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Corn Futures Climb Following Large Chinese Export Purchase

01/26/2021 | 03:38pm

By Kirk Maltais

--Corn for March delivery rose 4.1% to $5.32 1/4 a bushel on the Chicago Board of Trade Tuesday as China bought more than 1.3 million metric tons of U.S. corn.

--Wheat for March delivery rose 2.6% to $6.65 1/4 a bushel.

--Soybeans for March delivery rose 2% to $13.70 1/4 a bushel.

HIGHLIGHTS

Big Buy: The USDA confirmed the huge sale of U.S. corn to China this morning to be delivered in the 2020/21 marketing year. Additionally, 102,800 tons of corn were sold to unknown destinations for delivery in 2020/21. The strong buying suggests U.S. corn's high prices aren't dissuading purchasers and prices aren't high enough to spur demand rationing.

Back to Basics: After days dominated by managed money positioning, the focus seems to be returning to fundamentals. "The underlying need to ration old crop inventory remains supportive, mainly in the soy complex, " said Karl Setzer of AgriVisor. "Until we see signs this is working, values will likely remain elevated and buyers will surface on breaks."

INSIGHTS

Ethanol Ebbing: U.S. ethanol production is expected to post a slight decline this week, according to an informal survey of grain traders by Dow Jones. Participants say they expect production to total 935,000 barrels per day to 949,000 barrels per day, versus 945,000 barrels per day reported last week by the EIA. "I am expecting production to be lower with idle ethanol plants and an increase of inventories on slower exports this season," said Dan Flynn of Price Futures Group. Ethanol inventories are expected to climb in the EIA's next weekly report tomorrow.

Holding Out Hope: While U.S. ethanol production is contracting in the short-term, Archer Daniels Midland said it's hoping to restart some ethanol capacity curtailed in 2020 in the first half of 2021. "We're going to remain very disciplined in terms of when we actually restart the dry mills because we'll want to see sustainable margins before we restart," ADM Chief Financial Officer Ray Young said on the company's earnings call Tuesday. "And hopefully, sometime in the first half, we're going to see that." Chinese interest in U.S. ethanol exports may become a strong driver for the industry's recovery this year, Mr. Young added.

AHEAD:

--Railway operator Norfolk Southern will release fourth-quarter 2020 earnings before the stock market opens Wednesday.

--The EIA will release its weekly ethanol production and stocks report at 10:30 a.m. ET Wednesday.

--The USDA will release its weekly export sales report at 8:30 a.m. ET Thursday.

Write to Kirk Maltais at kirk.maltais@wsj.com

(END) Dow Jones Newswires

01-26-21 1537ET

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