Soybeans, soymeal, soyoil and corn traded lower. KC wheat was unchanged. US stocks were lower. Crude and gold were higher. CBOT grains will be closed Monday.
Soybean futures edged lower before the long US holiday weekend. Today’s big unknowns is will China buy any US Ag goods over the long holiday weekend and on Tuesday will the news concerning the coronavirus be negative or positive. There are also rumor that China import priority could be pork and medicine not soybeans. Malaysian palmoil futures had turned higher on hopes that once the China virus is contained, China will be a buyer of palmoil. US Jan NOPA soybean crush is estimated near 174 mil bu. This is equal to Dec but above last year. NOPA soyoil stocks could increase due to drop in biodiesel demand. Jan World soybean and soymeal trade dropped to 9.0 mmt vs 11.9 in Dec and 9.5 last year. World Oct-Jan trade is a record 51.4 mmt vs 45.5 last year. USDA est Oct-Sep trade to be a record 165.4 mmt vs 161.1 last year. Will be interesting if USDA drops this estimate on concern virus could slow demand. USDA 2020 baseline est for US 2020/21 cash soybean price is 8.85 vs 8.75 this year.
Corn futures traded lower. Today’s big unknowns are will China buy any US Ag goods over the long holiday weekend and on Tuesday will the news concerning the coronavirus be negative or positive. There is talk that China may have bought this week Ukraine corn. At the same time there are also rumor that China import priority could be pork and medicine. Fact corn open interest increased on Thursday despite the concern spread of the virus could slow demand. Some speculated that this could be China hedging for future US buying. We estimate managed funds to be net short 67,000 corn contracts. Seasonally grain futures tend to make bottoms in February but this is a different year with the virus and potential for record South America 2020 crops. USDA baseline projection suggest US 2020/21 average farm corn price to be near 3.40 vs 3.85 this year. Next Friday, USDA will have their annual Outlook Forum. They will release new US 2020/21 corn supply and demand estimates. We could see US 2020 corn crop near 15,440 mil bu vs 13,691 in 2019.
Wheat futures traded mixed. Battle between lower World 2019 Wheat supply and talk of higher 2020 supply continues. Today’s big unknowns is will China buy any US Ag goods over the long holiday weekend and on Tuesday will the news concerning the coronavirus be negative or positive. There are rumors that China import priority could be pork and medicine. Fact Chicago wheat open interest increased on Thursday despite the concern spread of the virus could slow demand offered support. Some speculated that this could be China hedging for future US buying. Next Friday, USDA will have their annual Outlook Forum. They will release new US 2020/21 corn wheat supply and demand estimates. We could see US 2020 wheat crop near 1,920 mil bu vs 1,920 this year. Today, USDA baseline projection suggest average US wheat farm prices near 4.80 vs 4.55 this year.
Feb 14 Central Banks Become More Accomodative PDF
STOCK INDEX FUTURES
S&P 500 and NASDAQ futures advanced to new record highs in the overnight trade.
Retail sales in the U.S. increased 0.3% on a monthly basis in January, which was as expected, and retail sales, excluding autos, also rose 0.3% in the same period, as anticipated.
Import prices held steady in January from December when economists estimated a 0.2% decline.
January industrial production was down 0.3%, as expected, and January capacity utilization was 76.8%, which was also as anticipated.
There are two 9:00 central time reports. The February consumer sentiment index is estimated to be 99.7 and the December business inventories report is expected to be up 0.1%.
My outlook remains unchanged in that stock index futures will end up higher in the first quarter. CURRENCY FUTURES
The U.S. dollar advanced to a new four month high.
Recent gains in the greenback are linked to the belief that the Federal Reserve will be less aggressive in adding more accommodation to the banking system than other major central banks. In the longer term, higher prices are likely for the U.S. dollar, which remains my minority opinion.
The euro currency declined to the lowest level since May 2017 after a report showed fourth quarter gross domestic product in the euro zone increased 0.1%, as expected.
Higher crude oil prices supported the Canadian dollar and the Australian dollar. INTEREST RATE MARKET FUTURES
Futures are higher on the belief that central banks around the world are coming under pressure to be more accommodative in an attempt to stem the negative consequences of the coronavirus on the global economy.
Based on financial futures markets, currently there is a 69% probability that the Federal Open Market Committee will lower its fed funds rate at its September 16, 2020 policy meeting. Yesterday the probability was 69%.
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