Morning Comments; Wednesday, January 22nd, 2020
Agrivisor - SETZ - Wed Jan 22, 6:38AM CST

Wheat has become the well-defined leader in the commodity market recently, taking support from a variety of factors. One of the main ones is global production issues, especially in Australia and Russia. E are also seeing supply disruptions from France given labor issues in that country. Speculative buying following the recent USDA prediction for the least amount of wheat acres in the US in over 100 years is also supporting the wheat complex. While global wheat stocks are adequate for now, it would not take much to see a shift in balance sheets to a point where we would need to monitor usage. One thing to watch with wheat is the spread between that grain and corn. This is starting to approach $2.00 indicating either wheat is over-valued, or corn is under-valued. To see some shifting of demand from wheat to corn under this circumstance would not be surprising, especially in the global feed market. This is exactly what the corn complex needs as demand remains an issue for the US market. Soybeans were under heavy pressure yesterday from the onset of harvest in South America and how it will likely start to affect demand for our offerings in the global market. The US is not the cheapest source of soybeans in the world which will likely deter demand, even from China. In the Phase 1 agreement China agreed to buy US soybeans when ‘market conditions” were favorable. Being higher priced than other soybean suppliers is not favorable. Higher than expected soybean yields is also weighing on the complex with reports of 70+ bushel per acre soybeans coming in from Mato Grasso. This puts Brazil on track to reach the higher estimates than have been given for the crop. All eyes will be on China in the next few weeks to get an indication of what they do intend to import from the US. We will also see market influence from the outside markets and how the impeachment trial impacts investor attitudes.

Highlights

* Chinese Lunar New Year starts Jan 25th

* Initial Brazil soybean yields very high

* Trade tensions with EU escalate

* Fertilizer demand up in China

* No MFP payments following 3rd tranche

* Trade starting to doubt Chinese business

* US to keep tariffs on China even into Phase 2

* Soil moisture falling in So Brazil

* Corn/wheat spread reaches $2.00

Corn

* Ukraine corn exports at record levels

* Ukraine exports 9.8 mmt corn from Oct to Dec

* Ukraine corn exports +29% on the year

* Chinese imports est at 7.2 mmt

* Chinese imports just enough to satisfy WTO obligation

Soybeans

* Mato Grasso yield at 71 bpa

* Many 4-5 soybean pods

* Brazil soy harvest 1.8%, year ago was 6.1%

* US not cheapest source in global market

* China imports may hit 90 mmt

Wheat

* High wheat values hurt Argentine millers

* Pakistan to up wheat imports

* Record Argentine exports to Asia

* Export demand remains high

* Russia sees record high export values

Livestock

* COF this Friday

* Wholesale beef rallies

* Pork cutout values firm

* Winter storms slow slaughter numbers

* Hog weights continue to climb

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.




 

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Karl Setzer Grain Commentary