Bean Oil Ignites the Board as Policy Hopes and Weather Risks Steal the Spotlight

The bean complex was today’s upside leader with bean oil sharply higher on bullish expectations of higher bio-fuel mandates in the EPA update scheduled to be released in the next 4-6 weeks. The big move in bean oil pulled both old and new crop beans higher while the grains drifted to small losses in an otherwise dull day. President Trump did calm some tensions over Greenland in a speech in Europe which helped rally the world equity markets, but no other meaningful news was available today as some focus is returning to Argentina’s drier weather heading into the end of the month. The normal Thursday export report will be delayed until Friday due to Monday’s holiday, which will leave the trade in search of fresh news to trade.

News and Notes:

• Some concern is developing on a dry 10-day forecast for eastern Argentina and southern Brazil. Temperature forecasts have steadily increased into the 90’s during eth dry pattern to add stress to the crop. Weekend forecast changes will be closely watched. US weather from Texas to New York is going get nasty this weekend with record snow fall potential, ice, and single digit temperatures to follow.
• The daily December corn chart is on Page 2 and shows the dramatic drop after last Monday’s report, but the range from the June high of $4.62 to the August low at $4.10, prices have carved out a wide range which should continue into US planting. Strong demand but large world stocks are battling to a draw, and this range-bound trade is the result. US planted acres will decide the next directional leg, but that is months away. Trade the extremes of the range.
• It was a busy day in Washington as negotiations are ongoing to avoid another government shutdown on January 30^th. The emergency funding bill is being crafted and unfortunately, the year-round E-15 amendment was cut out of the current rough draft but could still be negotiated back in before a vote. Agriculture heavy states elected officials are pushing for a larger Farm Assistance Program on top of the one already approved. There is no doubt that the on-farm income and margins have seen the worst 3-year run in decades and this money would help, but it is an election year bribe to buy votes. The more money the government sends our farmers, the longer the problem of low prices and high ending stocks remain. With massive government support in every major production country around the world, it is impossible to let the market naturally solve this problem.
• Another wildly volatile trading day in most markets as President Trump addressed the World Economic Forum in Switzerland and calmed market fears about military action to take Greenland. Equity markets clawed back most of the early week losses. The unpredictable nature of this administration words and actions has kept record volatility in all markets as we are just a tweet away from another shocking statement. Expect this to get worse before it gets better.
• Thanks to Chip Flory and his team at AgriTalk for including me in Tuesday’s broadcast. Here is the link if you did not hear it live.

Normally after the January USDA report the markets hit the new information doldrums and spend more time chopping around than trending. This is starting to occur in the grains as the trade awaits the EPA report and if both SA crops will live up to the record production hype. Rallies will be harder to stretch out over several days as cash will need to be raised to pay bills heading into the spring. First notice day in late February for March corn and beans will tell an interesting story as how many bushels remain on farm and need to be sold to prevent further roll and storage fees. Selling rallies will remain the plan until the market gets  sense that world balance sheets are tightening.