Market News

Wheat pulls back from recent highs

Soybeans were modestly lower on fund and technical selling. Contracts were up early but couldn’t follow through while still waiting for solid signs of improved demand from China. No daily USDA sales announcements have been made since Phase One of the trade agreement was signed last week. There are indications Chinese supplies are ample enough that large scale purchases might not take place until after South American beans start hitting the market in earnest. Still, there are weather concerns in areas of South America, with parts of Brazil seeing harvest delaying rain and portions of Argentina are warm and dry, which limited losses. Yields have been better than a year in Brazil’s state of Mato Grosso, but it remains to be seen how much that will offset losses in other states. Soybean meal was lower and bean oil was higher on the adjustment of product spreads.

Corn was mixed on spread adjustments, with nearby contracts up a little and deferred months modestly lower. There’s also been more talk of new demand from Asia for U.S. corn, largely connected to a higher move in the Pacific Northwest cash basis last Friday, but no confirmation with export sales out Friday. Corn is also watching South America, expecting second crop planting delays in Brazil. That’s the larger of Brazil’s two crops and the source of most of their exports. Stateside, the trade is keeping an eye on the wet conditions in parts of the Midwest in the months ahead of planting. Ethanol futures were lower. The U.S. Energy Information Administration’s weekly ethanol production and stocks numbers are out Thursday. U.S. corn, ethanol, sorghum, and DDGS are all possible purchase targets by Beijing.

The wheat complex was lower on profit taking and technical selling. Contracts are overbought after Chicago hit more than one-year highs on the recent price strength in Europe and Russia. Still, global supplies have gotten tighter and export demand for U.S. wheat has been better than expected this marketing year. In addition to lower than expected planted area, producers in France are also dealing with rail transportation and port activity issues caused by a strike over pension reform. There’s also talk of China being interested in U.S. wheat, but no confirmations and China typically doesn’t buy anywhere close to the tariff rate quota. The USDA’s next set of supply, demand, and production estimates is out February 11^th. DTN says Algeria bought 400,000 tons of optional origin wheat, while Jordan purchased 60,000 tons of milling wheat from an unknown origin.