Closing Comments; Tuesday, January 21st, 2020
Agrivisor - SETZ - Tue Jan 21, 2:47PM CST

The mixed trade that started in the overnight session carried over into the day trade, with corn and soybeans under pressure and wheat on the positive side. Soybeans suffered the greatest losses as new crop harvest numbers are starting to come out of Brazil and are much better than expected. Corn was pressured by a lack of buying interest and heavy competition for the US in the global market. Wheat held strong in today’s trade though as global production concerns lent support.

Initial harvest reports from Brazil are showing much better than expected soybean yields. Harvest is getting underway in the state of Matto Grasso and early yields are at 71 bushels per acre. Scouts claim that many plants in the state are showing 4 and even some with 5 soybeans per pod which is a major reason for the elevated yield. This gives credence to forecasts for higher soybean production in Brazil than what the USDA is currently predicting.

While harvest is getting underway in Brazil, the completion rate is slower than in recent years. So far just 1.8% of Brazil’s soybean crop has been harvested. Heavy rains through the northern regions of the country and a slow spring planting pace are the main reasons for the slow harvest. This does not bode well for a large double cropping volume and could lower Brazil’s corn production potential.

The United States has seen considerable competition in the world corn market this year, with much of this coming from Ukraine. Ukraine officials report that corn exports from October through December were a record 9.8 million metric tons. This is a 29% increase for that period from last year. For the marketing year Ukraine has exported 33.87 mmt of corn which is a 7.6 mmt increase from last year.

The United States is also seeing heavier competition from Russia in the global market on grain sales. Even with restrictions, Russian officials believe grain exports will reach 22.7 mmt in the second half of the marketing year. Of this, 14.2 mmt will be wheat, which is a 3.5 mmt increase on the year. Yearly Russian wheat exports are forecast to come in at 35 mmt which would be similar to a year ago. Russia also believes its corn exports will be higher as production of that crop was better than expected.

Another source of export competition for the US is coming from Argentina. Argentina is forecast to export a record 1.2 mmt of wheat into the Asian market this year, and while a small volume, it would be the second year of record wheat trade from Argentina into that region. Total wheat exports from Argentina could reach 12 mmt this year given the record sized crop in the country which would greatly off-set production losses to the Australian crop.

Brazilian soybean sales surged last week on the heels of the trade agreement between the US and China. Much of this business was done with China even as the Phase 1 agreement was being signed. Not only did China book soybeans for delivery during 2020 but for 2021 as well. Brazilian exports feel soybean values will fall once China starts fulfilling its agreement with the US and want to capture as much of the current market as possible.

South American wheat remains a primary topic in trade and conditions are mixed. More rains are forecast for Northern Brazil which could further slow harvest activity. Southern Brazil remains dry, but cool temperatures are limiting soil moisture loss. There are rains forecast for Southern Brazil and Argentina in early February but at least some crop loss could take place by then.

Export loadings for the week ending January 17th favored soybeans over the grains, but even this news failed to support today’s soy trade. Soybean inspection for the week were well above what was needed to reach yearly expectations at 44 million bu. Nearly half of this total was loaded out to China. Corn fell short of needs with 13.6 mbu as did wheat with 16 mbu.

This commentary is the sole opinion of Karl Setzer, Senior Commodity Risk Analyst for AgriVisor, LLC. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to send an e-mail to ksetzer@agrivisor.com.




 

Market Commentary provided by:

Karl Setzer Grain Commentary