Daily Grain / Livestock Marketing Outlook 1/28/2021 - A C Trading Co

Daily Grain / Livestock Marketing Outlook
                       Written by: Jim Gerlach
                              1/28/2021

Early Call 8:45am EST: Corn up 7, soybeans up 8, wheat down 5. Equity markets are
weaker around the globe overnight after Wall Street posted its worst single day since
October on Wednesday. Analysts pointed toward a host of worse than expected earnings
results with the selling coming despite the Federal Reserve reassuring markets it would
keep monetary policy easy for the foreseeable future. Overnight, energy markets are
weaker but mainly holding in recent ranges. The U.S. Dollar Index is a touch firmer
overnight, continuing to play tag with its 50-day moving average. Grain markets once
again were volatile overnight, trading on both sides of unchanged before rallying into
the weekly export sales report.

Grains: Wheat for March delivery fell 1.1% to $6.58 ¼ on the Chicago Board of Trade
Wednesday, with grain traders opting to short wheat as a hedge for their long positions
in soybeans and corn. Corn for March delivery rose 0.3% to $5.34, while soybeans for
March delivery rose 0.3% to $13.74 ¾. Grain traders seeking to balance positions used
wheat futures as a short hedge for long positions in corn and soybeans, pushing wheat
futures lower Wednesday. The wheat/corn spread has narrowed to a premium of $1.24
per bushel with corn being the bullish stalwart. Also pressuring wheat futures was
supportive weather in the Black Sea for the winter wheat crop. The USDA yesterday
morning confirmed another big buy of U.S. corn exports by China, helping push corn to
new multi-year highs in pre-market trading. Traders are keeping a close eye on the
Beijing buying trend, with chatter of more of it coming, making it hard for the market to
break lower. Despite the early enthusiasm, corn's gain was quickly pared in trading later
in the day as the business was actually a couple of weeks old. Inventories of U.S.
ethanol shrank slightly this week, dropping 26,000 barrels to 23.6 million barrels,
according to data released by the EIA Wednesday. Traders informally surveyed by Dow
Jones had largely expected them to rise. Overall, inventories of ethanol in the U.S.
remain high, but daily ethanol production has dropped. U.S. production averaged
933,000 barrels per day this week, down 12,000 barrels from the previous week.
Speculation that China will buy more U.S. ethanol exports has been a factor pushing

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corn futures higher this week. More government relief is on the way for U.S. farmers, as
the USDA is temporarily suspending past-due debt collections and foreclosures for
distressed borrowers under some USDA-administered loan programs. While agricultural
commodity prices have surged in recent months, and an estimated $46 billion in
government payments went to the Farm Belt in 2020, the USDA said Covid-19's impact
on the farm sector continues to weigh on farmers' pocketbooks. The suspension, which
doesn't have an end date so far, will be available to more than 12,000 borrowers, or
nearly 10% of the agricultural producers who use the USDA loan programs.

Stress in Brazil remains focused on 15% of the soybean crop at 25% of the first-crop
corn the next 10 days, most in the northeast parts of the country. Pockets of excess rain
of 5-10” are likely the next 10 days in southern Paraguay and far southwest Brazil, but
welcome drying occurs in the 11-15 day period. 11-15 day showers narrow northeast
Brazil dryness to 10-15% of the corn/soybean crops due to strengthening global winds.
Center-West showers cause occasional fieldwork delays and slow Paraguay’s harvest as
well. The return of rains over Brazilian soybean-growing areas is disrupting harvesters,
slowing down field work. Analytical firm AgRural estimated Brazilian soy farmers had
harvested just 0.7% of the planted area through Jan 21st, a mere 0.3% rise from the
previous week. In Argentina, rains overnight favored central/southern Cordoba,
southern Santa Fe and far northern and southeast Buenos Aires, with an active weather
pattern through Tuesday. The forecast is not as wet for early in the 6-10 day period and
week two is still drier, but short-term rains keep stress minimal in Argentina. The
southeast 1/3rd of the ag belt slips drier, but stress will be slow to rebuild after recent
rains. U.S. wheat and livestock traders will need to keep a close eye on the 11-15 day
period, with the GFS model kicking out some bitterly cold temps across the Midwest
(see right map).

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Corn futures overnight remain near the new contract highs set the previous session.
Corn continues to be underpinned by impressive export demand as global importers
stepped in on last week's break to buy. On Tuesday, the combined China and unknown
destination corn sale combined to register the 10th largest single day corn purchase on
record. This was followed by another 26.7mb sold to China on Wednesday. China's
domestic corn prices remain near record levels, suggesting the purchases are not an
anomaly and could be followed by more. This idea was confirmed by the USDA
Attaché to China in his report released midweek where he maintained his corn import
estimate for the country at 865mb vs. the official USDA estimate of 687mb. The report
also seemed to suggest production and especially quality was not as high as official
estimates would lead one to believe. From a structural standpoint, the corn deficit in
China continues to increase and should mean sustained imports of corn. In 2018/19, the
deficit between production and demand was 660mb followed by 675mb in 2019/20 and
almost 800mb in 2020/21 according to the attaché. The official USDA estimate of the
deficit is over a billion bushels. Signs certainly point toward China needing to buy a
large amount of corn on an ongoing basis moving forward. Chinese demand for all
things corn looks as though it will support prices at current levels, at least until the focus
shifts to new crop and the acreage battle next month.

The soy complex was lower most of the overnight session before rallying this morning.
Soybeans received their own supportive export news Wednesday when the USDA
announced 4.8mb sold to China and 4.6mb sold to unknown destinations. The fact the
U.S. is still selling soybeans to China and other importers with South American
soybeans much cheaper March forward is encouraging. Private estimates of China's
2020/21 soybean imports continue to move higher with many in the trade between 105-
110mmt vs. the USDA's official estimate at 100mmt, which I see as ridiculously low vs.
last year’s 98.5mmt total. This could help explain why China would still be buying U.S.
soybeans as opposed to making the switch to South America completely. Another
supportive feature in the market this week has been the incessant rains in central and
southern Brazil. Reports from social media suggested places in Parana province have
seen in excess of 10 inches with more on the way later this week. Overnight forecasts
show Mato Grosso Du Sul, Parana, Santa Catarina and Rio Grande Do Sul getting 142-
312% of normal precipitation the next seven days. Rains of that magnitude on mature
soybeans will not be beneficial. Quality impacts are always difficult to assess but it will
be something the trade will monitor in coming weeks. After a correction during the
middle of the month, the Jul/Nov spread has recovered much of the prior sell off. The
record territory the spread continues to trade in suggests the market is still figuring a
carryout tighter than the current USDA estimate. The other major talker in the market is
the potential trucker strike in Brazil beginning February 1 st. Talk of the strike appears to
be gaining steam after a major oil worker union backed the action. If the trucker strike

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goes through as planned, and the wetter pattern holds in place, the potential gap in the
supply chain could encourage importers to keep buying U.S. soybeans.

Too much rain in southern Brazil is a short-term positive force and commercial buying
has been active as the outlook for extremely tight ending stocks continues to support
soybeans. The pace of Brazil’s soy harvest and second crop corn planting and the extent
to which a wet weather pattern delays harvest/lowers soy quality will be key variables
warranting attention over the next several weeks. A record Chinese soy crush pace
cannot afford any gaps in incoming supply flow. Soybean oil hit new contract highs on
fears of falling palm oil production, with Malaysia’s leading producing state of Sabah
on a voluntary lockdown amid a spike in virus cases, compounding a persistent shortage
of workers for the industry that relies heavily on migrant labor. Many in the trade don’t
realize that we need demand rationing right now, not after the South American or U.S.
crops this summer. Cumulative U.S. soybean exports sales are at 95% of the annual
forecast vs. the 5-year average of 76%. If we don’t slow down and keep this pace up,
we’d sell another 600mb! It’s certainly warranted to see USDA make another export
adjustment higher of at least 50mb, which would put ending stocks below pipeline
levels at 90mb. If we start the 2021/22 season with just 90mb, raised planted acreage
7.7% with trend yield and adjust demand marginally lower, 2021/22 U.S. ending stocks
still come in around 90mb and result in an all-time record low stocks/use ratio of 1.9%.
U.S. domestic crushers are very worried as evidenced by them reportedly extending
purchases well beyond typical levels amid concerns about availability down the road.
ECB crushers are said to have bought beans as far out as May vs. the typical 30-40 days
of coverage, while WCB crushers have pushed out to 90 days in some cases. I heard
Dreyfus’s Claypool, IN crush plant upped soy basis $.15/bushels and a Sioux City, IA
plant is paying $.25 pushes. I’m also hearing it’s harder to buy U.S. Feb/Mar beans off
the PNW. There’s also more chatter that U.S. crushers are being cautious in offering
summer meal due to concern over soybean sourcing.

For corn, the market is not only drawing support from bullish demand forecasts, but also
growing fears about Brazil’s second crop corn (75% of production) being planted late
due to flooding in southern Brazil and dryness in northern Brazil, leaving the crop
vulnerable the dry season later in the year. Corn futures priced in Brazilian Reals hit
fresh record highs on Wednesday, supported by the weak currency and rallying U.S.
prices. On the demand front, ADM on Tuesday forecast 25mmt in 2020/21 Chinese corn
imports (USDA 17.5mmt) and said China has already made commitments surpassing
the all-time record 200 million gallons of ethanol imports for just the first half of 2021
(198.1 million gallons in 2016 is the old record). That’s roughly 70mb of new corn
demand. It would be highly unusual if China bought from just a single source and my
contacts indicate that total purchases of ethanol from China could be as high as 400-700

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million gallons. Trade sources indicate that China is trying to scale back on industrial
corn usage such as ethanol to save it for much-needed feed needs. The USDA ag attache
to China also is forecasting imports of 22mmt, as alas, the USDA is again woefully
behind the market in their forecasting. U.S. weekly ethanol production achieved the
level needed to hit the USDA's marketing year forecast for the fourteenth week in a row.

On the demand front, Malaysian palm oil prices were unavailable due to a national
holiday. Chinese soybean futures were down 0.1% overnight, with corn futures were
down 1.1%. USDA yesterday reported another 680,000mt sale of 2020/21 U.S. corn to
China, with 126,500mt of 2020/21 soybeans sold to an unknown and 132,000mt of
2021/22 soybeans to an unknown as well. Algeria’s state importer has booked up to
630,000mt of milling wheat for February-March shipment. Most of it is EU wheat, with
some Argentine wheat possible as well. A growing list of U.S. soy crushers are no
longer offering soy products beyond May amid tightening soybean supplies as the
CBOT must more actively ration U.S. demand to preserve declining end stocks of U.S.
soybeans/corn. The threat of continued wet weather across southern Brazil along with a
February 1st truckers strike is real which could push additional unwanted demand to the
U.S. for February/March. It’s appearing that the U.S. crushing industry is going to take
the supply hit with reduced soy product production.

Weekly U.S. grain export sales were within expectations for everything except corn,
which came in above expectations. Wheat sales of 380,500mt for 2020/2021 were up
15% from the previous week and 13% from the prior 4-week average. China bought
130,000mt. For 2021/2022, net sales of 216,000mt were reported. Corn sales of
1,850,300mt for 2020/2021 were up 29% from the previous week and 61% from the
prior 4-week average and interestingly didn’t include any Chinese or large unknown
business, which will show up next week. Soybeans sales of 466,000mt for 2020/2021
were down 74% from the previous week and 45% from the prior 4-week average. China
bought 322,500mt. For 2021/2022, net sales of 1,564,400mt were reported mostly for
unknown destinations (654,000mt) and China (586,000mt). Soybean meal sales of
142,200mt for 2020/2021 were down 70% from the previous week and 44% from the
prior 4-week average. Soybean oil sales of 19,100mt for 2020/2021 were down 63%
from the previous week and 40% from the prior 4-week average.

U.S. ethanol production for the week ended 1/22/21 slipped to a 14-week low of 933k
barrels/day (274 million gallons/week) from 945k bpd (278 mil gal/week) the week
prior and compared to the most-recent 4-week average of 939k bpd (276 mil gal/week).
Additionally, this week's production was 9.3% below last year's same-week production
of 1.029 million bpd (303 mil gal/week), a bit of an improvement from the 12.1%
average year-over-year decline over the previous four weeks, but worse than the 7.9%

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average decline experienced so far during the 2020/21 corn marketing year. However,
this week's production was still in line with the roughly 925k bpd (272 mil gal/week)
average we estimate will be needed through the end of August in order to reach the
USDA's 4.950 billion bushel corn for ethanol usage estimate. U.S. ethanol stocks last
week were near unchanged at 991 million gallons (23.602 million barrels) vs the
previous week's 992 million gallons (23.628 mil barrels) and continue to run at a fairly
steady pace of late, averaging 989 million gallons over the last five weeks. Stocks
slipped to 27 million gallons below year ago levels vs the previous week's 17 million
gallon deficit after running above last year during the previous 8 weeks. U.S. gasoline
demand last week eased to 7.833 million bpd from 8.112 mbpd the week prior and
slipped back to a 10.9% year-over-year deficit from the previous week's 6.3% shortfall
and the 8.9% average decline of the previous three weeks. Interestingly, though, implied
weekly ethanol "off-take" (last week's stocks + this week's production - this week's
stocks) has been down only 1% from last year over the most-recent 4-week period,
despite gasoline demand running 9%+ below year ago levels, a very likely indication
ethanol exports are picking up with China the expected culprit.

Hogs: Cash hogs are called $1 lower to $1 higher, with most bids expected steady to
higher. Thursday slaughter numbers are expected near 494,000 head. Saturday runs are
expected at 248,000 head. USDA’s National Average Base Hog price was quoted at
$56.75, up $.58. Pork cutout futures ended the day with $.45-$.60 losses for the spring
and summer months, but a $.75 gain for Feb. The 1/25 CME Lean Hog Index was up
another $.35 to $66.23. The National Pork Carcass Cutout value was up $0.18 at $81.05
on average movement of 311 loads. Estimated packer margins were $42.18/head for
non-integrators and $37.02/head for integrators vs. $42.89 and $36.35 the previous day.
Weekly IA/MN hog weights were 291.6 lbs. vs. 291.8 lbs. last week and 287.3 lbs. last
year. Weekly U.S. egg/chick sets fell 0.1% vs. last year. Weekly kill is down 4.03% vs.
last year. Weekly U.S. pork export sales were huge at 52,900mt, with increases
primarily for Mexico (18,900mt), China (13,900mt), the Philippines (6,000mt), Japan
(4,100mt) and South Korea (3,100mt). Export shipments of 39,600mt were primarily to
China (12,500mt), Mexico (11,900mt), Japan (4,600mt), South Korea (2,600mt) and
Canada (2,100mt).

Lean hog futures have started to see moderate position adjustments, although the tone of
the market remains strong. Traders will continue to focus on the ability to move active
pork supplies in domestic and export markets through the next couple of months,
although current hog production seems to have stabilized for the time being. Average
carcass weights have started to tumble over the last week, falling nearly 5 pounds over
the last couple of days. This is starting to show the impact of higher feed prices as
producers and packers will continue to move hogs through the system faster. This not

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only creates less overall pork available to the market, but also helps to increase overall
turnaround time in barns through the upcoming months. Overall pork cutout prices
continue to shift slightly higher based on firming underlying support in pork prices. But
price volatility in individual pork cuts remains high with prices bouncing higher and
lower in wide ranges. Ham cuts on Wednesday gained nearly $8, offsetting the $7 losses
the day before. With each cut moving in a wild range, it is hard to find overall market
consistency in this current environment. Although prices have done well given the wild
and erratic market shifts, the lack of consistency and confidence on end user buying will
continue to limit further market support. With the vast support that the lean hog
contracts have seen over the last week, the contracts took a breather and traded modestly
lower into Wednesday's afternoon. Slaughter speeds were down slightly on Tuesday
which is understandable due large amount of snow that parts of the Midwest endured,
but hopefully by Wednesday afternoon packers are back to processing at higher levels.
China is selling another 30,000mt of domestic pork reserves for auction today.

Moderate midweek pressure developed across all cattle trade Wednesday with feeder
cattle futures holding the brunt of market losses. The focus in the feeder cattle market is
moving back to the renewed buyer interest developing in corn prices and overall feed
costs. The aggressive gains last week across the complex was sparked by aggressive
price pressure in corn trade. But given renewed active buying in the corn market by
noncommercial traders and a large export sale to China early in the week, corn prices
are once again testing market highs. This will continue to put increased pressure on
feeder cattle prices based on higher feed and production costs. Technical and
fundamental factors still remain bullish in live cattle futures, but traders have started to
slowly back away from the market on a short-term basis, as the recent price softness is
expected to be driven by position taking, rather than any significant change in market
direction. With strong beef demand growth still expected to develop through the
upcoming months, the momentum to hold live cattle above the $120 per cwt is likely to
continue to build. As the live cattle contracts rest from their recent run of higher prices,
once again the market's eyes fall to the cash cattle market as packers hate the idea of the
market trading much higher, but feedlots know they need to capitalize on this
opportunity to gain some market-share. Live cattle contracts traded modestly lower with
the entire complex seeing pretty even pressure as the contracts trade anywhere from
$0.62 to $0.90 lower. Beef cutouts hit their highest level since Dec 7th on Tuesday,
while April cattle hit their highest level since Jan 23rd. Favoring the cash market's
position is once again the strong, continued support that boxed beef prices are seeing.
There's been a little interest develop in the cash cattle market as bids of $173 are on the
table in Nebraska, which is mostly steady with last week's trade. Asking prices are
around $115 in the South and $182 to $185 in the North. If packers want to get cattle
procured this week, they are going to need to up their ante. Trade could develop as soon

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as this afternoon, but if feedlots are going to get their fully asking prices it's more likely
that trade waits until Thursday if not even until Friday. But remember, all good dealings
take time! Boxed beef prices were higher, with choice up $0.73 ($229.79) and select up
$1.44 ($218.77) with a movement of 73 loads. It was another day of lower trade for the
livestock contracts as the livestock sector neglects to draw the trader interest necessary
to rally the complex higher. March feeders were down $0.72 at $140.75, April feeders
were down $0.70 at $143.57 and May feeders were down $0.82 at $145.12. Even
though feeders would obviously like to see the feeder cattle contracts trading higher,
Wednesday's weakness thankfully isn't stemming for higher corn prices as the corn
contracts are too trading lower. If the cash cattle market can indeed secure higher profits
this week, the momentum will help the overall moral of the feeder cattle contracts.

Driven by higher estimates for pork, USDA recently revised higher its 2020 and 2021
forecast for China total meat imports by 4% and 1%, respectively. “While pork import
growth slowed in the fourth quarter of 2020, it nevertheless exceeded expectations and
results in a more bullish outlook for 2021,” USDA’s Foreign Agricultural Service (FAS)
noted in a recent report. The impact of African swine fever (ASF) is expected to have
peaked in 2020, which FAS said pressured consumption and increased the country’s
reliance on meat imports. “Despite the elevated pace of trade, China meat consumption
in 2020 fell to its lowest level in more than a decade. In 2021, higher estimates for both
China pork production and imports lead total meat consumption up 2% from the prior
forecast. However, total meat consumption is still expected to be below pre-ASF
levels.” USDA data, compiled by the U.S. Meat Export Federation (USMEF), revealed
beef exports to China continued to reach new heights in November at 8,372mt, up 700%
from a year ago, with value up 642% to $60.1 million (by comparison, exports to China
for all of 2019 totaled $86.1 million). For January through November, exports to China
totaled 33,081mt (up 277% year-over-year) valued at $237.8 million (up 239%).
November exports to China/Hong Kong were 3% below the previous year’s large
volume, at 83,396mt, and fell 5% in value to $193.8 million. However, through
November, USMEF exports to the region were still up 72% to 955,008mt, valued at
$2.18 billion (up 85%). USDA recently raised its 2021 global pork production forecast
by 2%, to 103.8mmt due to China’s domestic hog production recovery from ASF.
“Elevated prices continue to incentivize producers to expand their herds, resulting in the
production forecast for China being revised 5% higher,” FAS noted, adding that despite
upward revisions, “China production is still expected to remain below pre-ASF levels as
rising costs and animal management challenges generate headwinds.” While China’s
import demand is expected to be lower year over year, it will remain elevated by
historical standards, FAS said. “Abundant exportable supplies around the world are
expected to find a home in China as consumption in this key market continues to be

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well below pre-ASF levels.” USDA revised its global pork exports forecast for 2021 by
nearly 3% to 11.1mmt.

Weather: There is a trough building back into the West, a ridge in the Rockies, and a
trough in the east. The eastern trough will move eastward by the weekend while the
ridge shifts eastward. The western trough will move through the country over the
weekend into next week while another trough replaces it in the West early next week.
This trough will move through the country next week. The ridge in the Southeast will
buckle at times but remain a consistent feature through the period. The U.S. and
European models are fairly similar. For the outlook period, temperatures on Tuesday
will be below normal along the West Coast and Southeast and near to above normal
elsewhere. Temperatures will turn to a more cool-west and warm-east pattern in the
middle of next week as the main trough advances eastward. The below normal
temperatures will spread eastward through the end of the week and weekend. A large
storm will build in the Plains in the middle of next week and spread eastward through
the end of the week and weekend.

Global Weather Highlights: Scattered showers in Brazil continue to fall across western
and southern areas but are very spotty or dry in the east as was the case last week.
Showers will continue in the west, but amounts are likely to be below normal except for
the south, an area that will benefit as more of the crop goes further into reproduction. To
the north, the lower rainfall amounts may lead to stress and continue to be insufficient
for filling soils for the safrinha corn season. The surplus moisture in Argentina from two
weeks ago led to increased crop ratings last week. But dryness last week may have
caused more stress. Showers continue to increase this week as a front stalls in the region
through the weekend. Showers will likely be timely for much of the crop that is heading
further into reproduction. Showers have been plentiful this winter in Europe, benefiting
developing winter wheat across the south and maintaining adequate moisture for
dormant crops over the north. The storm track remains active through the continent,
with more showers expected across the south this weekend into early next week.
Tropical Cyclone Eloise made landfall over southern Mozambique this past weekend,
causing flooding and wind damage into northern South Africa. The low center has
stalled over southern Botswana, providing more moisture to the main crop areas through
the rest of the week. Outside of Eloise's damage, crops remain in favorable conditions.
Tropical moisture moved through southeastern areas of Australia earlier this week,
benefiting some cotton and sorghum, but northeastern areas will see little rainfall,
causing more irrigation to be used. Reserves remain adequate, but more showers would
be helpful. Above normal rainfall this season in Malaysia/Indonesia and continued
periods of showers will benefit palm oil prospects.

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North American Weather Highlights: Temperatures should rise above normal in the
northern Plains over the next couple of days, reducing the recent stress on livestock and
newborn calves. Showers will largely miss the region with the next few systems moving
through the country. Below normal temperatures return in the middle of next week,
returning the stress to livestock. A system that brought moderate to heavy snowfall early
this week in the central/southern Plains had some benefit to the driest sections across
Nebraska, but areas closer to the Rockies did not receive nearly as much precipitation.
Temperatures will rise over the next couple of days into early next week, melting some
snow and adding soil moisture to the profile. A system this weekend will bring
moderate precipitation to the eastern half of the region, but western areas will see little.
A system in the middle of next week looks more promising for increasing precipitation
through the region. A system produced moderate to heavy precipitation across the
Midwest earlier this week. This helped to relieve moisture deficits for some of the area.
Another system this weekend is expected to bring moderate precipitation to much of the
region, followed by another in the middle and end of next week.

Macros: The macro markets were lightly mixed as of 8:30am EST, with Dow futures
steady, the U.S. dollar index is up 0.2%, crude oil is down 0.2% and gold is down 0.4%.
The S&P 500 on Wednesday dropped to a 3-week low and closed 2.57% lower. The
DJIA lost 2.05% while the Nasdaq 100 lost 2.80%. Bearish factors included global
economic concerns after the German government cut its 2021 GDP estimate to 3.0%
from a 4.4% estimate in October, and comments from Fed Chair Powell who said the
pace of the recovery has moderated and it is likely to take "some time" before
substantial progress is seen toward the Fed's goals of maximum employment and price
stability. The outcome of yesterday's FOMC meeting was fully in line with market
expectations, and the interest rate markets showed little net change on the results. The
T-note market was satisfied with Fed Chair Powell's attempt to assuage the recent
concern about QE tapering. He said it would take "some time" to achieve the threshold
for considering a tapering of its QE program, suggesting that any such consideration is
months away. He also said, "The whole focus on [QE] exit is premature." The FOMC
yesterday said there has been a moderating pace of recovery in the economic data since
its last meeting in December. However, the Fed said the weakness was mostly limited to
the sectors of the economy most vulnerable to the pandemic. That suggests that the Fed
believes the overall economic outlook should be able to improve significantly once the
pandemic is brought under control. Separately, Mr. Powell yesterday seemed to suggest
that the recent strength in the stock market is mainly due to fiscal stimulus and hopes for
a return to economic normalcy, as opposed to monetary policy. He said, "If you look at
what's really been driving asset prices, really in the last couple of months, it isn't
monetary policy. The connection between low interest rates and asset values is probably
something that's not as tight as people think." Mr. Powell's comment suggested that the

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Fed does not believe it is responsible for the lofty stock market levels, which would
imply that the Fed also feels no responsibility for curbing the stock market gains.

Global shares skidded on Thursday as a reality check set in about longtime economic
damage from the coronavirus pandemic, giving Wall Street its worst day since October.
France's CAC 40 slipped 0.7% in early trading to 5,422.70, while Germany's DAX
dropped 1.2% to 13,463.25. Britain's FTSE 100 was down 1.6% at 6,460.34. U.S. shares
were set to extend losses, with Dow futures trading at 30,068.0, down 0.4%. The S&P
500 future contract slipped 0.8% to 3,716.12. Benchmarks in Japan, South Korea,
Australia and China declined Thursday. The region is looking ahead to earnings season
for a read on how companies are faring amid COVID-19 infections, which have been
relatively low in some nations such as New Zealand, compared to other global regions.
Japan's benchmark Nikkei 225 fell 1.5% to finish at 28,197.42. Australia's S&P/ASX
200 slipped 1.9% to 6,649.70. South Korea's Kospi sank 1.7% to 3,069.05. Hong Kong's
Hang Seng dropped 2.6% to 28,550.77, while the Shanghai Composite shed 1.9% to
3,505.18. Hopes are high for President Joe Biden's proposed a $1.9 trillion COVID-
relief package, but worries are growing the plan might also be scaled back.

Vaccine rollouts have not progressed in Asia as quickly as they have in the West, and
worries are growing about a tug-of-war for the products from Pfizer, Moderna and
AstraZeneca. Aside from China, which has its own vaccine, inoculations have not
started on a mass scale in Asia, although approvals have either been granted or are on
their way in most places, including Australia and Japan. Outbreaks persist and have
grown in some places such as Japan, where a third wave is claiming more lives at a
much faster pace than last year, at more than 5,000 so far. Daily deaths had been mostly
in single-digit figures until recently but are now surpassing 100 people a day. Adding to
caution, the Federal Reserve said Wednesday it would keep its low interest rate policies
in place, but it also released a sobering assessment of the gradual recovery ahead.
Investors are also focusing on company earnings. More than 100 companies in the S&P
500 are scheduled to tell investors this week how they fared during the last three months
of 2020. Markets had been meandering near record highs since last week as investors
weighed solid corporate earnings results against renewed worries that troubles with
COVID-19 vaccine rollouts and the spread of new variants of coronavirus might delay a
recovery from the pandemic. In energy trading, benchmark U.S. crude lost 39 cents to
$52.46 a barrel in electronic trading on the New York Mercantile Exchange. It picked
up 24 cents to $52.85 per barrel on Wednesday. Brent crude, the international standard,
fell 32 cents to $55.49 a barrel. In currency trading, the U.S. dollar rose to 104.33
Japanese yen from 104.12 yen. The euro cost $1.2096, inching down from $1.2112.

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Summary: Following the early Wednesday announcement of China's second corn
purchase in the past two days, corn exploded to a new contract high, rising over $.50
from Monday's correction low. China's total take in the past two days figured to be just
over 80mb, along with another 4mb sold to unknown. Corn futures faced a bit of the
"buy the rumor, sell the fact" syndrome at midday when corn went in the red for the
day, but then finished a modest $.01 ¾ higher. Although surely bullish in nature, with
corn export sales already record large, the announcement of new sales is always old
news, as exporters have no doubt already covered the futures. Also supporting corn was
news that the Archer Daniels Midland (ADM) CEO suggested China might import as
much as 25mmt (984mb), compared to 17.5mmt in the latest USDA report. In addition
to that, ADM reported China had bought as much as 200 million gallons of ethanol from
the U.S. Heavy rains are expected to continue in major southern Brazil producing areas
such as Parana and Rio Grande do Sul, delaying soybean harvest, and potentially
stalling safrinha corn planting. The corn futures rejection of those higher prices suggests
that no matter how bullish the supply and demand situation might become, it will
continue to be a volatile affair for the next few months. Managed money funds have
hopped back on the bullish corn bandwagon with the estimate of their long over 400,000
contracts to begin Wednesday trade.

Soybean futures continued their reversal from Monday's low. After plunging nearly
$1.40 per bushel from the highs set a week ago, March soybeans at one point on
Wednesday had gained back $.94. However, a correction in the middle of the day saw
soybeans fall nearly $.20 from the high, finishing the day up just $.04 ½. Soybean oil,
underpinned by a surging palm oil market that rose 3.6%, surged to a new contract high
early on Wednesday. The tightening balance sheet on world veg oil products also sent
Canadian canola to heights not seen since 2008. Two new soybean sales were
announced by FAS early Wednesday, including 4.9mb sold to China for 2021-22 and
another 4.6mb sold to unknown for 2020-21. Rumors of additional China interest in
U.S. soybeans for February-March permeated the trade, with no confirmation so far.
Heavy rains recently fell and were forecast to continue in southern Brazil, which has
stalled the soybean harvest there and increased concerns over disease, such as rust. With
the soybean harvest in Brazil only 1% done, well behind the average pace, business
could be shifted more to the U.S. The consulting firm, Agro Consult suggests Brazil's
January bean harvest may be only 5mmt, or roughly half of the prior year, as excess
rains and late planting hampered progress. Soybean export commitments of 2.12 billion
bushels (bb) thus far figure nearly 95% of the USDA projection, and will likely require
that U.S. exports be increased further. Funds remain net long the entire soy complex and
likely added to those totals in the past two days.

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The wheat markets on Wednesday had a round tripper, surging sharply higher in the
early morning and fading late to close much lower in all three markets. Recent and
projected decent rains and snow headed for the western and southern Plains is bearish.
Russia's ag minister confirmed the rumored addition of a 50-euro ($1.65 per bushel) tax
on Russian wheat exports, effective March 1. Some reports have Russian farmers trying
to get wheat sold prior to the new taxes being instituted. Although U.S. wheat is likely
to be a beneficiary of Russia's new export tax, some news sources are alluding to
Russian farmers rushing to sell more wheat to avoid the incoming tax, weakening
nearby values. Also pressuring wheat on Wednesday is the U.S. ag attache pegging the
Australian wheat crop at 31mmt (1.140 bb). That is up from USDA at 30mmt and
compares to last year's drought-ravaged crop of just 15.2mmt (558mb). Australia's
wheat exports are pegged at 21mmt versus just 9.4mmt last year.
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