Daily US grain report: spreading coronavirus outbreak hits grain futures markets hard

US grain futures are solidly lower in early US pre-market trading Monday. Corn is around 6 cents lower, soybeans 10 to 12 cents lower and wheat is around 8 cents down.
calendar icon 27 January 2020
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Grain traders are spooked to start the trading week, as over the weekend the coronavirus illness that apparently originated in China has rapidly spread, killing at least 80 of its citizens, with nearly 8,500 cases now reported in China. Several Chinese cities are under quarantine. Several cases are now reported in the US as doctors are now saying the illness is more easily contractable. There are increasing worries the outbreak could hurt world global demand for grains, including possibly impacting the recently signed partial trade agreement between the US and China that included China buying much more U`S agricultural products. Look for buying interest in the grain futures markets to continue to be squelched until this situation stabilizes, which could be a while.

Corn suffers market "shock" on coronavirus outbreak; remember that markets tend to overdo on the downside such events, however, don't rule out more near-term downside
Corn suffers market "shock" on coronavirus outbreak; remember that markets tend to overdo on the downside such events, however, don't rule out more near-term downside

© Jim Wyckoff

However, veteran traders know that “market shocks” such as this tend to see futures prices over-react and then recover at some point—providing value-buying opportunities at lower price levels. The key is timing when the markets bottom out, which is a very difficult endeavour.

Bears have solid chart advantage amid steep price downtrend line to suggest retest of December low, or below. However, the coronavirus market "shock" will likely see prices get overdone on the downside
Bears have solid chart advantage amid steep price downtrend line to suggest retest of December low, or below. However, the coronavirus market "shock" will likely see prices get overdone on the downside

© Jim Wyckoff

Traders will closely examine Monday’s weekly USDA export inspections report. The latest CFTC commitments of traders report out Friday afternoon shows the big speculative “funds” net position short 67,804 corn futures contracts, short 13,735 soybean futures contracts, and long 41,671 wheat futures contracts.

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