Morning Comments; Wednesday, January 29th, 2020
Agrivisor - SETZ - Wed Jan 29, 6:36AM CST

There is little doubt we will continue to see market reaction to the spreading Coronavirus in today’s session. To nobody’s surprise, this is already bringing into question the recently signed trade deal between the US and China. The fact that China has canceled various Lunar New Year celebrations will also impact its commodity demand. That said, any disruption will likely be short lived as China still needs imports, especially on pork. Equity markets stabilized yesterday which took some of the pressure off commodities. Trade is now speculating what may happen when Chinese trade resumes next Monday following its week-long holiday. It is not out of the question that the reaction to the virus outbreak may be limited as trade has had time to digest the information and react accordingly. The USMCA trade package is expected to be sign by President Trump today with a muted market reaction. Mexico is already a leading buyer of US commodities, especially corn. Several flash sales of corn have been announced in recent sessions and several of these have been to Mexico. Prior to this Mexico was already a buyer of US corn and pork, along with other commodities. Canada has also been booking US commodities, so a significant rise in demand is not expected. Trade will continue to monitor South American weather and what impact it may have on soybean harvest and double cropping. Private analysts have been tweaking their soybean crop for Brazil higher, with most now above the USDA. Corn crop estimates out of South American are more variable, with most calling for a decline in production from last year. Trade will continue to monitor technical indicators today, especially on soybeans, as that complex remains oversold. This should generate at least a short-covering rally, especially with month end approaching.

Highlights

* Coronavirus economic concerns build in world markets

* Confirmed cases in China top 6,000

* Lunar New Year celebrations cancelled

* Reduction to Chinese commodity demand may be short lived

* USMCA expected to be signed today

* Stats Canada stocks report Feb 5th

* Skepticism builds over Phase 1 benefits

* China waiting for lower values to buy

* Brazil lowers inflation outlook

* Brazil weather favorable, Argentine mixed

Corn

* Flash sales continue

* High FM a concern in exports

* Analysts leave SAM production unchanged

* EU imports down from last year

* South Africa raises planting estimates

Soybeans

* Large Chinese buying hopes fade

* No Chinese flash sales since Phase 1 was signed

* Brazil soy vessel line up building

* Private estimates above USDA on Brazil crop

* Soybeans have been down for 7 sessions

Wheat

* US sees heavy global competition

* China passes on US offerings

* Russian values rally, benefit US

* India output to rise 6.3% this year

* EU exports 6.5 mmt above last year

Livestock

* Brail to supply $717 million meat to China

* Chinese demand heavily questioned

* Economists claim hogs are undervalued

* Boxed beef under pressure

* China will still need pork imports

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