With the Chinese Lunar New Year celebration about to begin, the lack of any hint of Chinese interest in U.S. soybeans, along with growing Brazilian soy production estimates and the continued veg oil correction all combined to send March beans ever closer to $9.00. Also pressuring grains and soybeans is the expanding new coronavirus in China, which is now responsible for 26 deaths and over 900 infections, including two in the U.S.
All three wheat futures markets plunged on Friday, as overbought conditions and fund profit-taking sent values more than 20 cents lower than Wednesday’s high in Chicago. Paris milling wheat futures have also begun to correct the bull move that began in early September. There are indications the labor and transportation strike that had paralyzed French rail shipments to their ports will soon end. While major exporter stocks are tightening somewhat, following the disaster in Australia, the world remains awash in wheat, with a still record large stocks situation. Chicago March wheat has now had two bearish chart signals — Wednesday’s rejection of higher prices and Friday’s lower close is a bearish engulfing bar. Chicago March had rallied nearly $1.35 per bushel just since early September, and had gotten overbought. Wheat export sales last week were a respectable 25.6 mb, with total commitments sitting at 13% above a year ago. Wheat shipments of 569 mb are up 24% from last year. The U.S. ag attache in Argentina raised that crop to 19.3 mmt from the 18.8 mmt USDA estimate. However, there are rumors Argentina may have oversold their wheat stocks and may need to buy some in. DTN’s National HRW Index closed at $4.67 and the average basis is at 26 cents under the March contract.
Despite the second straight day of new corn sales announced to unknown destinations and March corn’s ascent above the key $3.92 area, corn began weaker on Friday, pressured by soybeans and wheat. In the past two days, nearly 11 million bushels (mb) of corn were announced sold to unknown, stirring rumors that China may be buying some U.S. corn as part of the recent phase-one deal. In addition, more sales to both Guatemala and South Korea made it clear U.S. corn offers are now much more competitive, and, in fact the cheapest in the world on an FOB basis. Export sales for the week ended Jan. 16 were a large 39.6 mb, but shipments still lagged the weekly average needed to achieve USDA’s 1.775 billion bushels (bb). Total corn commitments are still down 37% from a year ago and shipments are 49% below a year ago. In the background is the growing threat of the coronavirus originating in China, and spreading, leading to city lockdowns and suspension of transportation, and 26 deaths and over 900 infections estimated thus far. None of that is positive for markets that are seeking demand. While it appeared funds started to exit part of their corn short, estimated to still be 110,000 contracts to start Friday, they have turned sellers again on Friday. Ethanol production last week was 4.2% lower and stocks increased 4.5%, suggesting further demand woes for corn. Average margins in the Midwest are said to be 30 to 40 cents per bushel negative. On a bullish front, the U.S. ag attache in Argentina lowered that corn crop by 2 million metric tons (mmt) to 48 mmt compared to USDA’s 50 mmt estimate. The corn crop is 95% planted in Argentina, with a 59% good-to-excellent rating, and 39% fair. President Donald Trump will sign the new USMCA trade pact on Wednesday, Jan. 29, and then it should be ratified and signed by Canada in early February. The U.S. continues to work on possible trade deals with both the EU, and now India. Cattle on Feed is out later Friday and expected to show on feed at 102% of last year. While a solid close above $3.92 for a second time would have sent March corn to the $4.00 to $4.00 to $4.05, the next support is down at $3.83. DTN’s National Corn Index closed at $3.80 and is 14 cents under March futures.