By Doug Tenney, Leist Mercantile
Ahead of the report, many had expected it to be a non-bullish report for grains.
This past week, the trade remained confused if additional U.S. grain exports as a result of the Phase One signing would be included in this month’s report. Some thought yes, others no.
The market has been disappointed to see very few U.S. grain sales to China this past month. There were corn sales to China last month along with soybean sales the past few days. Traders and producers alike are expecting to see additional U.S. grain sales to China announced in coming weeks as a result of the Phase One trade deal signed Jan. 15.
Soybean exports were increased 50 million bushels, ending stocks went down 50 million bushels. Wheat exports were increased 25 million bushels and ending stocks went down 25 million bushels. Corn ending stocks were unchanged. Corn exports were lowered 50 million bushels, while seed/industrial went up 50 million bushels. Brazil soybean production was increased 2 million tons to 125 million tons, a surprise.
Shortly after the USDA report was released, corn was down 2 cents, soybeans up 1 cent, and wheat down 5 cents. Just before the noon report, grains were all lower. Corn was down 1 cent, soybeans down 2 cents, and wheat down 4 cents.
The Coronavirus has kept the market on the defensive the past three weeks. It appears the severity and number of cases and deaths are slowing. But, the Coronavirus is still present and not totally eliminated yet. The virus has been a negative across broad markets. Negative exists as a result of a huge unknown now present which was not present months ago. Unknowns can provide uncertainty as risk, higher or lower cannot be clearly identified.
Very small declines were expected for U.S. corn, soybeans, and wheat ending stocks.
Corn continues to trade in a sideways pattern which is weeks long. For example, March CBOT corn since Jan. 1 had seen a range of $3.75 to $3.94. The vast majority of the time in 2020, March CBOT has traded between $3.80-$3.90. It has been above $3.90 five days, anywhere from consecutive days to only a few hours. On the other end below $3.80, it has traded there 13 different days.
Corn basis continues to be over the March CBOT contract in many areas of Ohio with 10-30 over catching a lot of facilities. No consistent pattern has presented itself in February as some locations have seen basis declines while others have seen some improvement. Corn basis remains strong as producers are disappointed with CBOT corn prices. At some point you could see dimes of corn basis decline in attempts to gain pennies. Soybean basis has been consistently improving the past six weeks.