PM Comments January 22 2025
Good afternoon. Choppy trade through the morning hours led to mostly lower closes at the board of trade on Wednesday, with bean oil being the downside leader. Corn and beans flopped around either side of unchanged for a while after the 8:30am central time reopen, but selling emerged beyond mid-morning to drive prices lower through the noon hour and into the close. As far as news goes, the market traded mostly the same general themes as yesterday, with tariffs and Trump trade policy again being the primary drivers of price in the ag space, while South American crops and Argentine weather continue to linger in the background.
CH closed Wednesday at 4.84 1/4, down 5 and 3/4. CK was down 5 and 3/4 also at 4.94. SH closed at 10.56, down 11 and 1/4. SK finished at 10.68 1/4, down 9 and 1/2. All 4 contracts made new highs for the week before reversing course and finishing lower. WH closed at 5.54, down 4 and 3/4. Products were mixed, March soybean meal closed at 315.80, up $4.80/ton, and March soybean oil closed at 44.42, down 1.35. Livestock markets were firmer, February live cattle closed at 200.05, up $3.00, March feeders closed at 273.07, up $5.82, and February hogs closed at 81.47, up 27 cents. New contract highs for both live cattle and feeders, while hogs had an inside day. Outside markets are mixed, crude oil futures are down 20-40 cents/bbl, the Dow Jones index is up 160 points and the US$ index is up 10 points. The S&P500 is up 50 points and the NASDAQ is up 300 points.
Spreads were mostly lower, corn spreads were unchanged to down 5 and 1/2 cents, and soybean spreads were down a penny to down 8 cents. CH/CK closed unchanged at -9 3/4, while SH/SK closed at - 12 1/4, down a penny and 3/4. The SK:SN made a new high for the move today at -8 before closing a penny lower at -10 1/2.
USDA this morning announced daily sales flashes of 136,000 mt's of corn for delivery to unknown destinations during the 2024/25 marketing year.
Policy talk once again dominated most of the market chatter on Wednesday, as President Trump late yesterday signed an order effectively halting any new federal regulation, and also forcing a review by a Trump appointee of any regulations currently in pending that had been submitted before January 20th. The notice also outlined a 60-day postponement of the approval of any regulations that are currently published in the Federal Register, which would include the preliminary 45Z guidance that was issued by the Biden administration before leaving office. Other notable Trump news at mid-week included the reintroduction of a waiver for year-round E15 ethanol sales, which was part of yesterday's declaration of energy emergency, and also fresh threats of sanctions towards Russia that came with further requests to bring about an end to the war in Ukraine. Posted Trump, "... If we don't make a "deal," and soon, I have no other choice but to put high levels of Taxes, Tariffs, and Sanctions on anything being sold to Russia by the United States, and various other participating countries." The early stages of rhetoric between Trump and Russian President Putin have on the surface seemed at least cordial, leaving the trade curious as to whether such dialogue will actually produce results.
Technical trading seemed to be the other main factor in the markets on Wednesday aside from weather, as corn futures are reaching overbought levels, and soybean futures rolled over after trading near their 200-day moving average on the March contract for the first time since May. Unless/until losses are realized via combine data in Argentina and Brazil, markets are likely overvalued at $5.00 and $11.00 basis the board, especially with FOB offers in South America more than a dollar below those in the US on beans and only slightly above those in the US on corn. And as we knock on the door of full-blown harvest activity in Brazil, this situation likely doesn't improve in the short-term. Should the markets take a corrective pullback, we would see initial downside objectives in corn near the 4.75 level and in soybeans near the 10.20 level.
We also mentioned this morning that China had stopped soybean shipments from five companies in Brazil due to phytosanitary requirement failures; cash connected sources had this news yesterday, and say that it likely attributed to the run-up in prices to start the week. Further details on the matter say the concerns arose following the finding that some vessels had been contaminated with chemicals, pests or insects according to sources familiar with the matter. Traders don't expect the ban to be long-lived but say it ultimately depends on the Brazilian firms' ability to provide proof that they've figured out what led to the failures and provide a plan to rectify them. Some in the industry feel the situation could possibly be the result of the last of the old crop beans being shipped out before new crop harvest begins in earnest, which we can't rule out.
Argentine weather forecasts at mid-day expanded the area expected to see moisture over the next week to include areas slightly further east and south, but the 10-15 day outlook continues to show a return to drier conditions once these rains have passed. In southern Brazil however, models see rains sticking around into the first week of February, while nearly all of the country is expected to see upwards of 3-4" between now and then. Temperatures at mid-day trended slightly warmer in the areas surrounding Uruguay, but otherwise saw a similar outlook to what was offered overnight.
Mid-day weather forecasts for the states were also largely unchanged on Wednesday, as the overall pattern of flow coming out of the Canadian Prairies and into the northern Midwest/Great Lakes region remains the dominant feature into next week. This will keep moisture present in these areas, with Lake Effect snow expected to continue impacting the downwind, or eastern side of the regions surrounding the Great Lakes. Elsewhere, the southeast will see a few dryer days before low pressure systems return to the area next week, but warmer temps will allow this precip to fall as rain as opposed to the snow seen the last couple days. And while on the subject of temps, models are in decent agreement on a shot of warm air coming for the eastern 2/3's of the US next week and lasting into the opening days of February. Alaska is expected to turn off cold, with the models in a bit of disagreement as to just how far into the PNW this cool air is able to make it. Wek-two precip maps are noticeably wetter across the upper part of the US and also through most of the country east of the Mississippi.