Morning Comments; Tuesday, February 25th, 2020
Agrivisor - SETZ - Tue Feb 25, 6:29AM CST

Heavy losses were posted in the markets yesterday as worries over the spread of the Coronavirus mounted. Overnight values were able to stabilize, but buyers remain hesitant to establish positions at this time. Worldwide Coronavirus cases are now approaching 80,000 with deaths from the virus just under 3,000. Not only did this weigh on commodities, but the equity markets as well, with the Dow Jones Industrial Average dropping 1,080 points at one time. We did see buyers surface late in the session to allow all markets to rebound. The concern for commodities is what this means for demand. While disruptions to trade will take place in the short term, long term buyers will still need commodities. The question remains as to where buyers will source needs at that time. Given the price spread between the US and other commodity sources, the percentage of business the US will see may be less than hoped for. This is the case right now on soybeans from the US versus Brazil and within a few weeks this will be the case with South American corn as well. While this would take place whether we were dealing with the Coronavirus or not, the timing of the two together is a concern. China has stated they will adhere to the trade agreements they have made with the US, the longer it takes for actual trade to develop the less optimism trade is showing. One thing that needs to be monitored is the persistent rainfall in Northern Brazil. While harvest is in line with the historical average, it is slower than last year, with more rain in the forecast. There is little doubt this could slow harvest to the point where double cropping starts to be affected. This is especially the case with a weak Brazilian Real that will affect what a farmer can spend on inputs. To see a rebound in today’s session from yesterday’s sharp losses would not come as a surprise. The extent of any buying will be questionable though as we are right in front of First Notice Day on the March contracts.

Highlights

* Coronavirus continues to spread

* Analysts remain confident in Chinese trade

* Timing of Chinese purchases is unknown

* Chinese businesses ask employees to remain at home

* Global trade disrupted by virus outbreak

* US aid may lead to elevated production

* Brazil sees normal shipments of beef to China

* Winter storm to slow country movement

* Cash markets remain firm

* FND on March contracts this Friday

* Fresh news is limited

Corn

* US carryout to increase substantially

* Corn carryout may hit 33 year high

* Large world grain supply to build

* New contract lows in Dec corn

* Trade questions US acres

Soybeans

* SAM production estimates rising

* Brazil harvest 34% complete

* Export interest rising

* US carryout to tighten

* Very few US soybeans to China last week

Wheat

* Farmer movement halted

* Russian wheat firms

* Black Sea production to rise

* Funds trim long position

* Demand slipping for US offerings

Livestock

* Chinese hog herd +1.2% in January

* US cattle herd to decline in 2020

* Beef supply to hold steady from record weights

* China bans poultry from EU

* China lifts ban on US beef older than 30 months

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