Closing Comments; Monday, January 27th, 2020
Agrivisor - SETZ - Mon Jan 27, 2:20PM CST

Sizable losses were posted in the markets today as traders reacted to the spread of the coronavirus in not just China, but the world. This generated heavy selling in the equity markets along with the commodities as investors simply exited all positions. We did see another set of flash sales on corn this morning, but even these failed to offer much support. Soybeans were further pressured by ongoing high yield reports out of Brazil, although a slower harvest pace provided light support.

The latest data from China shows 2,900 Coronavirus cases have been reported and 80 people have died from it. In China alone 56 million people have been quarantined as the country kicks off its Lunar New Year celebration. In the US there have been 5 confirmed cases. The impact this will have on global commodity demand is what applied pressure to the market today, as well as a simple exit of speculative traders from the markets. China will return from the Lunar New Year break on February 3rd.

South American weather is giving the market mixed signals. Heavy rains fell in parts of Brazil over the weekend to help alleviate dry conditions, which was also viewed as beneficial for later developing crops. At the same time, these rains have stalled the start of the soybean harvest in some regions. The rains have not impacted yield in any way though, so a large soybean crop for the country is still expected. Many analysts are still projecting a 124 million metric tons crop for the country.

The Brazilian soybean harvest is now reported at just over 4% complete. This is well behind last year’s 13% complete on this date. The heavy rains that have moved through Brazil are expected to further slow the harvest in some regions over the next two weeks. The question is what this may mean for the Safrinha crop. While there is still plenty of time to get the crop seeded, any delay could lead to an overall decrease in crop size. Slow plantings also push corn maturity into the dry season prior to harvest.

One country that has greatly benefitted from rains this year is South Africa. South Africa is now forecast to produce a 12.5 mmt corn crop this year. This would be 11% greater than last year’s crop which was devastated by drought. As a result, South Africa will likely return to the export market this year and compensate for any potential losses to the Brazilian crop.

While mostly overlooked by trade, we did see another round of flash sales on corn today. Japan was in and booked 111,252 mt of corn, and an unknown buyer took 142,428 mt of corn. This continues a string of corn sales that started last week. Market bulls are quick to point out how low prices cure low prices, and demand for our corn is up even with concerns over quality. Bears are quick to point out how the United States needs these sales to make up for lost ground to start the export season. Trade on a whole is more interested in how long this demand may last, as any increase in corn values could quickly squelch the newfound buying interest.

Export loadings for the week ending January 23rd were mixed. Corn inspections totaled 26.3 million bu which was up from last week, but well under the 43 mbu that is needed to reach yearly USDA expectations. Soybean loadings were down on the week at 38.17 mbu but well above the needed amount. Wheat inspections for the week totaled a mere 8.23 mbu while 20 mbu is needed on a weekly basis. For the marketing year, export inspections are down 53% on corn from a year ago, while soybeans are up 23% and wheat is 12.8% higher.

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