AgriVisor Morning MarketWatch

Thursday, January 07, 2016
***** Corn futures down 2 ahead of the break; soybeans down 5; Chicago wheat down 2. ***** 

   # It’s an outside market story again today, with global equities selling off and crude oil down another dollar.  One could say that the grains are holding up rather well against the broader market malaise.       
   # Another big drop in the Chinese yuan currency preceded another tumble in Chinese stocks.  Global demand worries spread quickly into European markets and weigh on U.S. index futures as well.  
   # As for the grains, we immediately turn to corn futures and see the nearby March hovering above psychologically- and technically-important $3.50 mark.  The contract bottomed out at $3.50 1/4 on Wednesday before eventually turning back higher.         
   # Soybeans have fared slightly better relative to corn in recent weeks, having maintained more distance from their November contract lows.  Soon, we will begin to hear more talk of the corn-to-bean ratio as planting intentions are analyzed.  The new crop multiple currently stands at around 2.3.           
   #  Grain traders await the weekly export sales report.  Last week’s numbers were rather poor for soybeans and expectations are not very high for this week.  New soybean sales are anticipated near 20 million bushels; corn at 20 million, wheat at 10.
   # The Brazilian real currency is dropping precipitously on the latest developments in China.  A weak China means weak demand for Brazilian exports.  The Brazilian economy is also officially in recession, having contracted by 3.5 percent in 2015 and likely to shrink another 3 percent in 2016. Still, a weaker Brazilian currency favors Brazilian exports over U.S. exports.  
   # Malaysian palm oil prices were down about one percent on Thursday and helped to weigh on soy prices.  Traders await a key report on Asian palm production scheduled for release next week.      
   # El Nino may be on the way out, but it is likely to stick with use for at least two more months.  The weather phenomenon has been credited with wet weather in North America and dry weather in Asia.  Some areas in South America have experienced various weather abnormalities.  Now, the watch is on for whether or not El Nino will be followed up by a La Nina event.                    

***** Cattle and hog futures likely to start steady to a touch weaker as contracts continue to consolidate on recent gains.    ***** 

   # Cattle futures are in a bit of a holding pattern as traders wait to see how the cash market develops.  There is uncertainty over whether or not the market can keep up with wholesale prices that have jumped more than $20 over the last week.  Live futures face formidable technical resistance from the February’s 100-day moving average.      
   # Hog slaughters have risen to work through the post-holiday backlog and limit some of the enthusiasm, but traders see the supply-side bearishness as a temporary headwind that will gradually dissipate as winter wraps up.  The charts still lean bullish, but February futures have an important test of last month’s high just overhead.