The knee jerk reaction to the coronavirus outbreak continues to push the grains deep into oversold market condition. There is friendly fundamental news hitting the market, but the uncertainty on demand due to the virus outbreak in China has traders frozen in fear. So far, the result of the coronavirus outbreak on China’s stock market is a drop of about 9.5%. This is hard to gauge though as their stock market is closed and will remain closed until February in observance of the New Year. The decline in trading is seen in Chinese stocks traded in other countries. To date China has quarantined 50 million people.

Exports continue to be the thorn in the side of the U.S. grain market. China has not bought any U.S. products since the signing of the trade deal over two weeks ago, which has traders concerned that China will not be able to live up to their trade deal commitments. Last week’s shipments pace was at a marketing year low for wheat but close to expectations for corn and soybeans, although still below the level needed in corn to make U.S. Department of Agriculture projections.

The performance of the U.S. grains the past week has all three markets in an oversold condition and trading at or below support. Wheat and corn should have no trouble digging out of this hole. However, with widespread soybean harvest for Brazil right around the corner, it might be hard for the U.S. soybean complex to stage much of a recovery unless China were to come in and buy a large amount of U.S. soybeans in the short term.

President Donald Trump signed the U.S.-Mexico-Canada Agreement trade deal on Wednesday, Jan. 29. That will leave only Canada to ratify the trade deal. The Federal Reserve also met and left interest rates unchanged.

Wheat continues to trade sloppy, but more so due to slow export demand. Traders were expecting China to buy U.S. wheat after the trade deal was signed, but when the announcement came that China bought nine cargoes of Australian wheat instead, wheat traders took the news hard. Reports have Australian wheat at a higher price than U.S. as well, which contradicts China’s statement that they will buy grain when it economically makes sense.

Snow and rain moved across the Southern Plains which helped alleviate dry conditions in the short term. The hard red wheat crop continues to show signs of deterioration, which was evident in January’s Monthly Crop Progress report. Winter wheat conditions dropped 4% in Colorado to 53% good to excellent, 6% in Kansas to 34% good to excellent, 3% in Texas to 20% good to excellent and 11% in Nebraska to 59% good to excellent. But the report continues to show the winter wheat crop is declining due to dry conditions. Weather forecasts are also calling for dry conditions to continue as last weekend’s rains were disappointing and at this time there is little relief in the forecast. Now, fall and winter conditions are not indicative of spring conditions. But lower acreage and a crop that is declining in ratings should result in the market needing to encourage producers to keep the current planted crop or to plant hard red spring wheat.

Corn has started to show signs of strength. Exports are starting to pick up as other major corn exporting countries start to limit exports due to declining supplies. With the recent drop in price, U.S. corn has become the cheapest corn in the world export market. That should encourage importers to start looking hard at buying corn from the U.S. We are starting to see consistence purchases from South Korea, Japan and Mexico. But reports have China, South Korea and Bangladesh getting their corn needs met by Ukraine due to quality concerns in the U.S. corn crop due to light test weight. This will be an obstacle corn will fight for the rest of the year.

Domestic demand remains strong, but corn exports have been running at half the pace of last year. A slight pickup in export pace will help push corn out of its current 20 cent trading range.

Corn is also seeing issues with expectations of increased acreage in 2020. Touring across the Corn Belt this week has confirmed that the Corn Belt is staying with their rotation. So, if corn acreage is to increase it will have to come from the fringe regions. And the northern fringe will not likely increase acres due to North Dakota only being 49% harvested as of end of January. Coupled with the fact that the northern tier states have no fall tillage completed, no fertilizer applied and saturated soils, you have the recipe for declining acreage.

Soybeans have been on a one-way trip lower since the signing of the phase one trade deal with China. The lack of buying interest from China, coupled with the coronavirus outbreak, has many traders thinking China will not follow through with the requirements of the recently signed trade deal. If China does not buy soybeans in the short term, or any other ag product in the short term, it might be difficult to hit the $32 billion sales target. At this point, U.S. soybeans are undervalued as most contracts are sitting at or near May 2019 lows, which was when USDA was estimating an ending stocks estimate of 1 billion bushels.

On the bright side, Oil World is estimating 2019-2020 Chinese soybean imports at 88 million metric tons, up from USDA’s expectations of 85 million metric tons. This will help with U.S. exports to China. At this point, the U.S. has less than 150 days to get soybeans into China before Brazil and Argentina completely capture the market. And reports have conditions improving in Brazil. Estimates have the soybean crop in Brazil to be steady with or slightly better than last year, with some estimates shattering their old record production. Brazil’s harvest progress is estimated at 4% complete with early yields average to above average. There are trouble spots in Brazil, but the good areas are only improving with this latest round of rain. While Brazil’s weather continues to be ideal, Argentina’s weather is not. Hot and dry conditions are expected to return to Argentina this week and again in the six-to-10-day forecast. The hope is that the midweek rain system will be enough to keep the crop from going backwards.

Sunflower harvest was also updated in the Crop Progress report. North Dakota is reporting sunflower harvest progress at 67% while SD is at 96% complete.

Cattle took a break this past week due to demand concerns from the coronavirus. The virus is expected to cause less travel and a decline in dining out, which will result in a decrease in consumption. On the bright side, USDA’s January Cattle on Feed report was extremely uneventful as it came in at expectations. The hidden nugget in the report though was in the breakdown in the calves being placed in feedlots. Heifer placement into feedlots is up 4%, which is a sign that the breeding herd will likely see a reduction, or at worst small increase.