Morning Commentary

March corn down 1 at $3.7975

March beans down 1 ¼ at $9.19

The DOW is up

USD is stronger

Crude oil down $.15 at $53.51

Good morning,

Stock bulls remain up to bat as the market continues to rebound from the 2018 lows. The Fed has clearly pivoted, taking a less hawkish stance and investor optimism is once again banging the drum. Technically, we now have 80% of the S&P 500 companies trading back above their 50-Day Moving Average.

Corn prices remain in an extremely narrow trading range. Most are waiting to hear what the USDA has to say when they release update numbers on Friday. Some of the biggest question are… How big of a reduction will the USDA make to old-crop average yield? How many acres will go unharvested? Will there be a reduction in their U.S. export estimate? How much further will they reduce their corn used for ethanol forecast? Will corn used for feed be lowered because of more alternative backing up in the pipeline? Will there be any change to South American production? Will the Ukraine corn production estimate be raised higher? Outside of the USDA uncertainty, bulls are still hoping they will see more positive headlines regarding Chinese trade and the very real possibility of them buying larger doses of U.S. corn, ethanol and DDGs in the near future.  Corn basis seems to have done as much of the work as it needs to, so now we are due for a flat price rally over the next 60 days, which also means basis will begin to weaken.  Trend funds are thought to be long 24,000 contracts on a futures and options basis.  Significantly less long than expected, the CFTC last night pegged the trend fund long just 2,000 corn on a futures and options basis as of December 31st.  Commercials decreased their net short by nearly 28,000 contracts during the last week of 2018.  The short term trend is neutral-slightly positive.  The market remains in position to test the mid-upper 380 area.  Closing under 375.5 would undermine the outlook.  Short, system types will find buy stops above 384.5.  Options are implying a 370.5-389.5 trading range this week.

Soybean prices continue to chop around near the upper end of the recent 8-month range. There’s very little fresh or new to report as everyone inside the trade seems to be patiently waiting on Friday’s updated USDA data and additional insight regarding Chinese trade negotiations. The short term trend is positive.  A close over 924.5 provides targets at 937.25, perhaps the 941.  The 941 area will be key from a longer term perspective.  We need a close under 906.5 to undermine the outlook.  Long, system types will find sell stops below 913.25.   Options are implying an 902.5-937 trading range this week.

The USDA has received nearly 805,000 applications and paid out $6.41 billion so far in President Trump’s tariff payments created to buffer the impact of the China-U.S. trade war. The tariff payments are the largest element of a mitigation package that was announced as a maximum of $12 billion but could turn out smaller in the end. Remember, deadline to apply for payments is February 14. (Source: USDA)

Meat processor Tyson Foods has held talks to buy privately-owned California-based Foster Farms for roughly $2 billion. The two have had disagreements over price, and it is possible the talks could fall apart. The deal talks come just months after Tyson closed its $2.16 billion acquisition of McDonald’s meat supplier Keystone Foods, which further expanded its capabilities in Asia. (Source: CNBC)

As the U.S.-China trade war roiled global agriculture, Archer Daniels Midland reported lower-than-expected fourth-quarter 2018 earnings, sending its shares down more than -6% following the news on Tuesday.  Three of its four business units reported lower results, including their grain trading origination business, where adjusted operating profit slumped -30% to $183 million.


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