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Morning Commentary

March corn up ½ at $3.8275

March beans up 6 ½ at $8.86

The DOW is up

USD is stronger

Crude oil up $1.26 at $50.87

Good morning,

Corn bulls are happy to hear rumors and talk out of China, despite complications from coronavirus, Asian leaders still plan on meeting commitments agreed to in the recent “Phase 1” trade deal. Saying even though the Chinese purchases might be delayed it’s unlikely they will need to reduce or back out of agreed-upon talks and details. Bulls are also pointing to U.S. exports being highly competitive (cheaper than Argentine and Ukraine suppliers) and the fact demand could actually creep higher in the weeks ahead. There’s also talk that corn used for feed demand could eventually push higher, especially if we see anticipated stronger global demand for U.S. livestock. Bears are pointing to mostly cooperative weather in South America, more U.S. corn acres in 2020, and continued headwinds in the ethanol space. Technically, the market still feels somewhat range-bound. The 100-Day Moving Average in the MAR20 contract is just under $3.88 per bushel and the 200-Day Moving Average is trading just under $4.05 per bushel.

Soybean prices still appear to be tied directly to headlines out of China. If the Chinese government looks to be gaining an upper hand on the coronavirus the soybean market responds in a positive manner and is able to focus on a more bullish set of fundamentals. If the virus headlines paint a more dire picture soybean bulls pause and take a couple of steps back on the uncertainty. Bears are pointing to the fact the Brazilian soybean crop is getting larger as the harvest advances. There’s also continued talk of Chinese buyers purchasing more Brazilian soybeans cargos for early-Spring delivery. Don’t forget, as Bloomberg reminded us earlier this week, BR-163, the critical Brazilian road where soybean trucks would frequently get stuck in the mud, and is a reliable link between major western growing areas and the country’s northern ports that were built up by companies including Bunge Ltd., Archer-Daniels-Midland Co. and Cargill Inc. Transportation costs are already falling, and the journey for crop supplies has been cut down to two or three days from an average of five. Technically, the MAR20 contract started the week by posting fresh new multi-month lows, prices not seen since mid-May. This contract has traded for months between $8.80 and $9.60 per bushel so the recent breakout to the downside has raised some eyebrows and needs to be closely monitored.  Stable action over 901.5 confirms an end to the washout.  Sustained trade below 8.675 projects a target 8.5025. 

Flood-related federal crop insurance payouts for the 2019 growing season total more than $6.4 billion so far — the costliest on record. Most of those indemnities are tied to the spring and summer floods across states like North and South Dakota, Minnesota, and Illinois, according to an analysis of USDA data by Steve Bowen, a meteorologist and head of catastrophe insight at Aon, an insurance company. Bowen notes that saturated soils across the Plains and Midwest may set the stage for additional flooding this year. Bowen said that in terms of overall economic costs — including damage to agriculture, infrastructure and other property — the 1993 floods along the Mississippi and Missouri rivers remain the costliest disaster in modern history at $38 billion in today’s dollars. Last year’s disaster cost about $20 billion, he said. USDA economists last year found that more frequent and intense storms caused by climate change will ratchet up the price of crop insurance by between 4 percent and 22 percent, depending on future rates of greenhouse gas emissions. (Source: Politico)

 

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