Morning Comments; Friday, March 20th, 2020
Agrivisor - SETZ - Fri Mar 20, 6:39AM CDT

The return of buying interest is supporting commodity futures. A stabilization in the outside markets is also benefitting commodity futures, as is confirmation of China buying US wheat. We are now a little over a week away from the long-awaited March 31st USDA reports. Trade has been talking about the quarterly stocks and prospective planting reports for several weeks and now is when more positioning will start to develop ahead of them. The most interest remains on plantings which is not uncommon. The USDA projected plantings of 95 million corn and 85 million soybean acres in the Ag Outlook Forum in February but we are now seeing some doubt on these figures. For one weather at the present time is not conducive to high corn acres. Basic economics are also not very favorable for corn as economists believe soybeans stand a better chance of price appreciation right now than corn does. While there are several factors that can ultimately impact plantings, return prospects will play a major role. It is also not out of the question that lenders could have a say in what crops are planted for some farmers this year, especially those with tighter cash flows. Ahead of these reports, trade is starting to closely monitor basis values across the interior market. Basis has weakened in portions of the Corn Belt at the same time we have seen a drop in futures. This is a strong indication of just how poor commodity demand is right now. The most notable basis weakness has been in ethanol, with some plants simply pulling their bids until economics improve for the industry. An increase in farmer “give up” selling has only increased weakness in interior basis values. This low demand could easily cause trade to expect higher carryout numbers in future balance sheet reports, regardless of what is seen in the quarterly stocks report.

Highlights

* Stimulus packages stabilize market for now

* US dollar corrects from highest value since 2017

* Coronavirus may cause farm labor shortage

* Energy demand still expected to drop considerably

* Restaurant closures to push food to retail stores

* Coronavirus cases still jumping 10% per day

* Brazil closes borders, leaves export market open

* Market dynamics to impact plantings

* Gulf basis values firm

* Ukraine grain production to decline

* China farmers pessimistic on ag production

* Weather stress to continue in South America

Corn

* South Korea buying optional origin

* US ethanol plants continue to close

* Ethanol futures 30 cents over gasoline

* SAM weather cutting production

* Ethanol demand could be cut 300 mbu

Soybeans

* Soybeans rally in China

* Brazil crop down to 121 mmt

* Further losses likely in China

* Chinese soy demand to increase 2 mmt in 20/21

* Lack of DDG production to support meal

Wheat

* Ukraine grain production to decline 10.3% this year

* Ukraine wheat production -12.5%

* China buys from US

* Strong US dollar limits sales

* Egypt reserves up to 4-month supply

Livestock

* Cattle on feed after close

* March 1st on feed est 100%

* Feb placements 92%, marketings 106%

* Pork sales last week 35,700 mt; 15,700 mt to China

* Beef sales last week 21,200 mt; 7,300 mt to South Korea

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