Morning CME Globex Update:
Following the Dow Jones modest loss of 63 points on Friday, the Dow futures are up 102 points to start Monday. March crude oil futures are down 44 cents, the U.S. dollar index is up .1770, and April gold is down $10 an ounce. The U.S. government will attempt to avoid another shutdown by Feb. 15, as they determine funding for the U.S. southern border wall.
|U.S. Dollar Index:||Higher|
Corn was lower after a lackluster USDA report on Friday, which showed U.S. corn stocks below 12 billion bushels (bb), implying much larger disappearance than last year, and one of the largest November to final corn yield reductions of 2.5 bushels per acre (bpa) and it continues lower on Monday. It was the offsetting drop in both feed, and residual and ethanol demand, which dropped U.S. ending stocks just slightly to 1.735 bb -- a still comfortable carryout. Adding to the bearish tone was a Brazilian crop that was left unchanged at a hefty 94.5 million metric tons (mmt), compared to 82 mmt last year, and an Argentine corn crop that was increased by 3.5 mmt to 46 mmt -- some 14 mmt above last year. World corn stocks were increased to 309.8 mmt. Now that the USDA report is past, weather, the China trade issue, and demand and acreage intentions will likely be driving forces. While the new-crop soy/corn ratio of close to 2.40 would argue against a pick-up in corn acres, the February insurance average of $4.02 so far would suggest otherwise. U.S. corn continues to be very competitive in world markets, and last week's Gulf and Pacific Northwest (PNW) corn basis improvement suggested ongoing new demand. Gulf barge bids for corn rose by 8 cents last week, and PNW bids firmed. The China talks have resumed in Beijing this week, with Thursday-Friday talks expected to include both Treasury Secretary Steve Mnuchin and U.S. Trade Representative Robert Lighthizer. DTN's National Corn Index closed at $3.46 on Friday, with an average basis of 28 under the March contract.
Soybean yields were also reduced on Friday's USDA report -- down .5 bpa to 51.6 bpa, along with a smaller harvested acreage, resulting in a modest 56-million bushel reduction in the U.S. soy crop to 4.544 bb. U.S. ending soybean stocks fell to 910 million bushels (mb) -- 45 mb lower than previous, but still an all-time record large carryout. U.S. exports were dropped 25 mb. In world numbers, stocks fell by 3 mmt, and were well below the pre-report estimates. Brazil soy production fell by 5 mmt to 117 mmt, which was pretty much expected and just 3.3 mmt below last year's record production, while Argentina's crop fell by only 500,000 mt to 55 mmt -- some 17.2 mmt above last year's drought-impacted crop. More notable, and bearish, was the 2 mmt drop in China soybean imports to 88 mmt, the lowest since 2015-16, and down 6 mmt from last year. China domestic crush was also cut by 3.5 mmt. The trade fears a further drop in that import demand, possibly to as low as 85 mmt, due to not only the China-U.S. trade issue but also the African swine fever impact. Other soy importers have bought 10 mmt more U.S. soybeans than last year. Weather in South America appears to be slightly wetter than the Friday forecast as the pattern turns more favorable. All eyes will be on this week's trade discussions, which begin Monday, and ahead of another possible government shutdown on Feb. 15. Even though the CFTC is playing catch-up on the Commitment of Trader's report (COT), the recent release reflects the week of Jan. 7, and Monday's soybean position by funds is thought to be close to even. DTN's National Soybean Index closed at $8.26, and reflects an average basis of 88 cents under the March contract.
Private exporters reported to the U.S. Department of Agriculture export sales of 120,000 metric tons of soybean meal for delivery to Ecuador. Of the total, 60,000 metric tons is for delivery during the 2018-19 marketing year and 60,000 metric tons is for delivery for during the 2019-20 marketing year.
Despite Friday's USDA report revelation of a 110-year low in U.S. winter wheat seeding to a much lower than expected 31.3 million acres (ma), Kansas City July wheat fell to a new contract low, and is down again on Monday. U.S. ending stocks rose to a burdensome 1.010 bb from 974 mb in the last report, as a 5-mb reduction in seed use, and a 30-mb fall in feed led to higher stocks. U.S. wheat, although much more competitive now, is still 11% below last year's shipment pace. Some good news on Friday came in soft red winter wheat (SRW) as the U.S. sold 120,000 metric tons (mt) of a 300,000 mt Egypt purchase. U.S. wheat was the cheapest by far on a FOB basis. French and Ukraine filled the balance of the tender, as Russian wheat remains too high priced. Indonesia bought 60,000 mt of wheat, U.S. SRW may have gained part of that business. Bangladesh tendered for 50,000 mt of 12.5 protein optional origin wheat, and the U.S. is in contention, along with Russia and Canada. World wheat stocks fell only slightly to 267.5 mmt. Russian wheat production was raised by 1.6 mmt to 71.6 mmt. DTN's National HRW index closed at $4.72, and the average basis is at 22 under March, firmer.
Private exporters reported to the U.S. Department of Agriculture export sales of 128,000 metric tons of hard red winter wheat for delivery to Nigeria during the 2018-19 marketing year; and export sales of 120,000 metric tons of soft red winter wheat for delivery to Egypt during the 2018-19 marketing year.
Dana Mantini can be reached at email@example.com
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