Top Farmer Closing Commentary 1-27-20

CORN HIGHLIGHTS: Corn futures fell under selling pressure on Monday’s session as contracts were 2 to 6 cents lower. The front-month Mar contract was hardest hit, down 6-3/4 cents to 3.80-1/2, while May corn was down 6 cents to 3.86-3/4. The corn market, as well as the majority of markets, were under strong selling pressure throughout the session, as global markets went into a “risk-off” trade with fears of the spread of the coronavirus in China. Concerns regarding global growth due to this virus weighed heavily on stock markets, as well as energy markets today. Weakness in crude oil prices pushed front-month contracts to their lowest price levels since October and helped put selling pressure into the corn market. In addition, a weak close Friday weakened the technical picture, and the overall selling strength caused follow-through movement as prices posted a price gap lower into Sunday night’s open. The weakness in price does make the U.S. corn the most competitive price on the export market for global importers and should help support demand. Demand sales were stronger last week, this week started with the announced sale of 111,000 metric tonnes of 2020/21 corn to Japan. Weekly export sales released Monday morning were still disappointing at 26.3 million bushels inspected for export last week. This number needs to pick up its pace because we are currently running behind the levels needed to reach the USDA’s estimated export totals for the 2019/20 marketing year. This keeps selling pressure into the corn market, the prospects USDA make additional export demand adjustments in future reports, increasing overall carryout.

SOYBEAN HIGHLIGHTS: Soybean futures saw modest losses of 4 to 5 cents in Monday’s trade with the front-month Mar contract down 4-3/4 cents to 8.97-1/4, while May beans were down 4-3/4 cents to 9.11. Soybean futures challenged trendline support levels on follow-through selling off of last week’s technical weakness, but did firm towards the end of the trading session and finished around 8 to 9 cents off of intra-day lows. This was encouraging at least the current breakdown in price may be finding some support, but charts still are technically weak, and even at these price levels, the U.S. is struggling in competitiveness with Brazil for export business. Helping add to that difficult export picture has been the strength in the U.S. dollar vs the Brazilian real, which brings premium into South American beans over their U.S. counterparts. Managed money has been moving into a short position after holding relatively neutral the last handful of weeks, and money flow may push this market further. Weekly export inspection numbers did stay favorable at 38.2 million bushels for last week. This keeps current U.S. pace ahead of USDA projections for export movement, and with the prospects of China stepping into U.S. markets probably later in the year, could bring some upward revisions in further supply and demand reports and therefore supporting some longer-term price.

WHEAT HIGHLIGHTS: Wheat futures rebounded nicely off of intra-session lows today, but Chi wheat contracts still finished with mild losses of 1 to 2 cents. Front-month Chi Mar wheat futures were down 1-1/4 to 5.72-1/4, while May was down 1-1/4 to 5.71-1/4. KC hard winter wheat in Mar did finish 1/2 cent higher on Monday’s trade to 4.86-1/2, while spring wheat stayed mixed, relatively unchanged with the Mar contract down 1/4 cent to 5.47-1/4. Despite weakness in other commodity markets, wheat markets actually performed relatively well in today’s session. Chi Mar contract closed nearly 13 cents off of early session lows, and held key support on the 20-day moving average and finished near the top of today’s trading range despite the negative close. In the past couple of sessions, weakness in the crude oil market has weighed across all commodities, as well as the wheat market. Crude oil prices are tumbling, which weakens Russian ruble currency values, which puts pressure on global wheat prices, and with the current trend of the U.S. dollar working higher, it may make wheat prices more difficult to maintain rallies and the battle for global competition on the export front. Last week’s export inspections were disappointing for U.S. wheat at 8.2 million bushels, and this is behind the expected pace to reach the USDA’s export target for the 2019/20 marketing year. With last week’s strong topping signal in place, the wheat market will likely move into more of a choppy sideways fashion trying to find direction, which could be led by other grains or continuing from the change in fundamentals on the global scale in wheat price movements.

CATTLE HIGHLIGHTS: Cattle markets made sharply lower closes today, facing demand concerns stemming from the coronavirus outbreak. Feb lives were down 2.60 to 122.25, Apr lives were down 3.00 to 121.30, and Jun lives were down 3.00 to 113.02. Jan feeders were up 5 cents to 141.90 while Mar and Apr feeders were down 4.50, to 135.17 and 138.00 respectively. Choice beef closed 83 cents lower on Friday afternoon to 214.49 and was down another 45 cents this morning to 214.04. The coronavirus outbreak was a major source of pressure today from multiple perspectives. On one hand, with the stock market under heavy pressure, this is a negative demand indicator for beef in general, contributing to the selling in cattle markets. In addition, with China preoccupied with trying to contain the coronavirus, they are less likely to worry about meeting U.S. ag purchase targets in the near term. Even without outside pressure from coronavirus today, the technical setup today was very negative. The best traded Apr live cattle contract faced serious selling pressure late last week, trading on Friday to its lowest prices since October 31. Apr live cattle made their lowest closes today since October 21, and their first close below the 100-day moving average support level since September 20. Apr lives are oversold according to both Bollinger Band and Stochastics though speculative liquidation may keep the trend lower. Mar feeders made their lowest close today since September 20 and the first close below the 100-day moving average since September 24. Feeder markets are also oversold.

LEAN HOG HIGHLIGHTS: Hog markets took sharp losses today following other ag markets and general instability caused by the coronavirus outbreak. Feb hogs were down 1.27 to 65.95, Apr hogs were down 3.00 to 70.45, and Jun hogs were down 2.90 to 83.50. The CME Lean Hog Index was up 27 cents to 61.29, its highest value since November 4. Carcass cutout values were down 1.46 on Friday afternoon to 77.38 but were up 1.11 this morning to 78.49. Near-term Chinese demand for U.S. pork is likely on pause as the Chinese government tries to contain the coronavirus during the Lunar New Year holiday. Demand uncertainty was a major pressure point today, along with weakness in the stock market. Domestically, pork production was up 9.9% last week from the previous week contributing to supply concerns. The best traded Apr contract gapped lower today and made its lowest close since August 6. Feb and Jun contracts also gapped lower though the Feb contract closed not too far off the day’s highs.

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