Morning Comments; Monday, February 24th, 2020
Agrivisor - SETZ - Mon Feb 24, 6:42AM CST

Overnight trade was pressured by renewed concerns over the Coronavirus, with the greatest losses coming in the equity markets. The disease continues to spread around the globe, with many new cases reported worldwide over the weekend. Much of this week’s trade will focus on month end position squaring by the funds. This started last week and will intensify as this week progresses. First notice day on the March contracts will be this Friday, so most positioning will be done by Thursday. There is little doubt we will continue to see trade discuss the numbers that came out of the Ag Outlook Forum last week. Initial looks from the USDA indicate ending stocks of 2.63 billion bu on corn, 330 million bu on soybeans, and 777 million bu of wheat. The corn number is obviously bearish if correct, and at initial looks the soybean and wheat numbers are friendly. While we did see a reduction to soybean and wheat reserves, they are still not at a point where sizable buying interest would be warranted. Trade will now wait to see what is released in the first “official” balance sheets that come out in the May supply and demand report. The greatest unknown in all of these figures is planted acres, and that number will be officially updated at the end of March. Other factors that will be closely monitored today will include the South American harvest pace and crop reports. Harvest was slowed last week in Brazil as heavy rains continue to fall in the north. These have yet to cause any crop damage, but they are calling disruptions to the export channels. If these continue, we could easily see at least some business shift to the US, especially for buyers who need immediate coverage. Another topic of trade interest this week will likely be US spring weather outlooks. Some forecasts are starting to raise their rainfall chances of the Corn Belt this spring, indicating another wetter than normal planting season. While these are not indicating widespread flooding such as we had last year, at this point even normal rainfall for many areas would be too much given current soil moisture levels. Bottom line is that there is a tremendous amount of uncertainty in today’s market and volatility will likely increase as a result.

Highlights

* More countries close borders due to Coronavirus

* USDA predicts economic struggles ion 2020

* Total US ag exports at $139.5 billion in 2020

* 2020 Ag exports up $4 billion from 2019

* Phase 1 trade details left out of projections

* Chinese tariff reductions begin next Monday

* Heavy rains slow Brazil harvest

* China to spend $200 billion to control armyworms

* Cash markets remain firm

* FND on March contracts this Friday

* Fresh news is limited

Corn

* US corn yield predicted at 178.5 bpa

* US corn crop 15.5 bbu, carryout 2.63 bbu

* Average cash corn value at $3.60

* EU corn crop up 4 mmt in 2020

* Weekly sales surge higher

Soybeans

* US yield predicted at 49.8 bpa

* Crop at 4.2 bbu, carryout at 320 mbu

* US soy average value of $8.80 projected

* US soy exports to total 2.05 bbu

* US crush in 2020 at 2.1 bbu

Wheat

* US wheat crop at 1.84 bbu

* US carryout 777 mbu

* Average US wheat value $4.90

* US dollar hurts wheat demand

* US winter crop reported in good shape

Livestock

* US beef sales 19,387 mt last week

* Yearly beef sales 110,000 mt; +47.25% last year

* Weekly pork sales 23,747 mt

* Pork sales up 16% on the year

* Cattle on feed 102% of year ago

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