Dan Flynn is the writer of The Corn & Ethanol Report, a daily market letter covering grains, energies, and various global issues that are the driving force and backbone of the commodity markets. Contact Mr. Flynn at (312) 264-4374
We kickoff the day with S&P Global Composite PMI Final and S&P Global Services PMI Final at 8:45 A.M., ISM Services PMI, ISM Services Business Activity, ISM Services Employment, ISM Services New Orders, and ISM Services Prices at 9:00 A.M., Export Inspections at 10:00 A.M., 3-Month & 6-Month Bill Auction at 10:30 A.M., Fed Bostic Speech, Loan Officer Survey, and Total Vehicle Sales at 1:00 P.M., and Dairy Products at 2:00 P.M.
The Commitment of Traders report showed another week of selling in the ag markets. For the week ending Jan 30, funds sold 15,000 contracts of corn, 16,400 in soybeans, 3,000 contracts of soybean meal, and 9,700 contracts of soybean oil. Funds bought 7,900 contracts in wheat across all 3 wheat exchanges, 22,600 in hogs, 10,000 live cattle, and 3,000 feeder cattle. Across the principal ag market funds were net sellers of 420 contracts, pressing the net short to 533,000 contracts – the largest combine net short since the pandemic sell-off. A major short-covering rally is coming; it’s just a matter of time of a need for a fundamental reason to pull the trigger.
South American weather update, shows confidence with respect to Argentine rainfall during Feb 8-10; with central Brazilian forecast trends drier. The South American forecast into mid-Feb is viewed as mixed. The EU and GFS models maintain the return of potentially heavy rainfall across central Argentina beginning Feb 8-9th , but another full week of dryness and incredible heat lie ahead there nearby. The Brazilian forecast leans favorable as a lengthy period of dry weather is forecast in all but northern Mato Grosso Feb 8-18th . This will allow the soybean harvest move more smoothly – though regular rain is needed I N Brazil in March and April to keep safrinha corn well-watered. The NOAA’s bias corrected precipitation anomaly forecast a pattern of above-normal rainfall in an 8-14 day period, with major forecasting models in broad agreement that rainfall of 1-2” impacts key areas of Cordoba, Buenos Aires, and Santa Fe. A lot to digest before Thursday’s Crop Production USDA Suppl/Demand, and WASDE data. The grains are coming in slightly lower amid bearish chart price trends, a rising US dollar, and seasonally slowing US export demand. Another 4-5 days of hot/dry weather will batter Argentine crops, but rain prospects improve later this week and early next week. With most of the Argentina corn crop pollinating or in silk, 3-weeks of below normal rainfall and 8-12 days of extreme heat has taken the top end off yield potential. South American crop potential is in decline with CONAB/USDA to reduce their 2024 crop estimates later this week. February crop reports are not usually awe inspiring, but the degree that WASDE reduces it’s South American crop estimates that will be closely followed by traders.
Finally, China ia not expected to be a large buyer of South American soybeans ahead of their Lunar New Year which starts on Saturday and lasts the entire week. It’s the year of the Dragon, which in China lore is expected to bring good luck. China’s economic outlook stays gloomy with their stock market sinking to a 5-year low which is in stark contrast to US equities pushing to new highs. A housing market bust is hammering Chines Consumer Confidence.
Have A Great Trading Day!