THE OPEN
March beans: 7 lower
March meal: 1.70 lower
March soyoil: 27 lower
March corn: 1 1/4 higher
March wheat: 1 1/2 lower
The markets opened as called with spread trade dominant, as traders unwound previous buy wheat and beans/sell corn. The net short in corn and the prospect of corn turning more competitive (and China maybe purchasing some?), put the squeeze to the corn bear. Soyoil futures sold off vs. meal but the soy complex remained weak in general.
Ahead of the deal signing on Wed., the US Treasury announced it would drop its designation of China as a "currency manipulator".
At 10:00 export inspections were released as follows:
Beans: 1,136,304 mt vs. 1,039,014 mt week ago
Wheat: 473,960 mt vs. 420,653 mt week ago
Corn: 460,307 mt vs. 420,653 mt week ago
Grain inspections were viewed as mixed/bearish with beans friendly. Corn inspections for 2019/20 now total 357 mln bu, down 53% vs. year ago. Wheat inspections for 2019/20 total 566 mln bu, up 14% vs. year ago, while beans total 843 mln bu, also running above last year's pace.
SOY
- The soy complex traded cautiously after the open with funds about even in beans and seeming to stay put into the signing on Wed. The market will then begin to look for signs of Chinese Ag purchases. Ideas are that China will buy beans first, and may buy some early as a sign of good will. March bears did not surface to try to push values under key support at $9.33, (so far).
- Meal entered into a fairly subdued trade at range lows.
- March soyoil, burdened by the too large long position and a negative chart pattern, finally triggered small stops to trade under 34c, but also found short-covering as prices traded to fresh lows.
- South American harvest pressure may begin to pick up over the next few weeks, with Brazil's Mato Grosso state reported 2% complete with strong yields.
- In policy news, Argentina is reported to be considering a preferential tax for crushers, with meal basis higher for Feb.
- Bean spreads were supported as buying interest surfaced, with July/Nov narrowing into 3c from 4 1/2c. Meal spreads firmed as well with values trading into $4.10 from $4.40. Traders continued to take profits on oilshare, with March crush trading back under 1.00c/bu to 99c/bu, and oilshare trading to 35.93%.
GRAINS
- The reaction to the USDA report in corn was telling, as prices broke back towards trading range lows but closed out the day on a high note, indicating that shorts were looking to take something off the table on bearish numbers.
- For today, did not make much sense to see corn prices fall apart, and indeed the market remained well bid all day against wheat and beans.
- Spreads also were firmer with July/Dec trading into 1 1/2c from 3c, and March/May firming into 6 1/4c from 7c.
- Wheat prices were largely ignored, though remained positioned well above key support levels in March at $5.51. The wheat market has derived support from ideas that China may be in a buying mode after the signing, and bears were not looking to put on new shorts until a more active sell signal could be generated. Higher Russian wheat values and a firm bull in wheat are also tempering a break.
AT 12:00 THE MARKETS ARE AS FOLLOWS:
HI LO
March beans: 4 lower 9.49 1/2 9.38
March meal: .20 lower 304.00 301.20
March soyoil: .33 lower 3455 3390
March corn: 3 higher 3.89 1/2 3.85 1/2
March wheat: 3 lower 5.65 3/4 5.58 1/2
March canola: .30 lower 484.50 480.70
OUTSIDE MARKETS
The Dow opened 78 pts higher and is up still up the same amount at midday as equities remain on solid footing. Crude oil breaks down to $57.97/barrel, with the US dollar trading down to 97.30.
CLOSING COMMENTS
This is typically the time of year when corn stands up for itself as beans become available from South America. The new crop bean/corn ratio has narrowed to a 2-wk low at 2.4:1. The Jan report sent the market locked and loaded in trading ranges, as we will see if China will begin to buy ags and draw down carry-outs. For now, a healthy dose of skepticism seems to pervade the markets but suppose that funds appear ready to flip from short to long if buying emerges.
Overhead targets that must be exceeded to kick off a new leg higher include:
March corn: $3.92
March beans: $9.61
March wheat: $5.70
Would still own good pullbacks in soyoil futures, as demand for biofuels/China could still hold up. Would not be an active seller of these markets now until we pierce and settle under the following:
March beans: $9.33
March wheat: $5.45
March corn: $3.80
Have a good evening........
TAGS – Feed Grains, Soy & Oilseeds, Wheat, North America