Morning Comments; Thursday, January 30th, 2020
Agrivisor - SETZ - Thu Jan 30, 6:35AM CST

We have once again settled into a phase of lethargic commodity trade. This really is not that uncommon at this stage of the year and is commonly referred to as the “winter doldrums.” This is the time frame between active harvest in South America and the planting season in the United States. While early harvest is taking place in Brazil, we have yet to see much for yield data. So far, all we have heard is “better than expected” other than a few early numbers. One thing trade is monitoring with South America is the slow harvest on soybeans and slower planting pace on the Safrinha crop. It is not out of the question this could end up giving Brazil a smaller corn production total than currently being used in global balance sheets. This is the primary reason analysts have left the South American corn production estimate unchanged while raising soybean expectations. The topic that is driving all markets more than anything remains the ongoing spread of the Coronavirus. The full effect of this outbreak is not known, but the general feel is it will cause severe economic losses in China. While the immediate impact on China’s commodity demand may be muted, the long-term effect will likely be negative. While the Chinese population will still need to eat, it is questionable as to how many will eat in restaurants. Tourism will also be impacted by the disease as many countries are now prohibiting travel to China. Others have issued quarantines on people coming from China. Reports indicate that in China alone this has affected 60 million people, and that number is only expected to rise. Trade will show an extra amount of interest to the corn export figure today after the recent rise in flash sales. While many of these came after today’s data window, they will give us an indication if overall demand has finally started to increase. Trade will also be interested in soybean demand to see if buying interest has finally shifted from the US to South America. We are seeing the vessel line up in Brazil increase, but at the same time, we continue to see buying interest every week. The delays in Brazil’s harvest has been beneficial for US sales. The real focus may be on wheat though as many buyers have stepped away from the US following the big run up in values.

Highlights

* Coronavirus economic concerns build in world markets

* CV losses may exceed those of the $54 billion from SARS

* More passengers from China being quarantined

* USMCA signed by President Trump

* USMCA now needs to be ratified by Canada, Mexico

* Benign SAM weather developing

* Skepticism builds over Phase 1 benefits

* No Chinese business since Phase 1 signed

* USDA may incorporate trade deals into February WASDE

* US ethanol production down last week, stocks 4th highest

Corn

* Trade looking for high weekly sales total

* South Korea buying EU corn

* Ethanol margins deeper in the red

* Harvest of Brazil’s 1st corn crop at 11%

* Safrinha planting only half of normal rate

Soybeans

* Demand for US offerings slows

* Elevated Brazil harvest pressure

* Oversold, due for correction

* Indonesia to impose palm oil export tax

* Open Interest indicates short covering on bumps

Wheat

* Rally made US uncompetitive

* Buyers opt for Black Sea, EU wheat

* French wheat disruptions from labor issues

* Large amount of winter wheat abandonment expected

* Record India wheat crop expected

Livestock

* Cattle inventory report tomorrow at 2:00 PM CT

* Beef herd expected to be down

* Cash cattle remain untested

* High hog slaughter numbers continue

* Reports of ASF vaccine break-though in China

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




 

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