PM Comments February 20 2025
Good afternoon. Mixed trade in feed grain markets was seen on Thursday, while the prospects of a new trade deal with China was able to lift the soy complex to higher closes. We continue to offer skepticism around such a deal, but as there remains little else in the way of specific news this week, traders took the headline and ran with it.
CH finished Thursday at 4.98, up a half cent. CK was up a half cent also at 5.12 3/4. Inside day for both. SH closed at 10./45 1/2, up 13 and 3/4. SK was up 14 and 3/4 at 10.63. Inside days for both contracts here also. WH closed at 5.85 1/2, down 6 and 1/2 cents. Products were higher, March soybean meal closed at 296.0, up $1.30/ton, and March soybean oil closed at 47.26, up 96 points. Inside day for both as well. Livestock markets were lower, April live cattle ended the day at 193.80, down 97 cents, March feeders were down $2.20 at 266.82, and April hogs closed at 88.52, down $1.22. Outside markets are mixed, crude oil futures are up 40-50 cents/bbl, the Dow Jones index is down 450 points, and the US$ index is down 80 points. The S&P500 is down 30 points and the NASDAQ is down 100 points. New contract high in April gold at 2973.40.
Spreads were mixed Thursday, corn spreads were unchanged to three cents lower, and soybean spreads were down a penny to up 4 and 3/4. CH/CK was unchanged on the day and closed at -14 3/4, and SH/SK was down a penny at -17 and 1/2. New contract low again in CH/CK at -15 1/4. WH/WK matched its contract low at -15 before closing at -14 3/4.
Bean oil, as we mentioned above, also saw good gains on Thursday along with the soybeans as looming tariffs on Canadian canola oil continues to provide a bullish backdrop to this market. Otherwise, there just simply isn't a lot new on a known basis to drive price direction in the short term. The USDA's annual Outlook form will take place at the end of next, and will offer the first official look at what the domestic supply and demand situation might look like in the 2025/26 crop year. With the current corn:soybean ratio still heavily favoring corn planting, it will be interesting to see what the USDA sees as the likely acreage mix at least to begin the year. But aside from this, it is the ongoing themes of tariffs, weather in South America, and a possible end to the war in Ukraine that have the focus of traders in the meantime. Though it seems the rapid buying pace by managed money traders has slowed in recent days, we don't see them liquidating a large amount of their corn position until, at the very least, more is known about production in South America. Then it becomes a question of what US spring/summer weather prospects look like as to whether any liquidation may occur then.
This morning's weekly ethanol production report from the EIA for the week ending February 14th showed another strong week of production runs in the US despite the data being delayed for a day due to Monday's holiday. Daily production in the week averaged 1.084 mil bbls, which was nearly identical to both last week and the same week last year. Stocks were seen at 26.218 mil bbls, which after declining last week was right back up near the marketing year high made 3 weeks ago. We estimate corn usage in the week at 107.1 mil bu's, which brings cumulative use to 2.558 bil bu's; this compares to 2.463 bil bu's through the same week in the marketing year last year, and the USDA's full year forecast of 5.500 bil bu's. It will be interesting to see what next week's production report looks like, as the return of cold weather the last few days presumably slowed things down. The EIA report also showed crude oil stocks in the week up 4.633 mil bbls at 432.493 mil, gasoline stocks down 151k bbls at 247.092 mil bbls, and distillate stocks down 2.051 mil bbls at 116.564 mil bbls. Implied gasoline usage in the week was estimated at 8.239 mil bbls/day, compared to 8.576 mil last week and 8.200 mil last year.
Weather in Argentina continues to lean bearish beyond the middle of next week, with models still showing a wet forecast for nearly the whole of the country in the period from February 27th through March 6th. Rains will favor southern/southeastern growing areas between now and then, which will be important as temperature forecasts keep heat present for at least another week. In Brazil, models see further light/scattered shower potential through the south-central part of the country into next week, but otherwise the eastern half of the country's growing regions stay dry, with moisture limited to the north and the northwest. Temperatures will be less of an issue here, with only far southern Brazil seeing extreme heat.
Short term, there is not a lot new with US weather at mid-day on Thursday. Temperatures will slowly increase through the weekend, with highs returning to above average levels for most of the country by Monday. The rest of next week then looks to be on the warm side, but the EU AI's 10-15 day output this afternoon sees a return to cooler air in the east beyond March 2nd. We mentioned earlier this week, but confidence beyond the next 5-7 days is low due to the run-to-run differences that have been seen the past several days. Light precip is expected to fall across the upper Midwest the middle of next week, but otherwise, moisture looks to be largely confined to the PNW over the next 7 days. The Gulf will also receive additional moisture, but most of this looks to stay offshore. Further out, week two precip maps were wetter at mid-day than they were this morning, with the CPC's outlook now showing above average precip chances for most of the eastern 2/3's of the US into the first week of March. Also new from the CPC today were updated seasonal outlooks, which show most of the Corn Belt as having equal chances at being hot or cold through March, April and May, while precip is seen average in the west and above average in the east.
Updated drought monitor data this morning showed improvement over the past week in the southeast, but a good majority of the upper Midwest remains in some type of D1 to D4 drought condition. For this reason, it is important that upper Midwest precip develops over the next month to two months as forecast.