Morning Comments; Thursday, April 23rd, 2020
Agrivisor - SETZ - Thu Apr 23, 6:40AM CDT

Overnight trade continued to rebound as short covering is taking place. We have also started to see more export business, mainly from China. The simple fact that commodities are both technically oversold and fundamentally undervalued is at the very least limiting additional selling interest at this point. When we start talking about global commodity demand, all attention immediately turns to China. This is especially the case since the Phase 1 agreement was reached to slow the escalation of the trade war between them and the United States. The agreement between these parties was that China would increase purchases from the US to $32 billion in 2020. While China has increased its buying from last year, it is not nearly at levels that were hoped for. The commodities that China was expected to buy the most of were soybeans and pork. Pork trade has increased with China accounting for 39% of all US export business. This demand was starting to increase prior to the Phase 1 deal as China was recovering from the African Swine Fever outbreak. This was immediately followed by the Coronavirus outbreak however, which greatly affected all Chinese business. While China has been buying large volumes of pork, soybean trade has been sporadic at best. This was expected given the start of the South American harvest season and new crop soybeans coming out of those countries, especially Brazil. Not only have these been offered at a discount to the US, but shipment have been timely given the improvements Brazil has made to its infrastructure. Not only could this affect US exports to China for the remainder of this year, but well into the future.

Highlights

* Economic deflation concerns building

* Commodities are oversold

* Ethanol production last week down 46.3% from last year

* Ethanol stocks up 220,000 barrels

* Losses in ethanol could hit $10 billion

* OPEC+ to hold crude reduction at 10 million barrels

* US DDG production down 303,000 mt per week

* Planting reports mixed around the Corn Belt

* Low prices have attracted export interest

* May options expire tomorrow, FND next Thursday

* Trade looking forward to May 12th WASDE

Corn

* Safrinha reductions taking place

* Sizable increase in plantings next Monday

* Argentine crop 33% harvested

* Corn rebounds from oversold

* Ethanol used 56.8 mbu last week

Soybeans

* Global oilseeds under pressure

* Yearly sales remain under pressure

* Chinese crush margins collapse

* Chinese buying interest rises

* Brazil harvest winding down

Wheat

* Cold temperatures impacting winter crop quality

* Planting slow on spring crop

* India harvest reaches 67%, exports will ramp up

* Russian crop lowered 2.3 mmt from drought

* Russia already exported half of quota

Livestock

* Packing plant closures may cause supply disruptions

* Most concern is on pork

* Pork industry could lose $5 billion this year

* Reports of livestock herds being euthanized

* Cattle slaughter -64,000 from year ago, hog slaughter -86,000

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