2 cents, and March KC Wheat down 2 3/4 cents.CME Globex Recap:
Global equities are mixed around the globe this morning as investors wait to gauge the outcome of the latest round of U.S.-China trade talks. Adding support to equities were last week's more dovish comments from Fed Chair Jay Powell. Crude oil has quickly made its way back toward the 50-handle after trading as low as $42.36/barrel on Christmas Eve. Grains are mixed as traders prepare for no January WASDE, the index fund rebalance and any developments on U.S. Ag products from the Chinese trade talks.OUTSIDE MARKETS:
Friday closes showed the Dow Jones Industrial Average up 746.94 at 23,433.16 and the S&P 500 up 84.05 at 2,531.94 while the 10-yr Treasury yield ended at 2.668%. Early Monday, DJIA futures are up 311.00 points. Asian markets are higher with Japan's Nikkei 225 up 477.01 (2.44%) and China's Shanghai Composite up 18.22 points (0.72%). European markets are mixed with London's FTSE 100 down 24.91 points (0.36%), Germany's DAX down 35.89 points (-0.26%), and France's CAC 40 down 15.43 points (-0.33%). The euro was up 0.00415 at 1.14480 and the U.S. dollar index was down 0.2980 at 95.9000. December 30-year T-Bonds were up 12/32nds while February gold was up $7.00 at $1292.80 and February crude oil was up $1.36 at $49.32. Soybeans on China's Dalian Exchange closed down 0.35% while soymeal closed up 0.41%.
|1)||A cargo of Argentine wheat was rejected at an Algerian port last week due to sprout damage. Heavy rains before and during harvest have been noted.||1)||Weekly ethanol production last week missed the level needed to achieve the USDA forecast for the fourth week in a row and six out of the last seven weeks.|
From a seasonal perspective, January is the third strongest month on the calendar for corn, narrowly behind February.
|2)||Brazilian, Argentine and U.S. FOB soybean offers are now all within $5 per metric ton, setting up a dog fight for export business January to June.|
|3)||Private estimates of Brazilian soybean production are on the decline due to dryness in southern Brazil.||3)||Weekend rainfall in Brazil was called better than expected with 0.50-1.50" and isolated areas of more than 1.50" fell on 85% of soybean growing areas.|
CORN Corn is near unchanged Monday morning, consolidating just below Friday's highs which were the best levels since December 20. January is the third strongest month of the year from a seasonal perspective, averaging a 1.479% annualized return over the last 30-years. February is also a strong month, averaging a 1.501% return over the last 30-years, possibly setting the market up for a strong run into the February crop insurance pricing period. Outside of cash and spreads, the market is flying somewhat blind on demand and structure without export sales and commitments of traders data. Fortunately, U.S. corn export offers are trading below Argentine offers for January and February. Brazilian offers are absent as they will likely be out of the market until new crop bushels are harvested later this spring. Weekly ethanol production data released Friday showed production off 31,000 barrels per day to 1.011 million barrels per day, missing the level needed for the fourth week in a row. In fact, ethanol production last week was the lowest for this week since 2015/16. Margins remain poor, even though ethanol prices have rallied back to two-month highs. Despite production being down, weekly stocks were up 29,000 barrels to 23.162 million barrels and remain at record levels from a seasonal standpoint. If soybean production estimates in Brazil continue to fall, it will support corn, but demand data remains a concern for this market.
SOYBEANS Soybeans are stronger Monday morning, adding to last week's gains and attempting to close higher for the fourth session in a row. After bouncing off trend channel support on 12/27, soybeans have added 44 cents per bushel and are within 6 cents of the 200-day moving average. The 200-day moving average held prices in check on 12/12 and March soybeans haven't been above their 200-day moving average since June 7. Supporting soybeans are falling production estimates with a well-known brokerage cutting their estimate to 116.25 million metric tons (mmt), while Mato Grosso-based Brazilian farmer group Aprosoja lowered their estimate of the country's crop to 110-115 mmt. Based on our read of the balance sheet, production estimates in that territory would require some rationing of soybean exports. Delivery activity of soybeans remains incredibly heavy as no one wants the beans that were dumped on the street. Overnight, there were another 1,139 contracts re-delivered, bringing the month-to-date total to 5,160 contracts. New crop soybeans are back within 10 cents of the highest prices since June which is not sending the signal for producers to move acres to corn and wheat.
WHEAT Wheat markets are weaker, trading inside Friday's range as last week's gains are consolidated. Unfortunately, with the government closed, traders are not getting any confirmation of the rumored export business. Over the holiday break, Egypt was rumored to have purchased hard red winter wheat in a private tender, China is reportedly shopping for spring or soft red wheat and U.S. wheat is penciled very competitively with other origins into Algeria. With the news of the Argentine rejection by Algeria, U.S. HRW could be well-placed to connect on this business when they next tender. In addition to export sales data, the government shutdown will also prevent the released of the January WASDE and Winter Wheat Seedings report. A Memphis-based researcher released their updated view of U.S. winter wheat plantings last week, cutting acreage 750,000 acres from their last estimate and dropping it roughly one million acres from last year. Despite these ideas, our view of the HRW and SRW balance sheet remains comfortable barring a major yield drop this spring. Still, supplies are expected to decline, supporting higher calendar spreads and keeping variable storage rates on the decline. The market would like to see updated Russian pricing but they are likely to remain quiet this week as well with Eastern Orthodox Christmas occurring January 7.
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Tregg Cronin can be reached at email@example.com
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