Closing Markets: Corn: -24.25 old & -12.50 new.
Beans: -13.50 old & -4.75 new. Wheat: -6.
Good evening!
Market Recap-
The sideways trading seen largely since before the holidays several weeks ago came to an abrupt halt on Monday, as the USDA's January WASDE update led markets to sharply lower price action almost immediately after the numbers dropped at 11am central time. Traders have been asking for something new to chew on for a while now and it would appear they got their wish, only most had hoped it would have been in the form of yield cuts that sent the markets the other way, contrary to what actually came to fruition this morning.
Corn Summary-
Corn futures paced the declines in the ag space as Monday, as the spot March contract shed some 5+% of its value by the closing bell this afternoon. We had warned previously of something seemingly being a "sure thing" when it comes to the USDA and their reports, and today was a crystal clear example of what we meant. Not only did the USDA not lower corn yields like was assumed by most everyone since the last production updates in November, but they actually in-fact raised them, which was most of the reason for the sharp sell-off. The only way the current record demand landscape is friendly price is if we don't have enough bushels to satisfy it, and with production now north of 17 billion, that seems a long ways off. Chart-wise, the market blew past most all support levels today, with the August low on the March contract at 4.10 now the only thing really standing between where we closed today and $4.
Soybean Summary-
Soybean futures also shed premium on Monday, but it seemed to be more sympathy selling with the grains and meal markets than anything else as aside from a small bump in ending stocks due to an expended (and likely overdue) cut in exports, there really wasn't a lot of note in terms of adjustments on either the US or the world scale from the USDA. Yields were left alone which meant only minor adjustments to production, while the USDA offset some of the export cuts with a bump in crush, which is a move we see as somewhat questionable amid an ongoing lack of policy from the EPA. We would also argue that while USDA did adjust Brazil's production forecast figure higher, this number potentially still too low if what a lot of private groups in the country are predicting is accurate.
Wheat Summary-
Like the other two markets, wheat futures closed lower also on Monday, though similar to the beans, the selling here was more in-tow to the corn market as opposed to a notable bearish reaction to anything the report. The numbers were negative - ending stocks were up both in the US and the globally - but a lot of the higher production around the world is a variable that has been known for a while now and isn't really something that warranted dropping prices back near their lows. However, with US acres now seen down just fractionally from last year, a lack of a weather issue means world supplies likely stay downright plentiful, which will continue to limit rallies on the margin.
Outside News Headlines-
Crude oil futures: up 30-50 cents/bbl
Weather Updates-
- Midwest weather is expected to stay active this week, with the models in decent agreement on several low pressure systems continuing to work out of the northwest and then into the upper Midwest. Precip totals are expected to be light/variable for the most part, with the downwind side of the Great Lakes still the place that's expected to receive the most moisture. Temperature-wise, the central US stays warmer today and tomorrow, before more seasonally average air temps move in by mid-week.
- Extended forecasts this afternoon coming out of the weekend are not in great agreement on the precip side, but see the same outlook for the most part on the temperature side in that the eastern US goes colder while the west stays warm. Precip-wise, the GFS is wetter than the EU model in the week two period through the southeast and eastern Midwest, while both keep average to slightly above average precip chances in place across the northern Midwest and also both keep drier conditions in place through the PNW.
- Things have trended better forecast-wise for Argentina the last 72 hours or so, as the models now see several rainfall chances through the week this week and into next week with 10-day totals possibly reaching 1-2" over a bulk of the country's southern and south-central growing areas. Temperature-wise, things also look to stay cooler than normal for the most part over the next week to 10 days, which should keep stress limited.
- For Brazil, there also continues to be a lack of heat in the forecast here, while rainfall will favor more of the north-central part of the country as opposed to the south, which saw rains through the week last week and into the weekend. Parts of western Mato Grosso and other areas near the border with Paraguay will potentially be short-changed over the next several days, but there is little concern in these places today due to adequate soil moisture levels. Like we've been talking about, if anything, the drier forecast should allow for early harvest to get underway.
Noah Richardson
Topflight Grain Seymour
202 N Main Street, Seymour IL 61875
nrichardson@tfgrain.com
www.topflightgrain.com
