January 25 - Stocks are quietly higher at midday as Wall Street shrugs off predictions of recession after two years of fearing one. The VIX is trading near 13 at midday, while the dollar index is trading near 103.6. Yields on 10-year Treasuries are trading near 4.15%, while yields on 2-year Treasuries are trading near 4.33% as the inversion continues to shrink. Crude oil prices are 2% higher at eight-week highs as U.S. inventories shrink and as geopolitical risks increase. The grain and oilseed complex was mixed, with wheat prices continuing higher, while soybeans lead corn lower on disappointing weekly export sales.
New home sales rose to an annualized rate of 664K units in December, up from an upwardly revised 615K in November, and exceeding analyst expectations of 650K as the market responds to the fall drop in mortgage rates. This ties in with shelter costs in the inflation data that the Federal Reserve will be following closely in its monetary policy decisions. We still have a shortage of shelter in this country, and therefore demand for it surges whenever interest rates drop / consumer sentiment rises.
Exporters sold 37.6 million bushels of this year's corn crop in the week ending January 18, along with 20.6 million bushels of soybeans (as shown below), 16.6 million bushels of old-crop wheat and 2.4 million bushels of grain sorghum. Soybean sales continue to disappoint, with beans priced into the port in China now roughly $2.15 per bushel cheaper for February shipment if they come from Brazil rather than from the U.S. Gulf, and the discounts are even greater for March and April shipment. China was the featured buyer of U.S. soybeans in the week ending January 18 at a net 20.7 million bushels, but nearly half of that 9.3 million bushels - were previously purchased by "unknown destinations" and merely shifted in the books to China in this morning's report. Marketing year to date soybean export sales to all destinations total 1.394 billion bushels, down 313 million or 18% from the previous year's pace, while falling short of the seasonal pace needed to hit USDA's target by 17 million bushels - and the deficit is growing. It's difficult to justify a rally that rations demand for U.S. soybeans when they're already the highest priced on the market, and they're already struggling to generate export demand.
The break in the corn market came 60 days earlier than the soybean market, and demand is benefiting from that, supporting higher livestock feeding and ethanol grind rates, as well as generating export demand as Brazil focuses more on soybean shipments. Mexico was the featured buyer of U.S. corn in the week ending January 18 at a net 22.2 million bushels of old- and 1.5 million bushels of new-crop. Marketing year to date export sales to all destinations total 1.279 billion bushels, up 332 million or 35% from the previous year's pace. I covered the ethanol estimates yesterday, showing how those numbers need to rise as well. It still doesn't pull projected ending stocks below 2 billion bushels, but it is a move in the right direction for a commodity that is over supplied.
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