Morning Comments; Monday, February 3rd, 2020
Agrivisor - SETZ - Mon Feb 03, 6:05AM CST

Now that the calendar has shifted to February, we will see a few different changes to market influences. The main one being the anticipation of the Ag Outlook Forum data at the end of the month. These are an extension of the baseline numbers that were released at the end of 2019. They do give us the government’s long-term projections for commodity production and demand and do tend to have an impact on the futures’ market. We will also see the February supply and demand data next week which always has an influence on price discovery. February is also when we start to see more attention on spring weather forecasts as we approach the upcoming planting season. We will likely see more attention on spring forecasts this year given the issues that much of the United States faced a year ago. Any indication of another wet spring and planting delays and we will likely see a faster market reaction, especially on the cash side. Futures may be slower to react as even with less than stellar planting and production conditions a year ago, crop sizes were still adequate. This may limit the volume of risk premium that is added to commodity futures this year. For this week, most interest will be on the funds to see how they approach new month positioning. Much interest has been on what China will do following the outbreak of the Coronavirus and how it may impact the country’s commodity demand. Just as much interest has been on China’s economy to see how investors react to the disease outbreak. In the first day of trading since the outbreak the Chinese stock market closed 8% lower. This outbreak has weighed on the global market ahead of this, so to see losses in China’s markets would not come as a surprise. In spite of this, China still needs to replenish its commodity reserves, especially pork, and thoughts are we will still see an uptick in demand. We are also seeing tensions elevate between the US and Mexico that could lead to export restrictions, negating much of the recently signed USMCA agreement.

Highlights

* Coronavirus may negate Phase 1 agreement

* Coronavirus now declared a global emergency

* Coronavirus losses forecast between $120 and $160 billion

* 90% of losses from disease are fear-based

* Country movement drops

* Basis values are firming

* Rains to benefit Australia

* China/Russia lower economic outlooks

* US may increase total acres by 11%

* New month positioning

Corn

* US continues to see Ukraine pressure

* US is competitive for Feb and March

* Brazil has no corn offered through March

* World has 96-day supply of corn

* US holds 49% of world corn

Soybeans

* US soybeans competitive with Brazil

* Seasonal shift in demand underway

* Brazil yields remain very good

* Heavily oversold

* Soybeans -8% in January

Wheat

* Global production concerns ease

* Australia to see rebound next year

* Corn/wheat spread weighs on usage

* Russia to increase production

* US winter wheat crop doubted

Livestock

* Chinese livestock also impacted by Coronavirus

* High slaughter numbers

* US cattle inventory at 94.4 million head

* Cattle inventory -1.1% from last year

* Beef cattle -1.28%, replacement heifers -1.92%

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