Barchart Commodity Futures Morning Update

Grain prices this morning are lower with Mar corn -2.25 (-0.62%), Mar soybeans -4.75 (-0.48%), Mar wheat -5.50 (-1.21%). Grains on Thursday settled mixed with Mar corn at a 6-month nearest-futures high: Mar corn +0.50 (+0.14%), Mar soybeans +4.75 (+0.48%), Mar wheat -4.25 (-0.92%). Corn prices rallied after the USDA in Thursday's WASDE report cut its U.S. 2017/18 corn ending stocks estimate to 2.352 bln bu, less than expectations of 2.467 bln bu, and cut its global 2017/18 corn ending stocks estimate to a 4-year low of 203.09 MMT less than expectations of 204.2 MMT. Soybeans closed higher after the USDA cut its global 2017/18 soybean ending stocks estimate to 98.1 MMT, below expectations of 98.3 MMT, although gains were limited after the USDA raised its U.S. 2017/18 soybean ending stocks estimate to an 11-year high of 530 mln bu, more than expectations of 488 mln bu. Mar wheat posted a 6-month nearest-futures high after the USDA cut its global 2017/18 wheat ending stocks estimate to 266.1 MMT, less than expectations of 267.6 MMT. Prices fell back and closed lower, however, after the USDA unexpectedly raised its U.S. 2017/18 wheat ending stocks estimate to 1.009 bln bu, more than expectations of a cut to 988 mln bu. Data from the U.S. Drought Monitor show 44.1% of the area was experiencing moderate drought as of Feb 6, up from 13.6% three months ago. Another negative for soybeans was the action by researcher AgRural to raise their 2017/18 Brazil soybean crop estimate to a record 116.2 MMT from a Jan estimate of 114 MMT. A negative for wheat is increased wheat exports from Russia, the world's biggest wheat exporter, which may further erode demand for U.S. wheat as Russia wheat exports from Jul 1-Jan 24 are up +35% y/y at 23.5 MMT. Strong Chinese soybean demand for U.S soybeans has been a major bullish factor for soybean prices as China 2017 soybean imports rose +13.9% y/y to a record 95.54 MMT and the China National Grain and Oils Information Center estimates China 2018 soybean imports will rise +5% y/y to a record 100 MMT.



Livestock prices on Thursday settled mixed: Apr live cattle -0.250 (-0.20%), Apr lean hogs +0.225 (+0.33%). Apr cattle prices on Thursday closed lower on concern packer demand for cattle may wane after beef packer profit margins on Wednesday fell to their most negative in 11-1/2 months. Losses were limited after the USDA raised their U.S. 2018 beef export estimate and lowered their U.S. 2018 beef production estimate. The USDA raised its U.S. 2018 beef export estimate to a record 3.025 bln lbs, up +5.7% y/y. from 2.985 bln lbs estimated in Jan, and cut its U.S. 2018 beef production estimate to 27.792 bln lbs from a Jan estimate of 27.827 bln lbs. Apr cattle rose to a 2-month high Monday on strength in the cash market after cash cattle prices jumped to a 7-1/2 month high. Foreign demand for U.S. beef is robust with U.S. 2017 beef exports up +12% y/y to 2.862 bln lbs. The USDA projects U.S. 2018 beef production will climb +5.9% y/y to a record 27.792 bln lbs.

The Jan 24 USDA Cold Storage report was mixed as it showed beef in cold storage in Dec rose +0.9% m/m and fell -13.8% y/y to 489.543 mln lbs. The Jan 26 USDA Cattle on Feed report was negative as it showed cattle on feed as of Jan 1 rose +8.3% y/y to 11.489 million head, above expectations of +7.7% y/y, and cattle placements in feedlots during Dec unexpectedly rose +0.8% y/y to 1.799 million head, higher than expectations of a -2.4% y/y decline.

Apr lean hog prices on Thursday recovered from a 4-month low and closed higher after the USDA in Thursday's WASDE report cut its U.S. 2017/18 pork production estimate to 26.901 bln lbs from a Jan estimate of 26.976 bln lbs. Apr hogs had posted a 4-month low on bearish factors that included (1) domestic pork demand concerns after wholesale pork prices tumbled to a 6-week low, and (2) a slump in pork packer profit margins Wednesday to a 2-1/2 year low, which reduces incentive for packers to purchase hogs. On the positive side, the cash market remains strong as cash hog prices climbed to 5-1/2 month high. Apr hogs on Jan 8 posted a contract high on cash market strength after cash hog prices rose to a 5-month high. Also, foreign demand for U.S. pork is strong with U.S. 2017 pork exports up +7.5% y/y at 5.632 bln lbs and the USDA projects that U.S. 2018 pork exports will climb +5.6% y/y to a record 5.9 billion lbs. The USDA also projects U.S. 2017/18 pork production to climb +5.1% y/y to a record 26.901 bln lbs. The Jan 24 USDA Cold Storage report was mixed as it showed overall pork supplies in Dec fell -2.3% m/m and rose +3.2% y/y to 490.782 mln lbs.

The Dec 22 USDA Q4 Hogs & Pigs report was bearish as it showed the U.S. pig herd as of Dec 1 rose +2.4% y/y to 73.23 mln, more than expectations for a +2.3% y/y increase. Also, sows retained for breeding as of Dec 1 rose +1.1% y/y to 6.179 mln, more than expectations for a +0.9% increase, and hogs marketed for slaughter rose +2.5 y/y to 67.051 million, more than expectations of +2.2% y/y and a record high for a Dec 1 (data from 1964). In addition, there was a record 10.74 piglets per litter in Q4.



Softs this morning are mixed with Mar sugar +0.12 (+0.88%), Mar coffee -0.05 (-0.04%), Mar cocoa -14 (-0.69%), Mar cotton +0.56 (+0.73%). Softs on Thursday settled mixed: Mar sugar -0.42 (-3.00%), Mar coffee -0.45 (-0.36%), Mar cocoa +21 (+1.04%), Mar cotton +0.66 (+0.87%). Mar sugar on Thursday closed lower as the fall in crude oil prices to a 1-month low undercuts ethanol prices and may prompt Brazil's ethanol producers to cut back on production that boosts sugar supplies. Mar sugar posted a 3-week high Tuesday after researcher Sucden forecast global 2018/19 sugar production may fall -3.3% to 141 MMT. Mar sugar posted a 4-1/4 month nearest-futures low Jan 19 on signs of robust global supplies. India raised its 2017/18 sugar production estimate to 36.1 MMT from 25.1 MMT and said it may export a much a 1 MMT of sugar to reduces surpluses, the first time it may export sugar in 2-years. Researcher Green Pool Commodity Specialists recently raised their 2017/18 global sugar surplus estimate to 10.4 MMT from an Oct estimate of 9.8 MMT. Data from Unica shows sugar production in the 2017/18 crop year through mid-Jan in Brazil's Center-South region was up +1.65% y/y at 35.827 MMT, and that the percent of sugar use for ethanol production fell to 53.08% from 53.40% last year. ISO projects a global 2017/18 sugar surplus of +5.03 MMT following the global 2016/17 deficit of -6.465 MMT. The USDA's Foreign Agricultural Service (FAS) on Nov 17 raised its 2017/18 global sugar surplus estimate to 10.73 MMT from a May forecast of 8.07 MMT and raised its global 2017/18 sugar production estimate to a record 184.95 MMT from a May view of 179.64 MMT.

Mar coffee prices on Thursday fell back from a 1-week high and closed lower after the Brazilian real fell to a 1-month low against the dollar, which gives Brazil's coffee producers incentive to boost more-profitable exports with the weak real. Mar coffee had posted a 1-week high on fund short-covering after Columbia, the world's second-biggest arabica bean producer, reported its Jan coffee output fell -11% y/y to 1.13 mln bags. Mar coffee posted a 1-1/2 month low Tuesday on signs of ample global supplies. The ICO reported Friday that global Dec coffee exports rose +0.8% y/y to 10.62 mln bags, and Brazil reported its Jan coffee exports rose +6.4% y/y to 2.618 mln bags. Also, ICE-monitored coffee inventories last month rose to a 2-1/4 year high of 2.017 mln bags. The ICO projects global 2017/18 coffee production will climb +0.8% y/y to a record 158.93 mln bags. Also, Conab, Brazil's forecasting agency, forecast Brazil 2018 coffee output may jump +30% to as much as 58.5 mln bags from 44.97 mln bags in 2017 on timely rains. Abundant global supplies had fueled fund selling and pushed Mar coffee prices down to a contract low on Dec 12. ICO data shows global 2016/17 arabica coffee exports rose by +5.4% y/y to 76.23 mln bags, although 2017/18 global coffee exports from Oct-Dec are at 28.36 mln bags, down -6.7% y/y. The ICO projects a global 2016/17 coffee ending stocks surplus of 2.38 mln bags, the first surplus in 3 years. The Green Coffee Association reported that U.S. Dec coffee inventories rose +6.0% y/y to 6.632 mln bags. The USDA on Dec 15 projected that global 2017/18 coffee ending stocks will fall -8.6% to a 5-year low of 29.3 mln bags.

Mar cocoa prices on Thursday closed higher after the Indonesian Cocoa Association said it may need to import 250,000 MT of cocoa this year due to declining domestic production. Current supplies are adequate after data showed Ivory Coast farmers delivered 1.246 MMT of cocoa beans to Ivory Coast ports from Oct 1-Feb 4, up +0.4% y/y. Cocoa prices had risen to a 2-month high Monday on weather concerns in the Ivory Coast after Speedwell Weather reported that over the past month the Ivory Coast has received less than 75% of normal rainfall. Another supportive factor is signs of stronger global demand. Recent data from Barry Callebaut showed global chocolate sales rose +3.1% in the three months through Oct and the European Cocoa Association reported European Q4 cocoa processing rose +4.4% y/y to 353,286 MT, higher than expectations of +3.4% y/y and the most for a Q4 since the data began in 1999. However, Q4 Asia cocoa grindings rose +4.2% to 196,476 MT, below expectations of +8% y/y, and Q4 North American cocoa grindings unexpectedly fell -1.3% to 116,080 MT, weaker than expectations for a +2.5% increase. Mar cocoa on Dec 22 posted a contract low as signs of abundant supplies spurred fund selling of cocoa futures. The Ivory Coast on Dec 21 boosted its 2017/18 main cocoa crop forecast to 1.40 MMT to 1.45 MMT from a prior forecast of 1.35 MMT. Also, the ICCO recently hiked its 2016/17 global cocoa production estimate to a record 4.73 MMT from a prior estimate of 4.70 MMT, which will result in a 6-year-high global 2016/17 surplus of +335,000 MT. Ghana said its 2016/17 cocoa production rose +25% y/y to 969,438 MT, a 6-year high. The Ivory Coast, the world's biggest cocoa producer, reported cocoa purchases, a sign of production, rose to 2.015 MMT from Oct-Sep 24, up +29% y/y and a record high.

Mar cotton on Thursday closed higher on strength in foreign demand for U.S. cotton after the USDA reported 520.9 running bales of upland cotton were sold the week of Feb 1, up +56% w/w. Prices fell back from their best levels after the USDA in Thursday's WASDE report unexpectedly raised its U.S. 2017/18 cotton ending stocks estimate to a 9-year high of 6.0 mln bales, more than expectations of a cut to 5.6 mln bales. The USDA also raised its global 2017/18 cotton ending stocks estimate to 88.55 MMT, higher than expectations of a cut to 87.4 MMT, and raised their global 2017/18 cotton production estimate to a 5-year high of 121.37 MMT. Cotton prices remain on the defensive and posted a 1-1/2 month low Wednesday on signs of increased supplies after ICE-monitored cotton inventories rose to 6-3/4 month high of 76,757 bales. Another negative is concern the rally in cotton prices to an 8-3/4 month high last month will spur increased global production after Rabobank predicted U.S. farmers may boost their cotton acreage for 2018/19 by 2.0 mln acres to 14.6 mln acres, the most in 7-years. Cotton prices posted an 8-3/4 month nearest-futures high Jan 12 on expectations of increased foreign demand for U.S. cotton. Chinese cotton demand has been robust as China's 2017 cotton imports rose +28.9% y/y to 1.15 MMT. The Pakistan Textile Mills Association on Dec 6 said Pakistan may need to import 2.5 mln bales of cotton in 2018. Recent foods in Pakistan, the world's fourth-largest cotton producer, may reduce its cotton crop and prompt it to import as much as 1 mln bales this year, according to researcher Rose Commodity Group. The USDA projects global 2017/18 cotton use will climb to 120.5 mln bales, a 10-year high. On the negative side, the Cotton Advisory Board recently predicted 2017/18 cotton production in India, the world's biggest cotton producer, will climb +9.3% y/y to a 3-year high of 37.7 mln bales.



Mar crude oil this morning is down -66 cents (-1.08%) and Mar gasoline is down -0.0094 (-0.53%). Thursday's closes: Mar WTI crude -0.64 (-1.04%), Mar gasoline -0.0010 (-0.06%). Mar crude oil and gasoline on Thursday closed lower with Mar crude at a 1-month low. Crude oil prices were undercut by negative carry-over from Wednesday's EIA data that showed a +3.3% increase in U.S. crude production to 10.251 million bpd, a 47-year high.



Metals prices this morning are weaker with Apr gold -2.6 (-0.20%), Mar silver -0.051 (-0.31%), and Mar copper -0.020 (-0.63%) at a fresh 1-3/4 month low. Thursday's closes: Apr gold +4.4 (+0.33%), Mar silver +0.103 (+0.63%), Mar copper -0.0055 (-0.18%). Metals on Thursday settled mixed with Mar copper at a 1-3/4 month low. Metals prices were undercut by concern that near-term Chinese copper demand will drop with the start of the week-long Chinese Lunar New Year holidays next week. Copper prices were also undercut by increased copper supplies after LME copper inventories surged +21,125 MT to a 6-3/4 month high. Gold and silver closed higher as the plunge in stocks boosted safe-haven demand for precious metals.