Morning Commentary

May corn up 4 at $3.795

May beans up 1 ¼ at $9.0225

The DOW is down

USD is stronger

Crude oil up $1.12 at $47.87

Good morning,

Corn prices are coming off the biggest one day gain since mid-January. Traders wonder if the rising tide simply lifted all boats and will be short lived or could a longer-term bull run be brewing? Many technical traders argue that corn prices may now be comfortably numb and content trading in a sideways channel between $3.50 and $3.95 per bushel until more is known about coronavirus, Chinese buying, and upcoming U.S. and South American weather. Bulls are pointing to dry weather and excessive heat in Argentina and what appears to be overly wet Spring conditions in many important parts of the U.S. On the flip side, bears continue to point towards “demand” uncertainty, macro market headwinds, more U.S. acres, and burdensome ending stock estimates.

Soybean bulls believe there could be a window of opportunity for U.S. suppliers as Argentine exporters and crushers struggle to source old-crop supply and heavy rains and port complications in Brazil create a few logistical constraints. Bulls are also pointing to some recent weakness in the U.S. dollar as another possible tailwind. Technically, the market has rebounded back a bit but still faces stiffer resistance ahead in the MAY20 contract up between $9.10 and $9.20 per bushel. The NOV20 contract is looking at stiffer resistance up in the $9.20 to $9.30 range. There’s not a lot fresh or new to report…

Cattle: Much lower cash trade last week on moderate volumes. Most areas traded 4-5.00/CWT lower as a result of softer fundamentals and macro pressures in surrounding markets. The global health crisis and political uncertainty seemed to particularly spook the markets starting last Sunday night and continue to leave a wide wake as of now. So, what should we expect going forward? Short-term the cattle markets are no doubt oversold and due for a technical rally. Apr20 LC is spot as of today and with a 5.00 discount to cash will potentially support the nearby. Fund roll is on top of us and will see more sell Apr and buy Jun this week. The larger fund roll will come later in the week. Cash is potentially higher this week, but commercial hedgers will not let a strong basis slip away and thus could begin to see cash slip out at lower prices. The commitment of trader’s report was released last week and showed a net non-commercial position as short for the first time in quite a while. This move has less to do with increasing shorts and more reflective of the liquidating long. One thing to keep in mind in regards to the non-commercial net position is the last time they were net short was late Sep-early Oct 2019 and before that, it was May-Jun 2018. In both situations, the futures experienced sizeable rallies in the following weeks. Commercial hedgers are nearing the 40% hedged level as they have bought into the recent break which is seasonally low for the time period and rather early to be this under hedged. So many factors whirling about in the market place the moment. Making solid/wise business decisions for you and your operation remains vitally important. Trey Warnock – Amarillo Brokerage Company

Fears that the new coronavirus might slow the global economy have sent already-depressed natural gas prices tumbling to their lowest level in years. The virus marks the latest force of nature to slam U.S. gas producers, who were already contending with abnormally mild winter weather across the Northern Hemisphere. And it shows how tightly tied to overseas economic activity the U.S. gas market has become after functioning in isolation for decades. Back in 2016, just the domestic market was flooded as a big ramp in the number of facilities that load ships with liquefied natural gas, or LNG, was just beginning. Now, thanks largely to those export terminals, the global market is glutted. Analysts still generally expect global LNG demand will grow and lift U.S. gas prices from their depressed levels, but probably not this year. “The global gas glut will persist through at least 2021,” said Francisco Blanch, an analyst at Bank of America, which in January reduced its 2020 price estimate to $1.99 from $2.35. Meanwhile, Goldman Sachs Group analysts last week cut their 2020 price forecast for U.S. gas to $2.20, from $2.50. Rystad Energy reduced its forecast to $2.26, down from $2.50, and slashed its expectations for prices in Europe and Asia by -29% and -27%, respectively. (Source: WSJ)


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