AM Comments January 27 2025

Posted on Jan 27 at 07:12

Good morning. Ag markets at the CBOT are mostly lower to start Monday morning trade, led to the downside by spillover selling from the financial markets. News of a new software update from a startup AI company in China over the weekend led to the questioning of the US's dominance in this sector, and has pressured a host of tech stocks in pre-market trading on Sunday evening; NASDAQ futures are also down more than 3.5% as of this writing. The 'risk-off' trade has generally permeated through the rest of the space early to start the week, and has most commodities trading in the red. Corn futures this morning are down 4-6 cents, soybean futures are down 9-10 cents, and the Chicago wheat market is down 4-5 cents. Products are lower, soybean meal is down around $3/ton, and soybean oil is down 70-80 points. Outside markets, like we mentioned, are also trading lower; crude oil futures are down 50-70 cents/bbl, the Dow Jones index is down 320 points and the US$ index is down 30-40 points. The NASDAQ is down 800 points and the S&P500 is down 120 points; of note, the NASDAQ is some 400 points off its lows, which were made just before 5am central time this morning.

 

Today's Reports: Weekly Export Inspections

 

  • As we mentioned to start, headline news coming out of the weekend that has the overall tech sector on edge was the roll-out of the latest version of DeepSeek, an AI tool from a Chinese startup that analysts say is similar to the popular ChatGPT, but that runs on less advanced (cheaper) chip technology. The news has speculative money in the space heading for the exits this morning, which has largely produced the sell-off.

 

  • Friday afternoon's CFTC commitment of traders report showed a relatively quiet week of fund activity in the week ending January 24th; managed money traders were buyers 19,449 contracts of corn (now net-long 311,678 contracts), buyers of 5,497 contracts of soybeans (now net-long 40,330), and buyers of 2,601 contracts of Chicago wheat (now net-short 91,792).

 

  • In soy products, managed money traders were buyers of just 2,286 contracts of soybean meal, and were buyers of 16,564 contracts of soybean oil; this makes them now net-short 61,235 contracts in meal, and net-long 16,564 contracts in oil.

 

  • Also out Friday was the USDA's January cattle on feed report, which showed the January 1 US feedlot herd at 11.823 million head, or 99% of a year ago. Placements in December were seen at 1.642 mil head, and marketings were seen at 1.742 mil head; the placements number was below trade expectations, which analysts think will provide fuel to further the recent rally when markets open back up this morning. To view the full report, please click here.

 

  • The USDA's ag attaché to Mexico on Friday lowered their estimate of the country's production in the 2024/25 season to 23.3 mmt's, down from 23.7 previously and 23.5 in the 2023/24 season. Imports were also adjusted higher by 500k mt's to 25.0 mmt's, which compares to 24.759 mmt's in 2023/24. The latest WASDE update earlier this month pegged Mexico corn imports this year at 24.5 mmt's.

 

  • Brazilian ag officials on Friday said that the soybean import ban enacted on five companies due to phytosanitary concerns would last two months; a spokesman for the ag ministry said that it would continue further investigating the issue, and added that the five units effected represent only a small fraction of the more than 1,700 outfits authorized to export soybeans to China.

 

  • According to the USDA, federally inspected pork production in the week ending January 25th totaled 541 mil lbs, which was down 5.4% from the week prior; beef production was seen at 525 mil lbs, down just 0.3% on the week. YTD pork production is down is down 8.1% compared to 2024, while beef production is down 6.0%.

 

  • In other financial market news, both the US Federal Reserve and the European Central Bank are set to make interest rate decisions this week, with the Fed due on Wednesday and the ECB (European Central Bank) due on Thursday; the CME's FedWatch tool currently shows a better than 95% rates will stay unchanged in the US, while economists assume another quarter-point cut is likely from the ECB.

 

  • The latest tariff news over the weekend had Colombia as the main subject, as President Trump threatened 25% tariffs on all goods from the country before reaching a deal on the return of deported migrants with President Gustavo Petro; of note, Colombia was the third largest buyer of US corn in the 2024 calendar year. Also as a reminder while on the subject of tariffs, Saturday marks the February 1 'deadline' for tariffs on Canada and Mexico, meaning headline risk from that matter exists between now and then.

 

  • As temps across the US look to warm up this week, the Commodity Weather Group on Friday said they estimate as much as 15% of the US winter wheat crop saw damage from excessive cold weather last week. Winterkill is notoriously difficult to assess, but the lack of snow cover across a wide majority of the Wheat Belt means crops were mostly exposed to the brunt of the frigid weather.

 

  • Models continue to be in good agreement on temps that are some 5-15 degrees F above average for most of the country besides a small part of the far northern Plains this week, while even the 10-15 day outlooks show cold air limited mostly to Canada and the north while the southern and southeastern parts of the US stay on the warm side.

 

  • Precip-wise for this week, models are also in fair agreement on the remnants of a low pressure system providing light rains through the southeast today, while another system is expected to provide Gulf moisture to the same area beginning Wednesday in TX and working east through the southeast and southeastern Midwest into the end of the week. As temps increase, most of this precip will fall as rain, with snows limited mostly to areas at elevation around the four-corner states and parts of the far northeast.

 

  • Rains in Argentina fell mostly as expected over the weekend, with 72-hour satellite data showing pockets of 2+" rains in the west and the northwest, while areas in the east saw lighter/more scattered totals of 0.1-1". Southern Brazil also picked up good moisture, while most of Paraguay was short-changed and received just spotty showers. Central Brazil saw spotty moisture also, while areas further north continued to see normal rains.

 

  • Five-day forecasts for this week show continued good rain potential in parts of northern and north-central Argentina, while areas in the south and southeast see less potential. The whole of Brazil is expected to continue seeing rains, with totals generally estimated between 2" and 4". There was no weekend change to the extended outlook, as week two maps continue to show a return to dryness in Argentina, while all but far northeast Brazil looks to continue receiving moisture.