Morning Comments

Mar corn +6 at 5.545

Mar beans +7 at 13.7375

The DOW is UP


Crude oil +.65 at 57.51


Good morning,


Overnight grain markets traded higher with pre-report positioning a primary focus of today’s action. Corn is challenging last week’s contract high, wheat is bouncing out of support while soybeans remain in their choppy sideways range. The outside markets feature crude extending its rally with new highs over $57.50/barrel with equities also firming, the dollar is trading 17 pts higher although that is just a fraction of Friday’s sharp selloff in the currency. No 8 am sales reported today.

The weather outlook features extreme cold sticking around in the US this week with some winterkill possible in N Plains winter wheat noted but the cold is probably more pertinent to the energy and livestock markets. Argentina has entered another dry stretch where crop areas that have not seen recent rains (parts of La Pampa and Buenos Aires) should see increasing stress. Brazil has had its challenges, as always, but it appears a record soybean crop is on its way with the only question being how far back the harvest delays will push back full go shipments of the new crop (and Safrinha corn plantings). Harvest is reported at 4% complete, up from 2% last week and well behind normal with the slowest pace in 10 years according to AgRurual.

The USDA crop report is Tomorrow. This report carries more importance than normal for a Feb report due to the dramatic tightening in the S&Ds over the past 5 months. It will be an opportunity to bring the soybean bull stat realities back to the forefront where momentum has stalled since making new highs following last month’s crop report. Soybean prices have yet to discourage export or domestic crush usage according to data up to this point. We anticipate the ongoing tightening trend of domestic and world corn, wheat and bean stocks to continue, ranges and avg. trade estimates are shown below. Week 2 options expire on Friday and offer the least expensive time value for protection through the report.


Overnight, the corn market was mostly firm, heading into the biscuit break 5-6 cents higher in the old crop and a penny higher in new crop. The major influence on trade early will be positioning in front of tomorrow’s USDA report. The Feb WASDE is usually among the least influential reports of the year; however, given the trend of tightening carryout expectations in the row crops, it will get a little more play than usual! Still, only modest tweaks to the domestic S&D and world stats are likely, barring some sort of surprise adjustment on China carryout. Today is also Day 2 of the Goldman Roll; H/K has been volatile of late, trading 2-3 cent ranges each of the past three days (which is large for a calendar spread). Went from a high of nearly +5 over Thursday to nearly even money today. News flow is relatively light to start; the shift in the forecast to the first major cold spell in the U.S. winter is grabbing headlines but not creating a ton of futures volatility? China goes on a weeks-long holiday at the end of this week; it will be interesting to see if they make any last minute purchases ahead of time. South American weather remains favorably mixed, and the CME raised corn futures margins again Friday.


Swine Inspection Rule Challenge Moves Ahead: The United States District Court of Northern District of California last week allowed a lawsuit contesting the Trump administration’s update on swine slaughter line inspections to proceed. The court denied the government’s motion to dismiss the case, saying that the groups had the legal standing to pursue their claims. USDA’s Food Safety and Inspection Service’s New Swine Inspection System was enacted into law in the fall of 2019. The voluntary program increases efficiency and effectiveness of the federal inspection process, allows for the rapid adoption of new food-safety technologies in pork slaughter, and has the potential to increase U.S. harvest capacity. Plaintiffs assert that the rules will harm consumers by eliminating statutory requirements that federal government inspectors perform critical inspection responsibilities, instead handing these over to slaughter plant employees. The lawsuit also challenged the rules’ lifting of limits on plants’ slaughter line speed. The suit is one of three that have been lodged around the country challenging the legality of the swine slaughter rules.


Australia Exported Record Volume of Wheat to China: Australia shipped 2.5 million mt of wheat in December 2020, up 173% from December 2019, according to data obtained by S&P Global Platts. A crop turnaround from three consecutive drought years to the second largest wheat production ever, estimated at 31.2 million mt, coupled with tight export supply from other major wheat producers, has helped Australian suppliers so far this season (October 2020-September 2021). China was the number one destination, accounting for 32% of the total exports with shipped volume at just over 800,000 mt. This marked the largest ever monthly wheat export to any single country, despite trade tensions being at an all-time high between the two countries. China has been on a grain buying spree to replenish state reserves and fulfill its obligation to the World Trade Organization. However, the main factor encouraging Chinese buying was the price of new crop wheat at the time of purchase, sources said. Behind China was Vietnam, Indonesia, and the Philippines. otal export volume to the top three southeast Asian countries in December was up +178% year on year.


Darren, David, and Elizabeth


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