PM Comments February 27 2025
Good afternoon. Another lower close for the ag space on Thursday, as selling in the grain markets continues to produce headwinds for the rest of the space. As of the close today, May corn futures are nearly 40 cents off the highs made just last week, while May Chicago wheat futures are similarly about 60 cents off their highs.
CH closed Thursday at 4.64 3/4, down 13 and 1/2 cents. CK was down 12 and 1/2 at 4.81. Both made new February lows. SH closed at 10.22 3/4, down a penny and 3/4. SK was down 4 cents at 10.37 1/4. Outside day lower for SK. WH finished at 5.46 3/4, down 19 1/4. Also new February lows in wheat. Products were lower as well, May soybean meal closed at 300.20, down $2.30/ton, and May soybean oil closed at 45.35, down 24 points. Livestock markets were mixed, April live cattle closed at 196.12, up $1.50, April feeders closed at 275.55, up $2.02, and April hogs closed at 84.37, down $3.92. This the lowest trade in April hogs since last October. Outside markets are sharply mixed, crude oil futures are up $1.50-1.60/bbl, the Dow Jones index is down 190 points, and the US$ index is up 80-90 points. The S&P500 is down 90 points and the NASDAQ is down 550 points. Gold futures are down $40-50/oz. The NASDAQ made new lows for 2025, and the Dow traded a more than 600 point range today.
Spreads were mixed Thursday, corn spreads were down 3/4 of a cent to down more than 8 cents, and soybean spreads were down a half cent to up 3 cents. CH/CK closed at -16 1/4, down a penny, and SH/SK closed at -14 1/2, up 2 and 1/4. New contract low at -16 and 3/4 for CH/CK, and new contract low for WH/WK at -16 1/2.
Where to start. On a day that traders got the first look at new crop supply and demand data from the USDA, it was arguably tariffs that once again had the most market impact on price direction. As far we can tell, the March 4th deadline for new duties on Canada and Mexico is back on but we will feel more comfortable reporting this once the 4th actually gets here next week; conflicting reports have been going back and forth since Tuesday, and until pen hits paper and the measures are signed into law, nothing is a sure thing. As such, we would assume Friday's trade likely will also have no shortage of volatility. While on the topic of trade, Trump also mentioned on Thursday following a White House meeting with British Prime Minister Kier Starmer that there would be a trade deal between the US and the UK. As usual when he says these things, there was little detail given about what such a deal might look like or when it would be enacted.
As far as the USDA data goes, the numbers weren't friendly to the bulls, but also weren't anything overly shocking that hadn't already been anticipated which is making us to some extent question the ferociousness of today's sell-off. Our opinion, especially in corn, is that the funds won't fully start to exit their long position until the production situation in Brazil and Argentina is better known, and today did nothing to further that process. On the soybean side, we would generally agree with other analyst's opinions that the export forecast in the coming season looks a little rich right now given current dynamics; with Brazilian production being seen up roughly 10% or so from last year and the Chinese continuing to take more of their import business there, we find it rather unlikely that exports will be up at all year-over-year, let alone by 40 million bushels. That the crop was several weeks behind coming out this year also means that the South American export tail likely stretches further out into our new crop window than is typical. Like we mentioned in our mid-day commentary though, we would remind that these are simply starting points for the season, and can change drastically between now and fall depending on a number of different factors. Price-wise from here, support in May corn isn't seen until the upper 4.60 area, which makes up the band of highs from the first week of the calendar year, while the biggest support level in May soybeans continues to be the even $10 level.
Other ag-specific market news on Thursday included the weekly export sales report this morning for the week ending February 20th, which didn't help in the overall bearishness of the day as sales for both corn and wheat were below expectations and soybean sales were just mediocre at best. Corn sales in the week totaled 795k mt's, which was the lowest figure since the week of December 26th, or the Christmas holiday week; featured buyers were Mexico (378,800 mt's), Colombia (184,300 mt's), and Japan (171,200 mt's), while unknown destinations assigned out/canceled/rolled 134k mt's. Soybean sales in the week totaled 411k mt's; featured buyers were China (202,200 mt's) and Egypt (172,500 mt's), while unknown destinations assigned out/canceled/rolled 215,600 mt's. And lastly, wheat sales in the week totaled 269k mt's, which was the lowest in the last 5 weeks; featured buyer in the week was Taiwan, who booked 103,400 mt's, while unknown destinations assigned out/rolled/canceled 102,300 mt's.
On the weather front, market focus remains largely in Argentina where forecasts through mid-day on Thursday trended wetter in the north over the next few days, but were otherwise unchanged in the extended period. The country's main ag belt will be well-watered, with models showing accumulation over the next week in a range of 2-6". Further north, there were little changes for Brazil on Thursday, as the models remain in good agreement on areas north and west of Mato Grosso remaining cooler and wetter, while areas south and east of here will stay generally warmer and drier.
US weather looks to remain quiet going into the weekend, as models continue to keep precip over the next 72 hours limited mostly to the northeast and into Canada. Moisture returns to the Midwest next week though, with there continuing to be good agreement on most of the eastern US picking up some sort of measurable rainfall between Monday and Friday next week. However, the 12Z GFS run did back off a bit on its totals vs what was offered overnight, which will need watching through the day and tomorrow and into next week. Otherwise, there continues to be little to no sign of above average temperatures abating at least into the second week of March for the Midwest, while models at mid-day today are still showing a chance at slightly cooler air working back into the West Coast starting the middle of next week.