Morning Comments; Thursday, February 27th, 2020
Agrivisor - SETZ - Thu Feb 27, 5:51AM CST

Ongoing concerns over the Coronavirus and its impact on the global economy weighed on all overnight markets. While the data is already a week old, trade continues to go back to a few of the figures that were released in the Ag Outlook Forum in Washington. The most talked about remain the economic outlooks for US agriculture for the next year. The USDA projected average cash values of $3.60 on corn and $8.80 on soybeans for the upcoming year. If correct, given current market conditions and costs, these cash values will lead to negative returns on both commodities. At the present time these cash values would equate to negative returns of $29.00 on corn and $77.00 on soybeans in the heart of the Corn Belt. While there are many variables and these losses do not cover everyone, they are concerning for many. Given these numbers, the USDA is also predicting US farm debt in 2020 to increase to $425 billion, up $10billion from 2019. The concern is this debt led to a 24% increase in bankruptcies in 2019, and that number may rise again in 2020. The biggest difference between the two years may be that for 2020 there is no plans for a financial aid package such as the Market Facilitation Program in 2019. There are several factors that will impact these economic outlooks though, with Chinese demand being the main one. The USDA is not incorporating the Phase 1 agreement details into their economic outlooks. This leaves Chinese trade projected at $14 billion, well short of the $36 billion in goods China has agreed to buy. The reason the higher values are not being used is that the exact amount of trade is questionable, as factors such as the Coronavirus could easily impact actual trade.

Highlights

* Coronavirus continues to spread

* Worst may be yet to come

* Virus may impact fertilizer availability

* Buyers showing interest in safe haven investing

* More rains for Brazil

* Argentine weather near perfect

* Lower prices attract export buyers

* High value of US dollar remains an issue

* Markets becoming oversold

* Argentina to adjust export taxes

* Starting to see positioning for March WASDE

Corn

* South Africa production up 29%

* Ukraine grain production to fall 5 mmt

* Buyers shopping for US corn

* Safrinha plantings limited so far

* Basis values starting to firm

Soybeans

* Rains slow Brazil harvest

* Global oilseed market weakens

* Record Brazil selling

* Brazil soybean sales already total 15.4 mmt

* Brazil soy 20c/bu under US

Wheat

* US dollar hinders demand

* Ukraine grain exports +24% this year

* Ukraine wheat exports at 16.4 mmt

* Fund position hits record long

* Slowing Russian exports

Livestock

* YTD pork exports at 259,453 mt

* 13% of pork sold to China

* China accounts for 10% of weekly trade

* Lower cattle placements to impact supply

* Light cash trade this week

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