Morning Comments; Tuesday, January 28th, 2020
Agrivisor - SETZ - Tue Jan 28, 6:33AM CST

Yesterday’s trade was hit hard by the market reaction to the spread of the coronavirus around the world, and this weakness carried over into the night session. A reported 2,900 cases have been discovered in China with 81 deaths. In the US there have been 5 confirmed cases. While to see this virus is not something new, to see the reaction is it getting is. The greatest concern is what it will mean for the Chinese economy once the country returns from its Lunar New Year holiday next week. Markets are closed in China because of this and will reportedly reopen next Monday, the 3rd of February. Until then expect a large amount of speculation to take place in the market, with many traders simply moving to the sidelines. At the same time, it would not come as a surprise to see buyers try to pick a bottom in the market and view this break as a buying opportunity. Aside from the ongoing reaction to the spread of coronavirus, the fundamentals in the market remain mostly unchanged. One of the main ones is Brazilian harvest progress as rains continue to slow progress. This does not necessarily mean Brazil will produce a smaller soybean crop, just that it will be available at a later date. Brazil has not exhausted old crop soybean reserves though, so no disruption is expected to exports anyway. What the slower soybean harvest pace does mean is less time to plant a large Safrinha crop. Analysts have already lowered their Brazilian corn output predictions and these conditions could cause them to shrink even further. Trade will be eager to see if another batch of flash sales on corn are announced this morning as that has become normal in recent sessions. Fresh news remains sparse which could easily limit today’s trade. At the same time, to see speculative buying surface after our recent break would not come as a surprise. This is especially the case on soybeans where indicators have turned oversold.

Highlights

* Coronavirus economic concerns build in world markets

* China to return to trade next Monday

* Largest reaction has been in equity markets

* SAM weather mixed

* Brazil rains slow harvest, may limit double cropping

* Rains a great benefit for south Africa

* Brazilian Real weakens, pressure soybeans

* UK to leave EU this Friday

* USMCA scheduled to be signed Wednesday

Corn

* Buyers surface on break

* Feed demand expected to rise

* Delays to Safrinha planting

* Global production may rise

* Us attaché lowers Argentine crop

Soybeans

* Rains slow Brazil harvest

* Brazil harvest 4% complete, last year was 13%

* No Chinese trade this week

* Global oilseed market under pressure

* Technically oversold

Wheat

* Technical correction underway

* Corn/wheat spread narrows 20 cents

* Funds remain buyers

* Ukraine grain exports +8 mmt this year

* Egypt has wheat needs covered through June

Livestock

* Coronavirus concerns limiting demand

* Cattle numbers growing

* Higher slaughter numbers, weights

* US has 490,000 mt unshipped pork sales

* Chicken wings rally 5% ahead of super Bowl

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