Morning Commentary

March corn up 1 at $3.815

March beans down 3 at $8.9425

The DOW is up

USD is stronger

Crude oil up $.19 at $53.32

Good morning,

Corn bulls will be trying to gather themselves after yesterday’s “risk-off” selling sparked by headline fears associated with the coronavirus spreading across China. Bulls have been waiting for positive headlines from China so this is a bit of a 180-degree spin. The concern is not that it’s necessarily a wildly bearish headline but rather the fact it could work to keep new bullish money on the sideline. U.S. corn exports remain very competitive in the global marketplace and the USDA has reported a few good sales. Nothing major to China as of yet but certainly an uptick in U.S. corn exports. Meaning demand might start pushing itself higher in the weeks ahead, especially if the Chinese decided to step in as a U.S. buyer. At the same time, more bulls are talking about this year’s U.S. production being trimmed in upcoming USDA reports after states are resurveyed. Bears are doubtful there will be a major U.S. production adjustment and are also becoming more suspect about the Chinese following through with their “Phase One” commitment. Technical traders were paying very close attention as the market traded below most of the major moving averages yesterday. Nearby support in the MAR20 contract is thought to remain at around $3.75 per bushel. Resistance seems to remain the $3.90 to $3.95 range. The new-crop DEC20 contract seems to be in a fairly tight range with support in the $3.75 to $3.85 range and upside resistance in the $3.95 to $4.05 range.

Soybean bulls are desperately trying to stop the bleeding. The MAR20 prices have tumbled more than -60 cents from the beginning of the new year and are hoping to find more long-term support somewhere between $8.75 and $8.85 per bushel. The MAR20 contract hasn’t traded sub-$8.75 since mid to late-May. The new-crop NOV20 contract has major nearby chart support between $9.00 and $9.20 per bushel. Upside new-crop resistance seems to remain in the $9.50 to $9.60 range.

Cattle markets are very defensive to start the week. There were no material changes in fundamentals over the weekend, at least not directly. Yesterday’s futures break seemed to be largely reactive and rooted in fear/uncertainty regarding both micro and macro factors. Having said all of that we have been in the camp that there was a significant amount of risk in the market due to supply, demand and leverage. Cash trade from last week was reported today at over 100,000 head and steady-to-slightly firm in general. Overall, weekly formula numbers being reported are massive while negotiated numbers are choppier. Northern cash volumes are on longer term lows, Nebraska is starting off Q1 2020 trading fewer numbers that has been noted in more than 5 years. Outlook for this week’s cash trade are certainly softer currently. Cash bulls would tout firming packing margins and larger steer and heifer slaughter recently. Bears looking at cattle numbers to come and little to no advantage over the packer as evidenced by softer basis. Combined fed and non-fed slaughter totals ended last week at 647,000 head, topping most early week estimates. Spot beef markets were essentially unchanged for the week and there is no doubt some hand wringing around beef movement and demand. There remains a tremendous amount of noise around protein supplies both internationally and domestically. African Swine Fever, Australian losses and potential impacts from the current virus spreading across Asia are just some of the situations the markets are watching closely. Cattle on feed report was released Friday afternoon and generally checked all the boxes from an analyst expectation standpoint. Cattle on feed was reported as 102% of a year ago, placements at 103% of a year ago and marketing’s at 105% of last year. Still dealing with records on feed numbers and placements, and not showing any signs of that changing soon. As mentioned earlier, the futures sold off rapidly over the last several sessions. A lot of factors are associated with this, but yesterday’s action certainly seemed to be led by fear, panic and possibly some speculative liquidation. Some relief rally and filling action is expected later in the week. Trey Warnock – Amarillo Brokerage Company

A U.S. appeals court has ruled that the Environmental Protection Agency must reconsider three of the biofuel waivers it recently granted to small oil refineries, arguing the agency’s justification for approving the exemptions was flawed. The decision from the U.S. Court of Appeals for the 10th Circuit dated Jan. 24 came after a coalition of biofuel industry groups had challenged the 2016 exemptions for Holly Frontier’s Woods Cross and Cheyenne refineries, as well as CVR Energy’s Wynewood refinery. According to the court’s decision, the EPA overstepped its authority to grant the Holly Frontier and CVR waivers because the refineries had not received exemptions in the previous year. The court said the RFS is worded in such a way that any exemption granted to a small refinery after 2010 must take the form of an “extension”. Biofuel groups cheered the decision and said it could raise questions about numerous other waivers granted to small refiners in recent years. (Source: Reuters)


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