AM Comments 01/28/15
Wednesday, January 28, 2015, 8:01 AM
Submitted by: Dustin Weiner
Once again – ugh – it was a quiet overnight session with very little action and mixed trade. As we look at the screen this morning, corn, beans and wheat are all trading lower than yesterday’s close. Those who believe that price action is seasonal and the corn/bean markets like to make lows in February may be proven right, as the pattern is setting up to lead us into the traditional Feb lows.
The corn market still feels fairly heavy, as evidenced by yesterday’s poor performance (which continued into last night). Traders are still concerned that US corn will struggle to compete in world export markets, especially with cheap offers of Ukrainian corn undercutting US values significantly. Also – concerns that declining ethanol margins will eventually weigh on domestic use of corn for ethanol are keeping buyers on the sidelines. And just to take one more jab at corn prices – the market is expecting (for what it thinks is) a huge amount of unsold corn from US producers to hit the market at some point.
Soybeans… you may or may not have known this – but soybean oil has been on its contract lows lately – and made new lows again overnight. The reason for the push to new lows? There are reports out (link) that the EPA confirmed that biodiesel imports from Argentina will be eligible to generate a RIN. Simply put, this will allow ARG imports of biodiesel to compete with US manufactured biodiesel, which would reduce the amount of soyoil used in the US. This of course puts pressure on the entire soy complex. Also, as you saw yesterday, Chinese cancellations of US soybean purchases have been taking place – and the market is fearful that they will continue to happen as long as that crop in SA gets harvested in a timely fashion.
Everything listed above is pretty bearish (read: negative) to prices, sorry!. However, corn and soybeans are only down a few cents this morning and to me, one of the main reasons for that is that the charts are technically oversold and could be due for a correction. Will that come? Maybe. If it does, it could be a good selling opportunity for the US producer who is long grain.
Corn 1 to 2 cents lower
Soybeans 3 to 5 cents lower
Have a great day!