Market News

Soybeans down on China concerns

Soybeans were modestly lower on fund and technical selling but managed to finish closer to the session’s highs than the lows. Commodities and the broader market reacted to the uncertainties regarding the spread of coronavirus in China, including tens of millions of people reportedly being placed under quarantine. The Shanghai Stock Exchange will extend its Lunar New Year closure until February 3^rd. Chinese demand for U.S. beans has been disappointing since Phase One of the trade agreement was signed and any further potential trade disruption will be viewed as a negative. The beans that China has purchased continue to move out at a good clip, with another bullish week for export inspections. Vegetable oils were also lower and development conditions in South America, for the most part, look good, with Brazil’s harvest pulling closer to average. That said – heavy rains have delayed activity in parts of Brazil, causing flooding and some fatalities. For now, U.S. beans remain higher priced than supplies from Brazil and Beijing would have to grant tariff waivers. Soybean meal was mixed, mostly modestly lower.

Corn was lower on fund and technical selling, closing near the middle of the day’s range. Japan bought 111,252 tons of 2020/21, the third business day in a row with a new sale, but that was not enough to break the bearishness. The combined three-day sales total is more than 500,000 tons. Still, it was another bearish week for export inspections and 2019/20 sales continue to trail 2018/19 by a wide margin, even with U.S. corn at a very competitive price on the global market. President Trump will reportedly sign the USMCA Wednesday. The trade agreement still needs to be ratified by Canada. Corn is also watching conditions in South America, with more rain in some forecasts for parts of Argentina. Ethanol futures were mixed, with the industry waiting to see what tack the EPA takes while reconsidering three recent granted biofuel waivers following a ruling by the 10^th Circuit Court of Appeals. Sorghum inspections were more than what’s needed to meet USDA projections for the marketing year. U.S. corn, sorghum, DDGS, and ethanol remain potential purchase targets for China.

The wheat complex was mixed, with Chicago down, Kansas City up, and Minneapolis narrowly mixed. China reportedly bought wheat from Australia last week, one of the more expensive origins right now. Wheat is another one of the commodities reportedly under purchase consideration by Beijing, with a recent study showing China’s tariff rate quotas negatively impacted U.S. wheat exports for a larger degree than corn or rice. Conditions look good for U.S. hard red winter wheat, but some soft red winter areas are excessively wet. The USDA’s updated state crop progress and weather stories are out this week and the next set of supply, demand, and production numbers are out February 11^th. Wheat inspections were bearish, but the 2019/20 pace remains ahead of 2018/19. Demand continues to be better for higher protein varieties of U.S. wheat, specifically hard red winter and hard red spring.