Morning Comments; Thursday, January 23rd, 2020
Agrivisor - SETZ - Thu Jan 23, 6:38AM CST

The market is moving back into a position of sparse fresh news which limited yesterday’s rally. This was especially the case for wheat, where even though fundamental information remains supportive, the contract has now moved into overbought territory. Not only is the 14-day RSI on wheat at 70%, but the contract has worked its way above the Bollinger Band levels, setting it up for a correction. Wheat still has plenty of supportive fundamentals, but these are already priced into the market. Without fresh support a set-back should not come as a surprise. To see weak longs flushed out of the market is not a surprise either. Conversely, soybeans and corn have started to work towards oversold on the charts. This is especially the case on soybeans where the 14-day RSI is below the 40% mark. While not at a point where active buying would develop, this point is where additional selling should start to fade. Unlike corn and wheat, soybeans are starting to see harvest pressure in the global market from South America. Many buyers, including China, claim to have soybean needs covered for the next several weeks. This may allow them the ability to wait for cheaper offerings out of South America to cover needs. As a result, we could easily see soybean demand slip until mid-spring. One fundamental story the market keeps going back to is trade relations between the US and China. Its been over a week since the Phase 1 agreement was signed and we do not know anymore about China’s prospective demand than we did prior to the agreement. The longer it takes for Chinese buying to surface, the less optimism we are seeing for the projected rise in sales.

Highlights

* Coronavirus may limit Chinese demand

* Mat Grasso only seeing 57% of normal rainfall

* More countries oppose Phase 1 agreement

* China claims Phase 1 will not deter other purchases

* Chinese delegation visits US last week

* No frame contracts from visit

* total Chinese demand questioned

* Wheat rallies to highest level since Aug 2018

* South America harvest pressure building

Corn

* Yearly loadings 371 mbu vs 812 mbu last year

* No Chinese business confirmed

* Safrinha production questioned

* Corn demand still a concern

* Drought to impact Arg corn production

Soybeans

* US crush underestimated

* Brazil harvest builds

* Brail yields remain high

* US not a priority for Chinese importers

* US loadings +23.7% last year

Wheat

* Wheat values +4.5% in past week

* Wheat approaching overbought

* Yearly export loadings +13.5%

* Buyers continue to surface for US offerings

* Next round of fresh wheat 4 months away

Livestock

* COF tomorrow

* Market expects bearish numbers

* Market expecting higher beef production in 2020

* 580.9 mil pounds pork in cold storage; 505.3 last year

* 481 mil pounds beef in cold storage, 495.6 year ago

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