PM Comments February 4 2025
Good afternoon. Another choppy trading day at the Board of Trade on Tuesday, as an overnight sell-off once again failed and gave way to higher price action throughout the day session and into the close. Not a lot of new news throughout the day, as ongoing themes of tariffs and managed money flows largely dominated price action for the second, and looks to largely continue doing so for the foreseeable future.
CH closed Tuesday at 4.94 1/2, up 5 and 3/4 CK closed at 5.04 3/4, up 5 cents. SH closed at 10.75, up 16 and 3/4. SK was up 15 and 1/4 at 10.88. WH finished at 5.77, up 10 1/4. Products were mixed, March soybean meal closed at 314.0, up $10.30/ton, and March soybean oil closed at 45.76, down 75 points. Meal closed the open chart gap from January 24th, and oil had a gap-lower open last night, but it is not open on the chart. Livestock markets were lower, February live cattle closed at 201.87, down $1.10, March feeders closed at 268.25, down $2.25, and February hogs closed at 85.07, up 75 cents. Outside markets are mixed, crude oil futures are down around 70 cents/bbl, the Dow Jones index is up 70 points and the US$ index is down 105 points. The S&P500 is up 30 points and the NASDAQ is up 230 points. New lows for the move in crude oil, and new contract highs in gold and coffee.
Spreads were mostly firmer, corn spreads ended Tuesday down a quarter cent to up 3 cents, and soybean spreads were up a penny to up 6 and 1/2 cents. CH/CK closed at -10 1/4, up 3/4 of a cent, and SH/SK closed at -13 up a penny and a half.
USDA this morning announced daily sales flashes of 132,000 mt's of corn for delivery to South Korea during the 2024/25 marketing year. Interestingly, this sale matches the one announced a week ago, and was the first daily sales flash since then.
Technically, both new crop corn and soybeans each made new highs for their respective moves this morning, as buyers seemingly continue to have propensity to add longs to their already sizeable position. And in the case of the old crop, March contracts again traded right near the highs made the last couple weeks, but were unable to push through. March soybeans also closed above their 200-day moving average for the first time since the last trading day in 2023; prices gapped below the 200-day on the first trading day of 2024, and have been unable to close above that level ever since until today. Looking at the big picture, we continue to not see a lot of reason fundamentally for corn to surpass $5 or beans to surpass $11 for any prolonged period until either a) a new trade deal that mandates buying of soybeans from China is signed or b) a loss of safrinha corn planted area is confirmed in Brazil due to latent soybean harvest. That being said, should managed money want to continue hedging perceived tariff inflation risk by buying ag commodities, we can not rule out a further rally above these levels at least in the short-term. Should this occur, we would view it as a selling opportunity for both crop years as the bottom line remains that economically, trade wars long term are not bullish for any party involved. South American weather also remains a primary focus through February and March, but action the last two days shows that traders/algorithms clearly have a significant amount of focus on what is happening politically.
Speaking to which, we don't have a lot of new detail on the tariff front as of this writing, with Trump and Chinese President Xi Jinping said to be taking part in a phone conversation at some point later today. Most sources familiar with the matter feel that the talks are unlikely to yield deals similar to what happened with Canada and Mexico yesterday due in part to the fact that a quick concession on the part of the Chinese would look like a weak move to start a new era of relations with the US. We would mention though that China is in a far worse position this time around economically in terms of being able to take a more hardline approach to dealing with Trump than they were the first go around, which leaves questions as to how Xi might approach the talks this time. However, that no US ag products were listed in China's initial list of retaliatory measures was taken by some as a possibility that a deal similar to the Phase One deal signed in 2020 was still possible.
Weather forecasts for South America at mid-day on Tuesday were little changed from Monday's runs in Argentina, but offered a beneficial drier shift to central and east-central Brazil both in the short term and in the week two output. In Argentina, thunderstorm activity will continue providing sporadic rains to areas south and east of Buenos Aires for the rest of this week, while forecasts into next week continue to offer a return to wetter conditions in the north. And back to Brazil, a pocket in the south-central part of the country looks to continue seeing normal rains, but otherwise, areas to the north look to see a drier shift that will hopefully allow for an increase in soybean harvest pace. Temperature forecasts for both countries remain little changed, with heat largely confined to northern and northeast Argentina. East-central Brazil is trending slightly above average, but along with desired drier weather, a little heat to aid in the dry down of soils would be welcome here.
Will keep the US comments short today as there are next to no updates in the forecast from what was seen on Monday. A sharp temperature gradient in place throughout the central US will keep weather along its path active, with the models in agreement on upper atmosphere flow allowing regular precip to continue for the eastern US over most of the next 10-15 days; the PNW also looks to stay active in this period. For example on the temps, highs in south-central Oklahoma are forecast near 46 degrees F for tomorrow, while highs in northern Texas are seen reaching 77 degrees F.