Closing Comments; Thursday, January 23rd, 2020
Agrivisor - SETZ - Thu Jan 23, 2:04PM CST

Trade was mixed to start the day with grains in positive territory while soybeans were on the negative side. Even though soybeans are oversold they are being pressured by elevated South American harvest activity and yield reports. The lack of business with China is also applying persistent pressure to soy futures. Demand is a benefit for the grains, especially corn where several flash sales were announced for both this year and next.

The US made several corn sales overnight which is just what the complex needed to see. Guatemala was in the market and booked 114,244 metric tons of corn for delivery in the 2019/20 marketing year. Guatemala also booked 29,724 mt of corn for 2020/21 delivery. An unknown buyer was in the market and booked 141,000 mt of corn for delivery during the 219/20 year. While these sales were positive, much more business is needed to reach yearly projections.

The International Grains Council updated their world balance sheet estimates today. The IGC is predicting world grain production of 2.17 billion metric tons for 2019/20 compared to 2.14 bmt in 2018/19. Their revised estimate is also 7 million metric tons larger than their December projection. Increases of 3 mmt to US and 5 mmt to Chinese corn crops was the reason for higher output. World grain production is still expected to fall short of demand though, as the IGC predicts world grain demand of 2.19 bmt for this year.

The economic firm Rabobank has released an outlook for the wheat market and predicts a correction may take place. Despite current market action, Rabobank believes wheat values will set back to the $5.50 level this marketing year. Their prediction is being based on the fact that while tighter, the world wheat supply remains in a surplus state. Until this changes, the complex is likely to be limited.

Yield data out of Brazil continues to point towards a large soybean crop. Initial reports out of Mato Grasso indicate a soybean crop that will be from 10 to 15% larger than a year ago. Mato Grasso is currently projected to raise 34 mmt of soybeans but current data indicates this could be even higher. The question is if this is a trend that will continue throughout the country, especially when harvest gets into the regions that have been suffering from drought conditions.

Trade is also starting to focus on Argentine corn production possibilities. The main area of attention in Argentina is the state of Cordoba, where rainfall has only been 26% of normal. There is little doubt this has impacted corn production in that area. Other regions of Argentina have seen 100% of normal precipitation though, and the question now is if corn production in them will be enough to compensate for losses in others.

Ethanol manufacturing numbers for the week ending January 17th were released today and were less than supportive for the industry. Ethanol production for the week totaled 7.34 million barrels, down 322,000 barrels from the week before. Even with this decrease ethanol stocks increased a large 1.025 million barrels to total 24.03 million. Ethanol reserves have increased 3.8 million barrels in the past two months, and are now above a year ago and approaching a record high volume.

The final cold storage report for 2019 has been released. On December 31st the US had 580.9 million pounds of pork in storage compared to 505.3 million pounds a year earlier. Pork bellies climbed from 42.25 million pounds in 2018 to 68 million pounds at the end of 2019. Beef in cold storage shrunk though, going from 495.6 million pounds to 481 million pounds.

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