- Chicago ag futures are up slightly at midday. Chicago wheat futures have recovered as major chart-based support was neared as the market began to flirt with oversold territory. But it is macro market strength that is leading the charge as the trade expects the impact and spread of coronavirus to peak shortly. Spot WTI crude is up $1.45/barrel at midday, despite another build in US crude stocks, with the Dow up 200 points.
- The number of new coronavirus cases has been on the margin slowing, with Chinese state officials urging food processing industries to resume normal workflows. Chinese soy crushers are beginning to return to pre-virus levels of activity after operating at just half-capacity last week.
- There is a dire need to boost near-term food supplies within China. Medical officials are suspecting the virus outbreak may end entirely by April. It is difficult to be precise and prior calls for peak virus incidences were a bit premature. But the slowing of new cases will likely boost sentiment and consumer spending in East Asia moving forward. Calls within China to alter Phase One commitments persist, but longer term, coronavirus looks to lose its impact on global financial markets by mid/late spring.
- US ethanol production through the week ending Feb 7 totalled 304 million gallons, a sharp, but seasonal, drop from the prior week’s 318 million gallons. Cumulative weekly US ethanol production sits at 6.97 billion gallons, down a modest 28 million from early Feb a year ago. Recall the USDA raised ethanol’s corn demand draw to 5,425 million bu, 49 million above last year. Monthly ethanol yields will be watched carefully moving forward.
- Ethanol stocks last Friday were up 37 million gallons to 1,023 million gallons. This is a record level for early Feb and is the fourth largest figure for any week on record. Improved ethanol export demand is needed.
- Other news is lacking. Key nearby will be weekly Brazilian soy harvest and safrinha seedings data. But we doubt a new trend will be established ahead of the USDA’s 2020 Outlook Forum balance sheets, due next Thursday. This will give more insight into the USDA’s expectation of US export demand following the signing of Phase One.
- The midday GFS weather forecast is slightly drier in Central Brazil in the next 10 days, though normal/above normal precipitation will return to the region beyond early next week. It remains that the jet stream moves southward in the 8-15 day period. High pressure ridging will exit Brazil. This will allow for daily shower activity to be established into the very end of the month. Soil moisture will be abundant for newly planted safrinha corn, but whether the crop can be completely planted prior to the first week of March is most important. Rainfall returns to Argentina next Mon-Tues. Argentine crop production potential is rising.
- Chasing breaks and rallies is unwise, and not until US and Brazilian weather in March-April is better known will a clear trend develop. The spark needed to be outright bullish will be lacking amid tepid world GDP growth and strength in the US$, which is nearing a 4-month high.