January 17, 2020 Comments per MIDCO
Good morning. Corn and soybeans markets did not see the bearish mood from yesterday carryover to the night trade with corn rallying on perceptions that yesterday’s losses were overdone. Yesterday’s bearish trade was attributed to doubts that China will meet the purchase targets set in the Phase 1 trade pact. Commodity funds were sellers of an estimated 40,000 contracts of corn yesterday along with 7000 corn and 6000 wheat contracts as they apparently don’t feel that corn will benefit from the trade deal. Large ethanol stocks, negative ethanol margins, and weak export demand are currently negative corn factors, but near-term export demand is expected to improve substantially, and the trade deal makes ethanol sales to China much more likely. Yesterday’s pessimism seems premature and unwarranted as it will likely take at least 2 to 3 months before we can determine if China is adhering to the pact. Ag Secretary Perdue said yesterday that farmers will receive the third and final tranche of MFP payments. A drier pattern is expected to develop in Southern Argentina and Southern Brazil the remainder of January which will need to be watched as these regions have limited soil moisture reserves. Markets are pricing in large southern hemisphere corn and soybean crops. After yesterday’s selling spree, funds are estimated to be net short 116,000 corn and 19,000 soybean contracts and long 40,000 Chicago wheat contracts. The CBT is closed for the MLK Jr holiday on Monday – there will be a Monday night session beginning at the usual time of 7 PM Central. MID-CO will be closed on Monday. As mentioned, it feels like yesterday’s losses, particularly corn, were overdone. Expect a modest rally today to finish the week. Have a good Friday and weekend!