Ag markets lose Friday’s bid
DES MOINES, Iowa -- On Friday, the CME Group’s farm markets finish mostly lower.
At the close, the May corn futures finished unchanged at $3.65. July corn futures ended ¼¢ lower at $3.68½.
May soybean futures closed 10¾¢ lower at $8.48¼. July soybean futures settled 9¾¢ lower at $8.56.
May soymeal futures closed $3.30 per short ton lower at $299.50. May soy oil futures settled 0.01¢ lower at 26.37¢ per pound.
May wheat futures finished ½¢ higher at $5.06.
In the outside markets, the NYMEX crude oil market is $0.65 per barrel higher, the U.S. dollar is higher, and the Dow Jones Industrials are 779 points higher.
Britt O’Connell, cash adviser for Commodity Risk Management Group, says that we are seeing early gains now fading into the second half of the trading session.
“Most markets are following the lead of the stock market. Early this morning the Dow was up 1,100 points and we are now trading a gain just half of that. Crude oil traded as much as $2 higher and is now trading 25¢ lower. Corn, beans, and the livestock markets are all following the same pattern. Each had posted positive gains earlier in the session and are now lower, or in the case of corn clinking to a penny higher,” O’Connell says.
She added, “Markets that are driven by fear, panic and chaos are not rational. These are not markets that one should try and outguess or beat. All of the technicals and fundamentals can be thrown out the window. I am hopeful that very soon cooler heads prevail. When hysteria passes I would fully expect a recovery of some capacity in each of these markets,” O’Connell says.
On Friday, private exporters reported to the USDA export sales of 136,000 metric tons of corn for delivery to South Korea during the 2019/2020 marketing year.
The marketing year for corn began September 1.
Al Kluis, Kluis Advisors, says investors should be careful trying to pick the bottom of the market.
“Our markets saw more of the same on Thursday. As the U.S. puts in travel restrictions to more countries and more major events are canceled, people around the world get more nervous. U.S. stock prices had another rough day, and that spilled over into commodities. However, on a positive note, we did have some great weekly export sales for corn this week. This has been the trend lately. We are still selling U.S. commodities, but that is being overshadowed by the negative stock market,” Kluis told customers in a daily note.
Kluis added, “Be very careful trying to buy commodities now. There is an old saying that applies: Never catch a falling knife. Prices look cheap, but consider options instead. Until the stock market stabilizes, commodities will be under pressure.”
Thursday’s Grain Market Review
On Thursday, the CME Group’s farm markets tumble.
At the close, May corn futures finished 8¾¢ lower at $3.65¼; July corn futures ended 7¾¢ lower at $3.68¾.
May soybean futures settled 13½¢ lower at $8.59¾; July soybean futures ended 14¾¢ lower at $8.65¼.
May wheat futures settled 7¼¢ lower at $5.05¾.
May soy meal futures closed $1.20 per short ton lower at $302.80. May soy oil futures are 1.15¢ lower at 26.48¢ per pound.
In the outside markets, the NYMEX crude oil market is $1.96 per barrel lower, the U.S. dollar is higher, and the Dow Jones Industrials are 1,994 points lower. At 9:45 a.m., the Dow Jones Industrials plunged 2,100 points (8.0%), triggering the stock market’s circuit breaker. After restarting, the market continued its plunge.
Greg Lumsden, Cargill MarketGuide, says this week has been dominated by broad-based selling across all asset classes.
“As the coronavirus outbreak worsens, we have seen widespread fear of global economic slowdown. Given the recent developments around travel restrictions and limitations on sporting events, the outside markets have taken another big leg down,” Lumsden says.
Lumsden adds, “On top of the macro uncertainty and fear selling, we are also seeing a large drop in the Brazilian real (touched 5/USD), which is making our beans very uncompetitive. While it may not feel like it today, the ag markets are holding up pretty well given the 20%+ drop in equities and energy markets. Until there is relative calm in the outside markets, grains will be subdued, but there are a few things that bear watching as we enter into spring. The weather outlook still does not support an early start to the planting season. China, who is ahead of the curve in terms of containment on coronavirus can still buy ag products, giving us a lift. Lastly, the South American safrina crop is far from made, and the weather will be watched more closely over the next few weeks.”
Al Kluis, Kluis Advisors, says the grain markets are weighed down by the coronavirus.
“The WHO (World Health Organization) declared the coronavirus was a pandemic. As a result, the stock market sold off and pulled commodities with it. Fundamentals for U.S. grain are stagnant, since demand is still lacking. As we wait in uncertainty over the coronavirus, we will continue to see money flow to the sidelines,” Kluis told customers in daily note.
Kluis added, “We have lower interest rates and cheaper gas prices. Once we get the coronavirus under control, we could see a nice boost to our economy. People will have some extra spending money. ”
On Thursday, the USDA released strong corn, weak soybean weekly export data.
- Corn: 1.59 million metric tons (mmt) vs. the trade’s expectations of between 600,000 and 1.2 mmt
- Soybeans: 304,200 mt vs. the trade’s expectations of between 400,000 and 700,000 mt
- Wheat: 480,800 mt vs. the trade’s expectations of between 350,000 and 650,000 mt
- Soybean meal: 171,900 mt vs. the trade’s expectations of between 125,000 and 400,000 mt
Wednesday’s Grain Market Review
On Wednesday, the CME Group’s soybean market fell under the pressure of the global market weakness.
At the close, May corn futures settled 3¢ lower at $3.74; July corn futures ended 3¢ lower at $3.76.
May soybean futures closed 3¢ lower at $8.73¼; July soybean futures settled 3¾¢ lower at $8.80¼.
May wheat futures ended 9½¢ lower at $5.12¾.
May soy meal futures ended 30¢ per short ton lower at $301.60. May soy oil futures closed 0.14¢ lower at 27.53¢ per pound.
In the outside markets, the NYMEX crude oil market is 86¢ per barrel lower, the U.S. dollar is higher, and the Dow Jones Industrials are 1,400 points lower.
On Wednesday, the World Health Organization designated the novel coronavirus as a pandemic, as more than 118,000 cases of it have been reported worldwide, which have resulted in 4,291 deaths.
The Dow plunged following the announcement. The 30 industrials has now entered a bear market, falling 20% from its February peak.
Darin D. Fessler, Lakefront Futures & Options LLC, says the markets are focused on the outside markets.
“Outside fears continue to impact the ag sector but also fundamentals for corn could really turn bearish should we get 94 million acres at month end. Trendline yields that happen over 80% of the time over the last 30 years have to be respected. Watch crude oil. This slide in prices is not bullish ethanol putting more pressure on the corn market. I continue to think soybeans could be a sleeper market should demand come back and say we don’t get enough acres,” Fessler says.
Private exporters reported to the USDA export sales of 194,000 metric tons of soybeans for delivery to unknown destinations. Of the total, 126,000 metric tons is for delivery during the 2019/2020 marketing year and 68,000 metric tons is for delivery during the 2020/2021 marketing year.
The marketing year for soybeans began September 1.
Al Kluis, Kluis Advisors, says the equity markets will need to keep improving before the grain markets gain strength.
“The stock market and other major outside markets will need to keep posting gains in an orderly fashion before grains will get back to a more normal trading pattern.”
Kluis added, “The monthly USDA report on Tuesday did not waver far from prereport estimates. World wheat stocks were larger than traders expected. However, wheat prices are near contract lows in many cases. The news was not bearish enough to encourage new shorts to jump in at current prices. The outside markets had a roller-coaster day on Tuesday that ended with most markets posting sizable gains.”
Tuesday’s Grain Market Review
On Tuesday, the CME Group’s farm markets end higher.
At the close, May corn futures finished 4¾¢ higher at $3.77½; July corn futures finished 4½¢ higher at $3.79½.
May soybean futures settled 6¼¢ higher at $8.76¾; July soybean futures are 5¼¢ higher at $8.84¼.
May wheat futures finished 3½¢ higher at $5.22¼.
May soy meal futures settled $1.50 per short ton higher at $301.90. May soy oil futures closed 0.13¢ higher at 27.67¢ per pound.
In the outside markets, the NYMEX crude oil market is $3.09 per barrel higher, the U.S. dollar is higher, and the Dow Jones Industrials are 455 points higher.
On Tuesday, private exporters reported to the USDA export sales of 123,000 metric tons of soybeans for delivery to unknown destinations during the 2019/2020 marketing year.
The marketing year for soybeans began September 1.
Al Kluis, Kluis Advisors, says the equity market's collapse sets up a great buying opportunity.
“On Monday, the collapse of the stock market and energy futures put pressure on the grain and livestock markets," Kluis stated in a daily note to customers. “This collapse is setting up some great buys in the grain and energy markets. That is why we made recommendations yesterday to buy corn, soybean meal, and fall fuel needs."
Kluis added, "We are watching the oil trade war between Saudi Arabia and Putin. If Putin backs down and agrees to a production cut, then crude oil prices would rally back $10 to $12 per barrel the next day. This could take the stock market – and the entire commodity complex – higher at the same time. Saudi Arabia can produce crude for $17 per barrel, while Russia’s cost is $42 per barrel. Saudi Arabia is likely to win this war."
Monday’s Grain Markets Review
On Monday, the CME Group’s farm markets sink from the outside markets tanking.
At the close, May corn futures finished 3¼¢ lower at $3.72¾; July corn futures closed 4½¢ lower at $3.75.
May soybean futures settled 21¾¢ lower at $8.70; July soybean futures ended 21¢ lower at $8.79.
May wheat futures ended 2¾¢ higher at $5.18¼.
May soy meal futures closed $4.70 per short ton lower at $300.40. May soy oil futures settled 1.21¢ lower at 27.54¢ per pound.
In the outside markets, the NYMEX crude oil market is $9.70 per barrel lower, the U.S. dollar is lower, and the Dow Jones Industrials are 2,066 points lower.
The fall was so hard and fast that the stock market’s circuit breaker system was triggered Monday. Once the Dow Jones Industrials dropped 7%, the sell-off shut the market down for 15 minutes. The next trigger for a shutdown is a drop of 17%. As of 9:20 a.m., the stock market had bounced off its morning low.
Global market carnage spreads, partially due to the spread of the coronavirus, but mainly due to the crude oil price war between Saudi Arabia and Russia. Saudi Arabia dropped crude oil prices, over the weekend, by 20%.
Scott Shellady, head of U.S. producers for Marex Solutions, says investors are fearful, thus, the striking moves.
“That circuit breaker operates as a breather for the market. It just lets people get their feet under them. The market has bounced since then. The levels that trigger the circuit breaker are 7%, then 13%, and finally 20%.”
Shellady added, “The virus has people trading from a position of fear. It is getting close to being overdone. Everything is getting sold...good companies and bad companies together.”
Jack Scoville, PRICE Futures Group, says the markets crater with the grains caught in the crossfire.
“It looks like a giant risk-off mentality is hitting all markets including grains and the stock markets. The fact that the S&P went limit down means a circuit breaker is triggered. The question is whether we will have even more down coming. It's been pretty wild here. The coronavirus combined with the Saudi-Russian crude oil war is what is causing all of this carnage. Just hang on to your hats is all I can say,” Scoville says.
On Monday, private exporters reported to the USDA export sales of 123,500 metric tons of soybeans for delivery to unknown destinations during the 2019/2020 marketing year.
The marketing year for soybeans began September 1.
Al Kluis, Kluis Advisors, says the global markets are pushing down the ag markets.
“Global stock and energy prices are sharply lower, which is again putting pressure on the grain markets. Grains are all lower, but well off the lows made right at the open,” Kluis stated in a daily note to customers.
Kluis added, “The grain markets are holding up quite well considering the hard down move in the global stock and energy markets. I expect a major low this week in the grain and energy markets.”