Closing Comments; Monday, February 24th, 2020
Agrivisor - SETZ - Mon Feb 24, 2:20PM CST

The primary topic in today’s session was the spread of the Coronavirus and its impact on global markets. Not only did this weigh on commodities today, but even more so on equity markets. The fact we are unlikely to see Chinese export business this week also weighed on trade as we wait for the Phase 1 agreement to start being satisfied. We did see Mexico in the market and book 163,290 metric tons of soybeans but this was mostly overlooked by trade. This selling broke nearly all technical support points and caused December corn to establish a new contract low.

Several new cases of coronavirus were reported over the weekend, with the number of cases outside of China growing. Worldwide there are now nearly 80,000 cases reported with deaths approaching 3,000. Some are now starting to refer to this outbreak as being a Pandemic. This caused heavy selling in nearly all markets today, with precious metals being the only spot of strength. This came from traders flocking to Gold as a safe haven for their investments.

There are two main concerns when it comes to the Coronavirus; demand and logistics. The obvious concern is demand, and this is more of a short-term issue, as we know sooner or later all importers will need to resume their purchases. What is more of an issue right now is the logistic issues being created by the outbreak, with many countries closing their borders. In the case of China, even movement within the country is becoming an issue. While this too will eventually be remedied, it only compounds the issue of slow demand.

US export inspections for the week ending February 20th were on the light side. Corn inspections hit 35.9 million which was at the top end of expectations but below needs on a weekly basis. Soybean inspections came in at 21.8 million bu and wheat was at 15.1 million bu which were both less than the needed amount and also at the low end of expectations. For the year corn inspection trail last year by 47% while soybeans are up 15% on the year and wheat is 10% ahead of a year ago.

Rains continue to slow the Brazilian soybean harvest. A reported 34% of the crop has now been cut, mostly in southern parts of the country. This number is close to average, but well behind the 46% that was done a year ago. Widespread rains are forecast to continue, which will likely push the completion rate under average. While this has not impacted crop size on soybeans, it could start to affect corn production as rains linger.

Harvest of the first Brazilian corn crop is making advances as well. Sources in Brazil believe we will start to see export competition from the country in early April. It would not come as a surprise to see elevated corn exports out of Brazil given the low value of the Real and strong US Dollar. This is also why we are seeing record soybean sales out of Brazil.

The cattle on feed report was released last Friday with mixed numbers. As of February 1st, the US on-feed number was 102.1% of a year ago which was fully expected. Placements during January were on the light side though at 99% of a year ago, 2% under expectations. Marketings were just over estimates at 101.4%. This data indicates the US may see its cattle inventory tighten in future reports.

Chinese officials released a statement today that they will be lifting a ban on US beef and beef products from animals over the age of 30 months. This has been a sticking point with China ever since cases of BSE were discovered in the early 2000’s. Trade is taking this as a sign that China will soon need to start rebuilding its meat supplies following the outbreak of African Swine Fever led to usage of government stocks.

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