Soybean Futures Fall Last Week

04:17PM Jan 27, 2020
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Here is your weekly grain and livestock market outlook and review for Jan. 27, from the economic experts at Doane Advisory Services.

Major market movers last week:

  • Traders became more optimistic about corn prospects in the wake of the huge January 16 reversal of the previous day’s drop. Hopes for Chinese buying and ideas that the late soybean harvest will create critical delays in planting Brazil’s safrinha crop apparently added upward impetus as well. However, the commodity markets suffered from worries that the coronavirus outbreak will become a global pandemic and create a “black swan” market event.
  • The oat market seemed to gather spillover support from both the corn and wheat markets through much of last week, with the nearby March future climbing to a two-month high on Thursday. However, it suffered a major Friday setback, which suggested the bullish move has ended.  
  • Soybean futures proved less amenable to optimism last week, with ideas that the recent onset of the Brazilian harvest implies little Chinese buying of U.S. beans in the near future. Talk of the negative impact of a major coronavirus outbreak in China and possibly around the world also apparently dragged bean prices lower.
  • Ideas that the looming Argentine harvest will prompt a wave of soybean meal exports from that country appeared to weigh on meal values early last week. However, Thursday’s strong bounce from a test of the November low was quite impressive. The prospect of increased bean oil exports from Argentina may also have spurred selling in that market, as did the late-week palm oil retest of its recent lows.
  • Rumors that Russia is set to impose limits on its grain exports, along with labor issues in France and Australian drought, boosted nearby soft red winter wheat prices to fresh 18-month highs last Wednesday. But prices ended the weak on a poor note, possibly due to renewed coronavirus concerns.  
  • Rice futures seemed to benefit substantially from bullish expectations concerning the results of the weekly USDA Export Sales report issued Friday, as indicated by the nearby March contract’s surge to its highest level since mid-2014. The sales and shipments data were impressive, but Friday’s setback suggested trader disappointment.
  • The cotton market turned rather volatile last week, with a big Tuesday drop being repudiated by a strong Wednesday rebound. However, prices resumed their slide later in the week. As with other markets relying upon Chinese buying, the drop may have reflected concerns about the economic impact of the coronavirus outbreak.
  • Cash cattle prices traded firmly around $124/cwt last week, but traders apparently viewed the situation as turning bearish after months of cash gains and several weeks of sideways futures trading. Thursday’s big futures drop appeared to open the door for a much larger breakdown, but Friday’s minimal follow-through implied stout support.
  • The modest annual rise in December feedlot placements indicated on last Friday’s Cattle on Feed report implies feedlot demand for replacement yearlings is rather moderate. We still think farmers will be quick to remove stockers from winter wheat pastures in the coming weeks. Thus, the feeder outlook seems less than promising at the moment.
  • Despite indications that Chinese buying of U.S. pork remained extremely strong in December, the spread of the coronavirus outbreak across China may have played a big role in sinking CME hog futures late last week. Sizeable futures premiums also make them vulnerable to setbacks when the cash market isn’t actively rising.
  • The international dairy markets have surged lately, which has apparently been a big bullish factor in boosting cheese and Class III milk prices. Nearby Class III futures built upon their preceding rally through much of last week, but Thursday’s USDA Milk Production report boosted its estimate of the milking cow population and undercut prices.
  • After having broken out of its recent downtrend on January 17, the U.S. dollar surged again late last week. One has to suspect trader and investor fears about a global coronavirus pandemic spurred a great deal of flight-to-quality/safe-haven buying of the greenback.
  • Worries about the economic impact of the coronavirus outbreak probably played a significant role in sending crude oil futures lower last week, although the concurrent dollar advance likely played a role as well. Technicians would also point to last Tuesday’s March futures failure at 40-day moving average resistance for the subsequent breakdown.
  • Safe-haven buying probably explains last week’s gold advance in the face of U.S. dollar strength. That is, the quick spread of the coronavirus outside China to several nations, including the U.S, has raised significant concerns about the global economic outlook. Thus, active gold buying for a worst-case scenario were deemed appropriate.
  • The equity markets seemed to recover quickly from coronavirus fears early last week, but traders apparently wanted to take off some risk before the weekend, since the major indices suffered big losses to close the week. Technical indicators also didn’t look terribly supportive by the end of the week.

Likely market movers this week:

  • USDA Export Inspections (1/27).
  • EIA Petroleum status (1/29).
  • USDA Export sales (1/30).
  • USDA Cattle (1/31).
  • Economic reports this week: New home sales (1/27), Durable goods orders, Case-Shiller home prices, Consumer confidence index (1/28), Advance trade in goods, Pending home sales index, FOMC announcement, Jerome Powell press conference (1/29), Jobless claims (1/30), Employment cost index, Personal income, Consumer spending, Core price index, Chicago PMI, Consumer sentiment index (1/31).

Dan Vaught is a senior economist with Doane Advisory Services. He has been engaged in commodity market analysis for 27 years. Since earning his master’s degree in agricultural economics from the University of Arkansas, Dan has been involved in commodity market research and analysis, specializing in fundamental analysis and studying supply/demand factors and price charts to find market opportunities for clients. Dan specializes in livestock markets, including cattle, hogs and dairy.

Doane Advisory Services is a market leader for agricultural economic information and outlook. Doane’s economists combine Farm Journal’s deep farm-data content with its proven models and analysis – which distinguish Doane as the only advisory services with direct contact with America’s farmers and ranchers. Started in 1919 by Mr. D. Howard Doane, Doane Advisory Services was built with the vision of creating a more efficient, productive agriculture industry. Our promise is to provide research, analysis and insight with a personal component to each and every client as we celebrate our 100th anniversary and many more to come.