PM Comments February 5 2025
Good afternoon. Sellers were active across the CBOT on Wednesday, driving prices lower throughout the day session and into the close in what was a near-180 reversal from the action seen the last two days. Further fears over an impending trade war with China were pegged as the reason for the day's decline, and with the soy complex clearly leading the way down, we would see this as plausible. With as much headline risk that currently exists, volatility likely remains elevated in the short term.
CH closed Wednesday at 4.93 1/4, down a penny and 1/4. CK was unchanged at 5.04 3/4. SH finished at 10.57, down 18 cents. SK was down 15 and 3/4 at 10.72 1/4. WH closed at 5.72 1/4, down 4 3/4. Products were lower, March soybean meal closed at 308.30, down $5.70/ton, and March soybean oil closed at 45.09, down 67 points. Inside day for both. Livestock markets were higher at mid-week, April live cattle closed at 201.30, up $2.65, March feeders closed at 270.72, up $2.47, and April hogs closed at 91.55, up $1.80. Hogs had a gap-higher open this morning. Outside markets are mixed, crude oil futures are down $1.40-1.50/bbl, the Dow Jones index is up 300 points, and the US$ index is down 20-30 points. The S&P500 is up 20 points and the NASDAQ is up 90 points. Inside day for crude oil as of this writing.
Spreads were mostly lower, corn spreads were up a quarter cent in the deferred months but were down a half cent to 2 cents otherwise, and soybean spreads were down a penny to down 7 cents. CH/CK closed at -11 1/2, down a penny and a quarter, and SH/SK closed at -15 1/2, down 2 1/4. CH/CK matched its contract low at -11 3/4.
Despite the ongoing trade talks with Mexico, the USDA this morning announced that private exporters sold 330,000 mt's of corn to them for delivery during the 2025/26 marketing year. Of note, this is the first new crop corn sales flash since Mexico bought over 89k mt's on November 25th.
We would also mention as it pertains to ongoing trade themes that the funds have gotten rather long and have used a considerable amount of bullish ammo to get there. Basic supply and demand principles show that trade wars are not bullish price, and if the funds at some point start to be more concerned with this fact than the idea that they need to hedge re-rising inflation, an exit of their positions would cause considerable downward pressure. To that point though, we see enough reason for concern in South America as of now due to weather that it is unlikely that fund traders will do any sort of major position shifting in the short term. However, it remains a 'futures' market, and the trade will not be focused on crops in South America forever. April 1st is less than 50 calendar days away, and attention will turn to the coming US growing season sooner or later.
Ethanol production data released by the EIA this morning for the week ending January 31st showed a rebound in production to the third highest level of this marketing year, and a jump in stocks to the highest level since March of last year. Daily production in the week averaged 1.112 mil mil bbls, which was up 9.6% from last week and up 12.2% from the same week last year. Stocks in the week were seen at 26.412 mil bbls, which was the highest reading of this marketing year; the figure was up 2.7% from last week and up 8.8% from the same week last year. We estimate corn usage in the week at 109.9 mil bu's, which brings cumulative marketing year use to 2.344 bil bu's. Petroleum data in the report showed crude oil stocks in the week increasing 8.664 mil bbls to 423.79 mil bbls, gasoline stocks increased 2.233 mil bbls to 251.088 mil bbls and distillate stocks decreased 5.471 mil bbls to 118.48 mil bbls. Implied gasoline demand was estimated at 8.328 mil bbls/day, compared to 8.302 mil last week and 8.807 mil last year.
Also out today was updated census export data for December of last year, which showed an abnormally strong month of both corn and soybean exports, likely due to world buyers trying to frontload purchases ahead of Trump's return to the White House in January. Official data shows the US exported 214 mil bu's of corn in the month, 293 mil bu's of soybeans, and 61 mil bu's of wheat. The corn figure was the highest for the month of December in the last 35 years, and the soybean figure was up nearly 80% from December of last year. Export inspection data from the USDA shows Dec corn exports at 203 mil bu's, soybean exports at 300 mil bu's, and wheat exports at 64 mil bu's. Through the first four months in the marketing year, census exports are running roughly 88 mil bu's ahead of the USDA's inspection figure for corn, 11 mil bu's ahead for soybeans, and 3 mil bu's ahead for wheat. Also of note in the census data, the US exported just under 127,000 tons of soybean oil in the month which was a nine-year high for the month and the highest volume in any month since January of 2022. For the year, corn exports were up 37% from 2023, soybean exports were up 8% and wheat exports were up 22%.
Mid-day weather forecasts were unchanged for South America, and continue offering improved rains in northern Argentina next week and also drier conditions through eastern and east-central Brazil. A frontal boundary will continue producing thunderstorm activity across southern Argentina the rest of this week and into the weekend, with totals here having already surpassed 2-3" in the last few days. Temperature forecasts also remain mostly unchanged from recent days, with the bulk of Argentina continuing to see warmer than average conditions over the next week, while eastern and east-central Brazil see average to slightly below average temperature conditions.
Also again not a lot of change for the US forecast the rest of the week and into the weekend, with the main feature short term being the low pressure system working its way through the eastern US, providing rain to a majority of the area with a transition to freezing rain/sleet/snow later this evening further to the north. The pattern stays active though past this, with another rain event seen for the mid-south through the weekend and also additional snowfall possible in the northern Midwest. This pattern of regular moisture then looks to stick around through most of next week also, with the models in fair agreement on several more systems working through the area. Temperatures will drop off cooler, especially in the north, but both the EU and the GFS are keeping with a return to warmer conditions for most of the southern 2/3's of the country beyond February 15th.