Grain markets closed lower on Thursday:
Corn -12 cents/bu (Mar @ 3.75 ½ )
Soybeans – 4 ¾ cents/bu (Mar @ 9.24)
Chi Wheat – 8 cents/bu (Mar @ 5.65 ¼ )
Cdn $ -0.00040 (76.64 cents)
WTI Crude Oil +0.71/barrel (58.52)
Grain markets ended the day lower, with cereal grains suffering significant losses. Market direction continues to be dominated by fall out from yesterday’s USA/China Phase One trade agreement signing. For anyone that was following the dialogue heading into the signing ceremony, the trade agreement details are as expected, nothing shocking. In light of the perceived reduction in trade tensions between the two economic superpowers, equity values are soaring, hitting new record highs again today (Dow futures closed up another 211 points today to settle at a record close of 29,240 points). However, grains have been less enthusiastic, suffering from the typical “buy the rumor, sell the fact” mentality.
It is true that China has committed to by an all time record high 36.5 billion dollars of USA ag products in 2020, and a further 43.5 billion dollars in 2021. But the fact that the agreement contains a clause citing “market conditions” as a potential excuse for not reaching these targets is creating angst for many. The additional fact that the addendum outlining specific commodity purchase targets was not included either is also raising flags – again, most of us were fully aware that the Chinese did not want those numbers made public, for fear of backlash at home. The fact of the matter remains that the USA continues to have significant economic penalties to apply to China, should they not perform, but for now, the market wants to see evidence of Chinese buying.
The USDA Weekly Export Sales Report was released this morning, and the numbers were actually very good, relative to expectations. However, the overriding concerns about potential Chinese noncompliance with the Phase One trade agreement trumped the decent sales report today. Actual sales data is listed below (in thousands of tonnes):
Actual Trade Estimates Last Week Last Year
2019/20 Corn 784.7 400 to 800 161.9 1009.4
2020/21 Corn 207.0 200 to 250 0.0 4.9
2019/20 Soybeans 711.4 400 to 800 335.5 1088.6
2020/21 Soybeans 0.0 0 to 50 3.4 63.1
Wheat 650.6 200 to 500 80.6 595.8
Corn’s horrible performance today was tied to the fact that today’s export sales, while on the high end of expectations, fell further behind the pace of sales from last year. This leaves the USA export sales to date some 512 million bushels behind the pace at this time last year. With Argentina now reported to be 91% planted on their 2020 corn crop, the trade is assuming that South American corn production will be average, given current weather forecasts. That is implying solid competition for USA corn exports once the southern hemisphere crop matures. I think that today’s downward price action was overdone, but it is a bit of a self fulfilling prophecy for funds right now. They are adding to their short in the market, but until we see evidence of export buying, there is little incentive for commercials to go long corn.
Soybeans posted modest losses today, but of course, beans had the biggest losses yesterday. We are now down 20 cents/bushel in the past two days. China was responsible for 30% of the export bean buying last week (216,600 tonnes). Chinese purchases typically start to wane at this time of year, as South American beans become available. The jury is still out on whether or not the new trade deal might inspire contra seasonal buying from China. There were no flash USDA daily sales of beans to China today. Soybeans did trade below their 100 day moving average today, which is a technical concern.
Wheat values slumped today in concert with corn, although wheat did manage to rally up 5 cents/bu off of it’s daily lows. General malaise in grain values allowed for some profit taking in wheat futures after the huge rally we have enjoyed. USA wheat is said to be still overpriced relative to Black Sea wheat, despite the rise in world wheat bids. The market is still trying to figure out whether or not Russia will truly enact restrictions on wheat exports, as was rumored earlier in the week.
On the day, funds were thought to have been big sellers, across the board. Funds are credited with selling a whopping 27,000 corn contracts (short 116,000), 8,000 soybean contracts (short 22,000), and selling 5,000 Chicago wheat contracts (long 38,000).
Thank you to everyone that came out to the 1st annual Wanstead Farmers Funspiel at the Forest Curling Club today. I was impressed by some unexpected athletic prowess, and believe that all would agree that the day was a huge success. I hope that next year’s event will even be bigger, and that maybe we can convince a few more ladies to partake in the day.