- Disappointing price action in the corn market, as prices failed to hold the session highs and finished with losses. March corn established a new contract low and low close, losing 1 ¼ cents on the session. Strong selling pressure in the soybean market and a surge higher in the US dollar weighed on corn prices on Tuesday.
- Technically, March corn futures failed to push back through the psychological 450 level, setting up the afternoon retest of the lows of the session. The negative price action and weak close will keep sellers active going into Thursday’s trade.
- China reported weak GDP data overnight, which triggered selling pressure across the commodity sector. The Chinese economy grew 5.2% in the fourth quarter, which had analysts concerned about the overall Chinese economy. The slower growth rate weighed heavily on soybeans and the rest of the commodity markets for the early part of the session.
- The soft price action showed that sellers are in control of the market, and any buying strength runs into selling pressure. Hedge Funds continue to push their large net short position in the corn market, now estimated to have over 250,000 contracts.
- The US Dollar Index has rallied steadily since the first of the year. The Dollar Index traded to its highest level in six weeks at the 103-basis point level. The stronger dollar limits US competitiveness for grains and weighed on prices.
- Soybeans ended the day sharply lower following poor GDP data out of China and a lack of Chinese demand for soybeans. Soybean meal was the biggest loser of the day, but soybean oil managed to end the day slightly higher.
- Yesterday, the NOPA crush report showed 195.33 million bushels of soybeans crushed in December, which was well above the average trade guess and a record for any month. The crush was up 10% year over year and up 5% from the prior December high. This should be supportive, but aggressive fund selling, and the South American harvest has pressured soybeans.
- Chinese GDP data showed about 5% annual growth for 2023, but their economic recovery is still seen as uneven and concerning. Some analysts are predicting that the Chinese economy will see another slowdown later this year, which could impact imports of agricultural goods.
- Soybean production in Brazil was estimated at 157 mmt by the USDA last week, but many analysts have that number at 150 mmt or below. The concerning thing has been the lack of soybean purchases by China from Brazil recently after China went on a buying spree last year.
- Wheat attempted a rally today, with March Chicago up over a dime at one point. This could be tied to unconfirmed rumors that there are ships in the US Gulf loading SRW wheat to deliver to China. However, March Chicago ended up closing just a half cent higher, while the rest of the wheat contracts in all three classes settled with losses for the day.
- A combination of a higher US Dollar Index and sharply lower soybean futures likely weighed both wheat and corn today. Additionally, while about 20% of the US winter wheat crop was exposed to the recent cold temperatures, most are not expecting winterkill to be much of an issue. This may have offered some weakness to wheat, as there was some anticipation that crop damage would be a bullish factor.
- As of January 14, EU soft wheat exports reached 16.88 mmt since the season began in July. This compares with 18.17 mmt for the same timeframe last year, representing a roughly 7% decline year over year.
- According to FranceAgriMer, French soft wheat exports for 23/24 are estimated at 17.01 mmt, down from the previous estimate of 17.2 mmt. The stockpile projection also increased from 3.22 mmt to 3.43 mmt.
- As of January 17, Russia’s export duty on wheat has declined from 4,165.9 rubles per mt to 3,946.5 rubles. This represents a 5.3% decrease, and Russian wheat export values remain the world’s cheapest at $240 to $245 per mt. Despite these low prices, Algeria’s recent wheat purchase for up to 650,000 mt of wheat was sourced mainly from Europe.
- The US dairy spot trade was a quiet one on Wednesday with cheese down 0.875c, whey down a penny, butter up 1.25c, and powder unchanged.
- For the week, the US block/barrel average is down 2c to $1.48375/lb as the market still has a hard time holding over the $1.50/lb level.
- The butter market is choppy and lacks direction. Despite all of the up-and-down trade, Class IV futures are as steady as ever holding over $19.00/cwt.
- On Wednesday, February ’24 Class III fell 2c to $15.71 while March lost 4c to $16.14. Volume traded was relatively light.
- News for dairy will pick up next week with a US milk production report and US cold storage report both due out on January 24.
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