THE OPEN

March beans:  2 lower

March meal:  1.30 lower

March soyoil:  6 higher

March corn:    1/2 lower

March wheat:  3 1/2 lower

The markets opened on a weaker note, with oilshare still firmer as soyoil futures remained firmer vs. meal.  The weaker tone continued into the midday hour, as funds sold both corn and beans.  Skepticism about the Chinese "shopping list" and liquidation of length for bean bulls contributed to the weaker tone.  

In trade developments, China stated that they would not increase the annual grain import quotas to accommodate higher US farm purchases.  China has annual import quotas, also known as TRQ's, from all countries set at 7.2 mmt on corn, 9.6 mmt on wheat, and 5.3 mmt on rice.   Over the last 5 years, China's average annual purchases of corn have totaled 3.37 mmt of corn, 3.30 mmt of wheat, and 3.29 mmt of rice, or 44% of their total combined commitment.

On the political front, Senator Chuck Grassley said he expected the text of the phase one trade agreement to be released after the signing takes place, which is set for Jan 15. The US Senate finance committee approved the USMCA trade legislation, which moves it closer to the full Senate for a floor vote.  

SOY

• Trading range activity continued as beans and meal prices worked lower from the start of the trading session.  
• Bean and meal charts were in defensive mode from the start of the day, as recent bean bulls booked profits.  
• Meal prices worked, lower back towards the lowest end of its trading range as traders returned to a buy soyoil/sell meal trade.  
• In a news item that impacted meal, Argentina will suspend an export tax increase on meal, which fed into higher oilshare.  
• Beans found light selling from cautious bulls.   
• FC Stone estimates did little to help, raising their bean production number to 121.76 mmt.   
• March crush traded to 1.01c/bu while oilshare traded up to 36.54%.  Spreads were slightly firmer with March /May beans trading from 13 1/4c to 13 3/4c.  March/May meal firmed to $4.00 from $4.10.  July/Nov beans traded from 3 1/4c out to 4 1/2c.  
• The WSJ estimated that Friday's bean production would be slightly lower at 3.51 bln bu, with yield estimates only slightly lower at 46.6 bpa.  The modest changes triggered some long liquidation.  Soyoil prices continued firmer against both beans and meal, keeping its uptrend price action intact as the March contract holds onto its level of key support at 3440c.  

GRAINS

• The bear has been selling the corn market since prices topped $3.90 for the March contract, and lower support levels were tested from the outset of trade at $3.83 in what continues to be a light volume session.  
• Weaker corn prices continued for much of the session with funds selling into commercial pricing activity.  
• There were some supportive items for corn, which included WSJ estimates that Friday's yield would be lower with an est. at 165.9 bpa, which would result in a production figure of 13.4 bln bu, or 200 mln bu lower.  
• Additionally, Brazil's state of Rio Grande do Sul has been in drought, with FC Stone predicting losses up to 20% in the growing region, and total production at 98 mmt vs. 101 mmt USDA.  
• Grain volumes remain light as prices continue to consolidate.  
• Wheat prices were also lower as funds maintain a net long position, and for the day the weaker PM session close into major support levels triggered a cautious tone.  While world wheat supply still remains ample, winter wheat acreage is expected to fall by 700,000 to 900,000 acres.  
• Index funds may need to also buy some corn to re-weight their corn allocations. 

AT MIDDAY THE MARKETS ARE AS FOLLOWS:

                                                                               HI                            LO

March beans:  3 lower                                          947 1/2                    9.37 3/4

March meal:  1.60 lower                                       304.00                     300.40

March soyoil:  4 higher                                         3478                        3444

March corn:  1/4 lower                                         3.85 3/4                   3.83 1/2

March wheat:  4 lower                                          5.51                        5.45 1/2

March canola: 1.20 higher                                   479.90                     475.70

OUTSIDE MARKETS

The market had been higher but opened down 30 pts.  Crude oil trades down to $62.11 vs. a firmer US dollar of 97.09.  Gold prices remain well supported on continuing geopolitical concerns.  

CLOSING COMMENTS

Trading range activity continues as more position-evening occurs heading into Friday's USDA report.  Prices have been on good rallies, and therefore the pullback into the middle of trading ranges is not altogether surprising.  In any event, South American production levels will be extremely important heading into the month of Feb., typically a time when bean prices can see weight given export competition from Brazil as harvest arrives.  And of course, the all-important question remains as to how aggressive China will be regarding its shopping list.   

The trend that remains the most vibrant for now is oilshare, where demand throughout 2020 should continue to be a good pull for prices.  Would still look for oilshare pullbacks to own.  Think for the day, strength in soyoil futures will last into the close.

Key lower support levels which if violated would lead to more selling include:

March beans:  $9.33

March meal:  $299.00

March corn:  $3.80

March wheat:  $5.40

March soyoil:  3438c

 

TAGS – Feed Grains, Soy & Oilseeds, Wheat, North America