Morning Comments; Friday, January 24th, 2020
Agrivisor - SETZ - Fri Jan 24, 6:38AM CST

This week’s trade has been more volatile than we have seen in the past several weeks. Wheat values have rallied to a point not seen since 2018 on global production concerns. This is mainly from weather in the Black Sea and low US acreage projections. While wheat stocks are forecast to tighten, they are not anticipated to fall to a point where rationing would be warranted. We have also seen wheat venture into overbought territory which has lessened the willingness of traders to extend their long positions. Soybean volatility has also ramped up as the South American harvest season gets underway. Soybeans fell under pressure as initial yields from Brazil are much better than expected. This is giving support to estimates that are calling for a larger Brazilian soybean crop than what the USDA is predicting. The market is also growing concerned over the lack of Chinese business following the Phase 1 signing a week ago. While immediate sales were unlikely, the fact China has been actively booking South American soybeans rather than those from the US is a concern. Not only is China booking Brazilian soybeans for 2020 but also 2021 as well. Soybeans are now oversold, but without a reason for buying to take place, we could see futures flounder for the next several sessions. Corn has been more of a follower this week with little movement being seen. Demand remains a major hindrance for the corn complex as export sales remain well below expectations. The global corn supply is expected to remain adequately stocked this year even with demand outpacing production. Same as with soybeans the most interest on corn is in South America at the present time. Soybean harvest is slower than a year ago in Brazil and weather is less than perfect which could easily reduce plantings. Drought is also still impacting Argentina with the main state of Cordoba only receiving 26% of normal rainfall. There is little doubt this has reduced corn production in some areas, but others may end up seeing larger crops from favorable weather. For today’s session we will see attention on the weekly export numbers to see if any buying has taken place that was not seen in the flash reports.

Highlights

* Coronavirus economic concerns build in China

* China now quarantines cities

* US/EU trade deal may be approved before Nov elections

* US ethanol stocks up 3.8 mil gal in 2 months

* Ethanol margins continue to fall

* Low unshipped sales to China

* Lunar New Year starts Saturday

* US acreage debate begins

* Delayed export sales released today

Corn

* US share of global mkt shrinks

* IGC predicts larger global grain crop

* Asian feeders concerned with Us corn quality

* Buyers opt for Ukraine corn

* US does see flash sales

Soybeans

* Mato Grasso yields +10-15% from last year

* Lack of Chinese business a concern

* Only 56 mbu unshipped Chinese sales on books

* Virus outbreak may limit demand

* Technically oversold

Wheat

* Rabobank predicts weaker market to come

* Wheat approaching overbought

* Wheat trying to buy spring acres

* Buyers continue to surface for US offerings

* US rally pushes values above competition

Livestock

* COF estimated at 102.2% year ago

* Placements in Dec 103.2%, Marketings 105.2%

* Traders not concerned with large US pork supply

* Chinese demand to rise after Lunar New Year

* EU suspends imports of Ukraine poultry

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