News Source: SETZ

Morning Comments; Monday, January 27th, 2020

Many of the factors that affected trade last week will again have an influence this week. These will include demand, technical indicators, and of course the advancing South American harvest. China is on its Lunar New Year break, so we do not expect to see them in the market this week. We will hear updates on the spread of the Coronavirus in China though and how it may impact commodity demand. This is also expected to be a factor for the financial markets. The disease has now spread to the US which opens a whole new realm of concerns. We did see an increase in corn demand last week and hopes are this will carry over into this week, especially if values set back. There remain concerns on the quality of US corn in the global market and this is a factor that will only become more discussed in the future. The real question with quality is how bad it may get when there is no more old crop to blend in. South American harvest and weather will remain a factor for trade this week. For one trade will be anxious to see if better than expected yields continue as harvest advances. We will also start to get an indication of possible double cropping, as planting of the Safrinha corn crop begins almost as soon as the soybean harvest does. Weather and market economics will greatly impact the number of corn acres actually planted. Month end positioning will be a factor for trade this week, even though neither the grains nor soybeans go into delivery. We will see fund balancing as always though, and this will impact futures. The cash market will also be closely monitored this week as we are at a stage where country movement tends to increase ahead of the spring planting season in the US.

Highlights

* Coronavirus economic concerns build in world markets

* Most pressure from virus is on equities

* Minimal Chinese purchases last week

* China may start buying after Lunar New Year

* Month end positioning to increase

* Above normal temperatures for US continue

* Analysts predict large increase to US acres

* US pushes India to up imports

* US dollar strengthens

Corn

* US quality a concern

* So Africa crop +13% from last year

* US ethanol stocks +2.6% from last year

* US corn competitive with Argentina

* Yearly exports -37% from last year

Soybeans

* Market over-looking dry soils in SAM

* Country movement down

* Exports +2.8% on the year

* Brazil yields remain high

* US exports to slow

Wheat

* Sales +13.2% from year ago

* Global production lowered 1 mmt

* Bullish fresh news declines

* China rumored to buy Australian wheat

* Large EU crop to pressure export sales

Livestock

* Beef exports last week 27,800 mt

* Pork exports 30,300 mt; China only books 3,000 mt

* Jan 1st Cattle on Feed 102% of 2019 at 11.96 million

* December placements 103% year ago at 1.828 million

* December marketings 105% at 1.834 million

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.

Closing Comments; Friday, January 24th, 2020

Grain and soybean futures were pressured for much of today’s session as profit taking dominated trade activity. This was especially the case for wheat where futures are leaning towards overbought and have exhausted its fresh news supply. Soybeans were additionally pressured today by the build in South American harvest activity and continued reports of better than expected yields. A lack of Chinese business weighed on the soy complex as well. Corn also struggled today, although losses were limited by another flash sale, this one of 142,428 metric tons to an unknown buyer for 2019/20 delivery.

The delayed export sales totals for the week ending January 16th were released this morning with favorable totals. Corn sales totaled 39.64 million bu which was above estimates and greater than the volume needed to reach our USDA yearly projection. Soybean sales were in the middle of trade estimates at 29 mbu but above the amount needed on a weekly basis. Wheat bookings totaled 25.57 mbu for the week, at the top of expectations, and twice the volume needed per week.

Trade is monitoring the volume of soybeans the US has sold to China. Current soybean bookings total 418 mbu by China, with only 56 mbu of this remaining unshipped. A year ago, China had 110 mbu of unshipped sales at this time, and two years ago the total was 167 mbu. While the fact China is current on shipments is positive, the fact they do not have much forward contracted is worrisome.

When it comes to US corn exports a factor that is being closely watched is quality. We have known since harvest began there were issues with US corn quality this year, and now these are surfacing in the export market. Buyers have reportedly passed on US offerings in favor of those from Ukraine as even though price is higher, the quality is better. This narrows the window for the US to make sizable corn sales prior to the South American harvest.

A trend that is gaining market interest is the decline in world market share on corn trade by the US. The share of global corn trade the US is expected to have in the 2019/20 marketing year is 27%. This is the second lowest volume in recent history, with only the drought year of 2012/13 coming in lower. A record Ukraine corn crop cut into the US market share last year, as did heavy exports out of Argentina ahead of its election and concerns over export tax rates.

Acreage estimates are starting to be released for the upcoming US production season. A well followed analytical firm is projecting US acres at 93.4 million for corn and 86.5 million for soybeans. In the USDA’s baseline estimates from last fall we saw predictions for 94.5 million corn and 84 million soybean acres. This year’s plantings totaled 89.9 million for corn and 76.5 million for soybeans, but these were greatly impacted by the wet spring and flooding that took place. The fact is planting season is still weeks away and accurately predicting acres at this time is nearly impossible given the tremendous number of variables, with weather being a primary one.

The US attaché in Argentina has released a corn crop estimate of 48 million metric tons for this year. This would be 2 mmt under what the USDA is using in world balance sheets. The attaché has also revised its 2018/19 corn export total for Argentina to 38 mmt. Corn exports out of Argentina are expected to decline substantially this year though as farmers are not as worried about tax changes as a year ago. Many farmers and exporters both emptied their inventories to avoid the higher tax rates, which are now not forecast to increase as much as initially predicted.

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.

Morning Comments; Friday, January 24th, 2020

This week’s trade has been more volatile than we have seen in the past several weeks. Wheat values have rallied to a point not seen since 2018 on global production concerns. This is mainly from weather in the Black Sea and low US acreage projections. While wheat stocks are forecast to tighten, they are not anticipated to fall to a point where rationing would be warranted. We have also seen wheat venture into overbought territory which has lessened the willingness of traders to extend their long positions. Soybean volatility has also ramped up as the South American harvest season gets underway. Soybeans fell under pressure as initial yields from Brazil are much better than expected. This is giving support to estimates that are calling for a larger Brazilian soybean crop than what the USDA is predicting. The market is also growing concerned over the lack of Chinese business following the Phase 1 signing a week ago. While immediate sales were unlikely, the fact China has been actively booking South American soybeans rather than those from the US is a concern. Not only is China booking Brazilian soybeans for 2020 but also 2021 as well. Soybeans are now oversold, but without a reason for buying to take place, we could see futures flounder for the next several sessions. Corn has been more of a follower this week with little movement being seen. Demand remains a major hindrance for the corn complex as export sales remain well below expectations. The global corn supply is expected to remain adequately stocked this year even with demand outpacing production. Same as with soybeans the most interest on corn is in South America at the present time. Soybean harvest is slower than a year ago in Brazil and weather is less than perfect which could easily reduce plantings. Drought is also still impacting Argentina with the main state of Cordoba only receiving 26% of normal rainfall. There is little doubt this has reduced corn production in some areas, but others may end up seeing larger crops from favorable weather. For today’s session we will see attention on the weekly export numbers to see if any buying has taken place that was not seen in the flash reports.

Highlights

* Coronavirus economic concerns build in China

* China now quarantines cities

* US/EU trade deal may be approved before Nov elections

* US ethanol stocks up 3.8 mil gal in 2 months

* Ethanol margins continue to fall

* Low unshipped sales to China

* Lunar New Year starts Saturday

* US acreage debate begins

* Delayed export sales released today

Corn

* US share of global mkt shrinks

* IGC predicts larger global grain crop

* Asian feeders concerned with Us corn quality

* Buyers opt for Ukraine corn

* US does see flash sales

Soybeans

* Mato Grasso yields +10-15% from last year

* Lack of Chinese business a concern

* Only 56 mbu unshipped Chinese sales on books

* Virus outbreak may limit demand

* Technically oversold

Wheat

* Rabobank predicts weaker market to come

* Wheat approaching overbought

* Wheat trying to buy spring acres

* Buyers continue to surface for US offerings

* US rally pushes values above competition

Livestock

* COF estimated at 102.2% year ago

* Placements in Dec 103.2%, Marketings 105.2%

* Traders not concerned with large US pork supply

* Chinese demand to rise after Lunar New Year

* EU suspends imports of Ukraine poultry

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.

Closing Comments; Thursday, January 23rd, 2020

Trade was mixed to start the day with grains in positive territory while soybeans were on the negative side. Even though soybeans are oversold they are being pressured by elevated South American harvest activity and yield reports. The lack of business with China is also applying persistent pressure to soy futures. Demand is a benefit for the grains, especially corn where several flash sales were announced for both this year and next.

The US made several corn sales overnight which is just what the complex needed to see. Guatemala was in the market and booked 114,244 metric tons of corn for delivery in the 2019/20 marketing year. Guatemala also booked 29,724 mt of corn for 2020/21 delivery. An unknown buyer was in the market and booked 141,000 mt of corn for delivery during the 219/20 year. While these sales were positive, much more business is needed to reach yearly projections.

The International Grains Council updated their world balance sheet estimates today. The IGC is predicting world grain production of 2.17 billion metric tons for 2019/20 compared to 2.14 bmt in 2018/19. Their revised estimate is also 7 million metric tons larger than their December projection. Increases of 3 mmt to US and 5 mmt to Chinese corn crops was the reason for higher output. World grain production is still expected to fall short of demand though, as the IGC predicts world grain demand of 2.19 bmt for this year.

The economic firm Rabobank has released an outlook for the wheat market and predicts a correction may take place. Despite current market action, Rabobank believes wheat values will set back to the $5.50 level this marketing year. Their prediction is being based on the fact that while tighter, the world wheat supply remains in a surplus state. Until this changes, the complex is likely to be limited.

Yield data out of Brazil continues to point towards a large soybean crop. Initial reports out of Mato Grasso indicate a soybean crop that will be from 10 to 15% larger than a year ago. Mato Grasso is currently projected to raise 34 mmt of soybeans but current data indicates this could be even higher. The question is if this is a trend that will continue throughout the country, especially when harvest gets into the regions that have been suffering from drought conditions.

Trade is also starting to focus on Argentine corn production possibilities. The main area of attention in Argentina is the state of Cordoba, where rainfall has only been 26% of normal. There is little doubt this has impacted corn production in that area. Other regions of Argentina have seen 100% of normal precipitation though, and the question now is if corn production in them will be enough to compensate for losses in others.

Ethanol manufacturing numbers for the week ending January 17th were released today and were less than supportive for the industry. Ethanol production for the week totaled 7.34 million barrels, down 322,000 barrels from the week before. Even with this decrease ethanol stocks increased a large 1.025 million barrels to total 24.03 million. Ethanol reserves have increased 3.8 million barrels in the past two months, and are now above a year ago and approaching a record high volume.

The final cold storage report for 2019 has been released. On December 31st the US had 580.9 million pounds of pork in storage compared to 505.3 million pounds a year earlier. Pork bellies climbed from 42.25 million pounds in 2018 to 68 million pounds at the end of 2019. Beef in cold storage shrunk though, going from 495.6 million pounds to 481 million pounds.

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.

Morning Comments; Thursday, January 23rd, 2020

The market is moving back into a position of sparse fresh news which limited yesterday’s rally. This was especially the case for wheat, where even though fundamental information remains supportive, the contract has now moved into overbought territory. Not only is the 14-day RSI on wheat at 70%, but the contract has worked its way above the Bollinger Band levels, setting it up for a correction. Wheat still has plenty of supportive fundamentals, but these are already priced into the market. Without fresh support a set-back should not come as a surprise. To see weak longs flushed out of the market is not a surprise either. Conversely, soybeans and corn have started to work towards oversold on the charts. This is especially the case on soybeans where the 14-day RSI is below the 40% mark. While not at a point where active buying would develop, this point is where additional selling should start to fade. Unlike corn and wheat, soybeans are starting to see harvest pressure in the global market from South America. Many buyers, including China, claim to have soybean needs covered for the next several weeks. This may allow them the ability to wait for cheaper offerings out of South America to cover needs. As a result, we could easily see soybean demand slip until mid-spring. One fundamental story the market keeps going back to is trade relations between the US and China. Its been over a week since the Phase 1 agreement was signed and we do not know anymore about China’s prospective demand than we did prior to the agreement. The longer it takes for Chinese buying to surface, the less optimism we are seeing for the projected rise in sales.

Highlights

* Coronavirus may limit Chinese demand

* Mat Grasso only seeing 57% of normal rainfall

* More countries oppose Phase 1 agreement

* China claims Phase 1 will not deter other purchases

* Chinese delegation visits US last week

* No frame contracts from visit

* total Chinese demand questioned

* Wheat rallies to highest level since Aug 2018

* South America harvest pressure building

Corn

* Yearly loadings 371 mbu vs 812 mbu last year

* No Chinese business confirmed

* Safrinha production questioned

* Corn demand still a concern

* Drought to impact Arg corn production

Soybeans

* US crush underestimated

* Brazil harvest builds

* Brail yields remain high

* US not a priority for Chinese importers

* US loadings +23.7% last year

Wheat

* Wheat values +4.5% in past week

* Wheat approaching overbought

* Yearly export loadings +13.5%

* Buyers continue to surface for US offerings

* Next round of fresh wheat 4 months away

Livestock

* COF tomorrow

* Market expects bearish numbers

* Market expecting higher beef production in 2020

* 580.9 mil pounds pork in cold storage; 505.3 last year

* 481 mil pounds beef in cold storage, 495.6 year ago

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.

Closing Comments; Wednesday, January 22nd, 2020

Futures were firm to start today’s session as light buying surfaced in the grain and soybean complex. Wheat remains the leader of the grain complex but is starting to show signs of being over-extended to the upside. Conversely, corn and soybeans are starting to lean towards oversold, but are struggling to find fresh buying interest. It appears as though the market is starting to consolidate and wait for the next fresh batch of fundamental news to extend positions, which may be weeks away. This caused futures to slip lower late in the session.

One of the bigger fundamental stories right now is the start of the South American harvest season. Soybean harvest is underway in Brazil and yields are coming in much better than expected to start. Just as much interest is on harvest pace though, as progress is behind normal, which could limit the window for the planting of the Safrinha crop. Trade is also monitoring soil moisture in Brazil, with Mato Grasso only seeing 57% of normal precipitation recently. This state produces 42% of Brazil’s Safrinha crop so any decrease in plantings will have a major impact on total production.

As the Brazilian harvest ramps up, so will the pressure on the global soybean market. Asian buyers are reportedly covered on needs for the next several weeks and will wait to see how far futures set-back before extending coverage. Brazilian farmers and exporters have been active sellers to capture as much Asian business as they can prior to US and China enacting Phase 1 purchases which has further pressured futures. To see this pressure on the complex last for another month or two would not be surprising.

While the US may not see exports of whole soybeans in the near future, it could easily see elevated demand for soy meal. Many Argentine crushers are facing economic issues and are struggling to satisfy demand as production has been slowed or idled altogether. As a result, buyers have started to surface for US meal, and surprisingly pushed our sales above Argentina in recent weeks. Even with higher values we have seen buyers surface for US meal as the higher protein content compared to Argentina’s can negate the price differential. Typically, Argentina is the world’s leading soy meal provider.

Not all countries are pleased with the trade resolution agreement between the US and China. Their belief is it will give the US an unfair advantage over other sources on commodity trade. One of the most vocal is the EU, who claims they could lose up to $11 billion in trade because of the agreement. Chinese officials have released a statement that they will not change their import habits though, and they will continue to source commodities from all suppliers. China has further stated that their buyers do not need to make the US a priority when it comes to import purchases.

The United States is starting to have some logistic issues with the Mississippi River. Recent rains have elevated water levels on parts of the Mississippi, especially in lower regions. This is limiting barge movement and causing slower delivery times of commodities. Export demand from the Gulf has been light in recent weeks though, so delays have not yet had an impact on bids.

Russia and China are starting to open trade on beef. Last week China announced it would be allowing beef imports from Russia. The immediate reaction to this news was it is being done to provide relief from tight meat supplies following the outbreak of African Swine Fever in Asia. While this may be a partial factor, both countries have been working on beef trade for the past several years. Trade officials from both sides are now looking at opening pork trade as well.

The Lunar New Year celebration in China starts Saturday, and ahead of this, the country has again released frozen pork from government reserves. Typically, the demand for pork spikes considerably during this event. The Chinese government has released another 20,000 metric tons of pork from storage, bringing the total released since December to 200,000 metric tons. While this is satisfying immediate demand, it is creating and even greater deficit that will need to be replenished.

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.

Morning Comments; Wednesday, January 22nd, 2020

Wheat has become the well-defined leader in the commodity market recently, taking support from a variety of factors. One of the main ones is global production issues, especially in Australia and Russia. E are also seeing supply disruptions from France given labor issues in that country. Speculative buying following the recent USDA prediction for the least amount of wheat acres in the US in over 100 years is also supporting the wheat complex. While global wheat stocks are adequate for now, it would not take much to see a shift in balance sheets to a point where we would need to monitor usage. One thing to watch with wheat is the spread between that grain and corn. This is starting to approach $2.00 indicating either wheat is over-valued, or corn is under-valued. To see some shifting of demand from wheat to corn under this circumstance would not be surprising, especially in the global feed market. This is exactly what the corn complex needs as demand remains an issue for the US market. Soybeans were under heavy pressure yesterday from the onset of harvest in South America and how it will likely start to affect demand for our offerings in the global market. The US is not the cheapest source of soybeans in the world which will likely deter demand, even from China. In the Phase 1 agreement China agreed to buy US soybeans when ‘market conditions” were favorable. Being higher priced than other soybean suppliers is not favorable. Higher than expected soybean yields is also weighing on the complex with reports of 70+ bushel per acre soybeans coming in from Mato Grasso. This puts Brazil on track to reach the higher estimates than have been given for the crop. All eyes will be on China in the next few weeks to get an indication of what they do intend to import from the US. We will also see market influence from the outside markets and how the impeachment trial impacts investor attitudes.

Highlights

* Chinese Lunar New Year starts Jan 25th

* Initial Brazil soybean yields very high

* Trade tensions with EU escalate

* Fertilizer demand up in China

* No MFP payments following 3rd tranche

* Trade starting to doubt Chinese business

* US to keep tariffs on China even into Phase 2

* Soil moisture falling in So Brazil

* Corn/wheat spread reaches $2.00

Corn

* Ukraine corn exports at record levels

* Ukraine exports 9.8 mmt corn from Oct to Dec

* Ukraine corn exports +29% on the year

* Chinese imports est at 7.2 mmt

* Chinese imports just enough to satisfy WTO obligation

Soybeans

* Mato Grasso yield at 71 bpa

* Many 4-5 soybean pods

* Brazil soy harvest 1.8%, year ago was 6.1%

* US not cheapest source in global market

* China imports may hit 90 mmt

Wheat

* High wheat values hurt Argentine millers

* Pakistan to up wheat imports

* Record Argentine exports to Asia

* Export demand remains high

* Russia sees record high export values

Livestock

* COF this Friday

* Wholesale beef rallies

* Pork cutout values firm

* Winter storms slow slaughter numbers

* Hog weights continue to climb

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.

Closing Comments; Tuesday, January 21st, 2020

The mixed trade that started in the overnight session carried over into the day trade, with corn and soybeans under pressure and wheat on the positive side. Soybeans suffered the greatest losses as new crop harvest numbers are starting to come out of Brazil and are much better than expected. Corn was pressured by a lack of buying interest and heavy competition for the US in the global market. Wheat held strong in today’s trade though as global production concerns lent support.

Initial harvest reports from Brazil are showing much better than expected soybean yields. Harvest is getting underway in the state of Matto Grasso and early yields are at 71 bushels per acre. Scouts claim that many plants in the state are showing 4 and even some with 5 soybeans per pod which is a major reason for the elevated yield. This gives credence to forecasts for higher soybean production in Brazil than what the USDA is currently predicting.

While harvest is getting underway in Brazil, the completion rate is slower than in recent years. So far just 1.8% of Brazil’s soybean crop has been harvested. Heavy rains through the northern regions of the country and a slow spring planting pace are the main reasons for the slow harvest. This does not bode well for a large double cropping volume and could lower Brazil’s corn production potential.

The United States has seen considerable competition in the world corn market this year, with much of this coming from Ukraine. Ukraine officials report that corn exports from October through December were a record 9.8 million metric tons. This is a 29% increase for that period from last year. For the marketing year Ukraine has exported 33.87 mmt of corn which is a 7.6 mmt increase from last year.

The United States is also seeing heavier competition from Russia in the global market on grain sales. Even with restrictions, Russian officials believe grain exports will reach 22.7 mmt in the second half of the marketing year. Of this, 14.2 mmt will be wheat, which is a 3.5 mmt increase on the year. Yearly Russian wheat exports are forecast to come in at 35 mmt which would be similar to a year ago. Russia also believes its corn exports will be higher as production of that crop was better than expected.

Another source of export competition for the US is coming from Argentina. Argentina is forecast to export a record 1.2 mmt of wheat into the Asian market this year, and while a small volume, it would be the second year of record wheat trade from Argentina into that region. Total wheat exports from Argentina could reach 12 mmt this year given the record sized crop in the country which would greatly off-set production losses to the Australian crop.

Brazilian soybean sales surged last week on the heels of the trade agreement between the US and China. Much of this business was done with China even as the Phase 1 agreement was being signed. Not only did China book soybeans for delivery during 2020 but for 2021 as well. Brazilian exports feel soybean values will fall once China starts fulfilling its agreement with the US and want to capture as much of the current market as possible.

South American wheat remains a primary topic in trade and conditions are mixed. More rains are forecast for Northern Brazil which could further slow harvest activity. Southern Brazil remains dry, but cool temperatures are limiting soil moisture loss. There are rains forecast for Southern Brazil and Argentina in early February but at least some crop loss could take place by then.

Export loadings for the week ending January 17th favored soybeans over the grains, but even this news failed to support today’s soy trade. Soybean inspection for the week were well above what was needed to reach yearly expectations at 44 million bu. Nearly half of this total was loaded out to China. Corn fell short of needs with 13.6 mbu as did wheat with 16 mbu.

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.

Morning Comments; Tuesday, January 21st, 2020

The market is once again in a period where little fresh news is available. We are past the January USDA reports, and aside from the February WASDE report, the next batch of news will come from the USDA Outlook Forum at the end of February. The real attention will be placed on the March quarterly stocks and planting intentions reports though. While these are several weeks away, we will start to see estimates released in the not so distant future. Ahead of that, most attention will be on the start of the South American harvest. Private analysts continue to raise their Brazilian soybean crop estimates, with some now approaching 125 million metric tons. While this is only a slight increase from the current USDA estimate it would be a large 10 mmt increase on the year. Some analysts are skeptic of this number given the adverse weather that has impacted parts of Brazil this growing season. This is the same debate that took place in the United States last year though and production was well above expectations as well. The real interest in Brazil will be what we see for double cropping as that will greatly affect what the country can export on corn. Even with a large corn crop Brazil may not export as much as last year given the shortage it created domestically. For the immediate market, trade will continue to monitor the developments with Chinese trade and if demand starts to increase as hoped. Doubt over the benefit of the Phase 1 agreement working is growing, with some economists calling the projected Chinese import levels unrealistic. The reality is if we could simply see trade volumes get back to pre-trade war levels it would be a win for the US. The next trade issue that needs to be resolved is with the EU and that is where attention will start to shift.

Highlights

* Fresh news becoming sparse

* Phase 1 to be implemented in next 30 days

* Phase 2 talks reportedly underway already

* US ethanol margins negative 11 cents

* Chinese economy shows concerns

* GDP is 6% in China, slowest growth since 1990

* Dry weather continues in Argentina

* Russia/China building trade relations

* EU to challenge Phase 1 with WTO

Corn

* No guarantee of corn to China

* EU crop estimate increases

* Global corn stocks shrinking

* US to see additional acres

* Low wheat supply to benefit corn demand

Soybeans

* Chinese tariffs remain in tact

* Estimates rising on Brazilian crop

* Rains may delay start of Brazil harvest

* Soybeans fall to one month low

* Fewer Argentina acres

Wheat

* EU export forecast raised 2.3 mmt

* Trade monitoring Black Sea supply

* French plantings -10% in 2020

* Floods a concern in France

* US needs to remain price competitive

Livestock

* Bird flu spreading through Asia

* Chinese pork production a 16-year low

* China produced 42.55 mmt pork in 2019

* Chinese hogs at end of Dec -27.5% from 2018

* Russia to trade beef into China

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.

Closing Comments; Thursday, January 16th, 2020

Trade opened this morning with ongoing reaction to the Phase 1 agreement being a main influence. Trade remains uncertain over the actual benefit this deal with provide for markets, with some doubting it will provide any support given the loopholes it provides. Soybeans did take light support from a flash sale announcement of 180,000 tons of meal being sold to the Philippines. A lack of supportive news limited all commodities today, as did overbought technical indicators.

Many traders do not believe the Phase 1 agreement will provide as much support as hoped. This is from the fact China has agreed to purchase US commodities when “market conditions” allow. Basically, this gives China to right to continue to source commodities from any seller, same as they do now. While this could bring the US more export business, it also means we must be just as price competitive as in the past to maintain trade.

The most doubt surrounding the Phase 1 agreement is if China can buy the volume of commodities listed, or if the US can even supply as much as expected. Terms of the deal are using the 2017 Chinese purchases of $19.5 billion as a baseline, as that is the last year prior to the trade war. In 2020 China is expected to increase sales by $12.5 billion for $32 billion of imports, and then double 2017 imports in 2021 to $38 billion.

Domestically, a question that is being asked is if the Market Facilitation Payments will continue now that the Phase 1 agreement has been signed. These were set up to help farmers cope with financial losses from the trade war between the US and China. Now that trade tensions have started to ease, government officials have stated these payments are unlikely to be made. Farm groups have a different opinion and claim the markets have not rebounded from the drop when China started avoiding US imports. The truth is markets may not rebound even with a signed Phase 1 agreement, and income could hold steady for the foreseeable future.

We are seeing a reaction to the Phase 1 agreement in Brazil as well as the United States and China. Brazilian farmers have started selling large volumes of soybeans, both for this year’s crop and next year’s expected production. Farmers and traders in the country believe soybean futures will fall as China sources more product from the United States and want to take advantage of the current market.

Export sales for the week ending January 9th were better than we have seen in recent weeks. Corn sales for the week totaled 30.89 million bu, above both trade estimates and the volume needed to reach yearly projections. Soybean sales were at the top end of the estimate range and above the needed amount with 26.14 mbu. Wheat bookings were very good last week at 23.91 mbu, well above expectations and the amount needed on a weekly basis.

Export sales of beef and pork were good last week but failed to offer much market support. Pork sales for the week totaled 38,700 metric tons, with 19,200 mt going to Mexico. Trade was disappointed with the Chinese business that only totaled 1,900 mt on pork. US beef sales were solid for the week at 17,800 mt with South Korea and Japan being the primary buyers.

There is a division in the global corn market that could end up being beneficial to the United States. In the latest USDA data, the world corn carryout projection was lowered to 297.8 million metric tons. While this was not a huge decrease from month to month, it continues a trend of global corn production falling short of corn demand. For the year world corn demand is expected to outpace production by 23 mmt this year. This could end up making the United States one of the main suppliers to the world market on corn.

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.

Morning Comments; Thursday, January 16th, 2020

Now that the Phase 1 agreement has been signed the question is what impact it will have on the commodity market. The obvious question is what it means for export sales, especially on soybeans. The immediate thought is we will see China step in and buy soybeans. While this is possible, any rapid increase in demand is unlikely. We also have a waiting period to get through where both sides can air grievances if they feel the other side is not holding up their end of the bargain. There are some other opinions on what the Phase 1 deal may bring. One is what it may mean for acres during the upcoming planting season. There are thoughts we may see more soybeans planted to satisfy Chinese demand, but this is not being supported by farmer polls. In fact, most farmers claim they may plant more corn as they feel that commodity has the most price potential in the upcoming year. Another factor to consider is how long the Phase 1 agreement will stay in place. It is not out of the question that if a new president is elected this year, we could see changes to the existing agreement, or possibly see it scraped altogether if it is not as beneficial as expected. Bottom line is that the signing of the agreement is just the first step in how the market reacts, now is when we see what the real effect of the plan is. Aside from the Phase 1 reaction, trade will focus on the weekly export sales data today to see if volumes pick up following the Holiday season. This will be most critical for corn where demand continues to disappoint. We will also need to monitor soybean sales to see if the seasonal shift to South America has begun. China has been an active buyer of Brazilian soybeans recently and this may start to impact US sales.

Highlights

* Phase 1 to increase China ag imports $12.5 Bil in 2020

* Chinese Ag imports up $19.5 B in 2021

* China to buy commodities “when market conditions allow”

* Trade doubts China will follow through

* US to maintain tariffs in $250 billion of Chinese imports

* US will drop tariffs on $125 billion of goods

* USMCA expected to be signed this week

* US political developments

* Unseasonable high ethanol production last week

Corn

* Domestic corn supply up, global down

* US ethanol production up last week

* US ethanol stocks near year ago

* Low soil moisture in Argentina

* US acres likely to rise

Soybeans

* NOPA crush 2nd highest ever in Dec at 174.84 mbu

* US soy oil stocks jump 21%

* Chinese needs rising, still hampered by ASF

* Chinese Dec imports a 19-month high

* Southern Brazil remains dry

Wheat

* Russia capping exports a non-factor

* New highs in Chicago contract

* Fresh news remains sparse

* France ups wheat export forecast

* US needs to remain competitive

Livestock

* Chinese hog herd +2.2% in Dec

* China’s hog herd +7% from September

* Bird flu reported in Romania

* Cash markets mostly untested

* Slaughter numbers continue to rise

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.

Closing Comments; Wednesday, January 15th, 2020

All eyes in the market were on the government today and news surrounding the Phase 1 signing agreement. Ahead of this a flash sale of 126,000 metric tons of soybeans for 2020/21 delivery was announced. China’s Ag Minister did state that 2020 soybean imports will be up but failed to give a defined volume. Aside from trade developments, South American weather was a factor as short-term conditions are more favorable, although long-term conditions need to be monitored.

The signing of the Phase 1 agreement offered little support to the commodity market, especially to the soy complex. This is mainly from the vagueness of the details surrounding the package. The agreement states Ag sales to China will increase $12.5 billion in 2020 and by $19.5 billion in 2021. There is no clarification on what products will be included in this which caused concern in the market. The US will also maintain tariffs on $250 billion of Chinese imports until the next phase is signed which may not take place until after the November election.

Even though the Phase 1 trade agreement was signed today, there remain some doubts over actual business the US will see. The main reason for this doubt is that China continues to source soybeans from Brazil and was an active buyer of the commodity last week. Sources in China claim the country is already covered on its 1st quarter needs, which will allow them to wait for cheaper soybeans out of South America. The lack of confirmation on details contained in the Phase 1 deal is also concerning to trade.

The commodity that may find the most support from Chinese demand is pork. China needs to elevate its pork imports to both satisfy immediate demand and also to rebuild government reserves. China may also import US beef, which could end up being more of a factor for the domestic market. There is speculation that US beef values could rise by 9% if we see elevated demand, which would impact domestic consumers.

Aside from the Phase 1 agreement, the Chinese Ag Minister released a statement that the country’s soybean imports will increase in 2020. Last year China imported 88.5 million metric tons, which was a 500,000 mt increase from 2018. Speculation is we will see an equal increase in 2020 giving us a 90 mmt import projection. China is starting to rebuild its hog herd which is increasing demand, but the elevation rate is unlikely to be a sharp one.

South American weather forecasts gave the market mixed signals today. Rains continue to fall in Northern Brazil, and while these are beneficial for developing crops, they could hinder the start of harvest if they continue. Rains are also expected to fall in Southern Brazil and Argentina, but amounts are forecast to be light. One benefit for the dry regions of South America is cooler temperatures which are limiting evaporation rates.

Ethanol production stats for the week ending January 10th were released today and showed a 3.1% increase in output from a week ago. For the week a total of 7.665 million barrels of ethanol were manufactured which was the 3rd highest weekly volume on record. Ethanol stocks again increased by 544,000 barrels which tempered the production news. US ethanol stocks now total 23 million barrels, 3 million more than in reserve at the end of November, and just under the 23.35 million from a year ago.

The National Oilseed Processors Association, or NOPA, crush report for December was released today and was the 2nd highest monthly total on record. NOPA members crushed 174.81 million bu of soybeans in December, a 6% increase from November. This total was well above all trade estimates. While the crush number was positive, a 21% increase in soy oil reserves negated some of the positive news. US soy oil stocks are now at the highest level in the past 8 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.

Morning Comments; Wednesday, January 15th, 2020

Nearly all attention today will be on the scheduled signing of the Phase 1 trade agreement between the United States and China. The actual signing itself is not as interesting as what the actual volume of imports will be. Officials from both sides have now stated these details will be available as soon as signed. While there has been much hype leading into this, not all are expecting to see a surge in demand. One reason for this is that China already is thought to have immediate soybean needs covered, and in the past week has actively booked soybeans from Brazil. There are also doubts over China’s ability to import commodities at a volume that is being given. There are thoughts that energy products may make up a bulk of the import projections, leaving commodity demand little changed. Chinese officials have also started that the signing of Phase 1 does not end the trade war, it simply prevents it from further escalation. Aside from this event, the NOPA crush report for December will be released today and trade is expecting to see record soybean consumption for the month. Once all this data is released, trade will start looking for its next source of fresh news. Trade will likely start to focus more on South America as harvest gets underway in those countries. Private analysts have upped Brazil’s soybean crop potential in recent weeks so more attention will be on early activity. Trade will also focus more on South American weather to see how later crops finish out and if as much double cropping will take place as expected. US weather is also becoming more of a market factor as saturated regions of the US continue to receive rainfall. While it is way too early for this to be a factor for the spring planting season, the possibility of a repeat of last year’s conditions is worth monitoring.

Highlights

* Phase 1 expected to be signed today

* China points out trade war not over

* US will not remove tariffs in Chinese imports yet

* Phase 1 expected to impact US acres

* Brazil economy becomes unstable

* Next round of MFP payments questioned

* Refinery waivers to be investigated

* Rains forecast for Australia

* Market again void of fresh news

Corn

* Buyers surface on breaks

* Technical resistance limits gains

* Corn loadings only 20% of expectations

* India raises import forecast

* Quality becoming an issue

Soybeans

* NOPA crush today; 171.6 mbu usage expected

* Weak Brazilian Real hurts soy futures

* SAM weather stabilizes

* Chinese Dec soy imports highest since May 2018

* China’s 2019 soy imports at 88.5 mmt

Wheat

* Less Russian competition

* Russia to cap exports at 45 mmt

* Nov-Jan Russian exports -11 mmt year ago

* Brazil importing US wheat

* Wheat rallies to 16-month high

Livestock

* Chinese Dec pork imports 375,000 mt

* Dec 18 pork imports were just 95,384 mmt

* Poland sees more bird flu

* Most of China’s ASF in small farms

* Wholesale beef/pork rise

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.

Closing Comments; Tuesday, January 14th, 2020

Trade was mostly higher to start today with soybeans and wheat leading the way. Soybeans took support from a flash sale announcement of a 120,000 metric ton purchase by an unknown for 2020/21 delivery. Wheat traded sharply higher on news that Russia may be limiting its exports for the remainder of the market year. Corn tried to follow the rest of the market but was limited by overhead technical resistance.

Russian officials have announced a proposal to limit grain exports through June. Plans are to export no more than another 20 million metric tons of grains through June. This will put Russia’s yearly grain exports at 45 mmt, which is what was projected at the beginning of the marketing year. Russian officials claim that by imposing this limit it would ensure enough reserves to satisfy domestic needs.

World food values in the month of December increased for the 3rd consecutive month. World food values are now sitting at a five-year high and are being led by vegetable oils. December’s increase in food values from November is being listed at 2.5%. For the year food costs are up 1.8%. Trade is starting to question the impact this rise may start to have on global economies.

One country that is seeing the highest food inflation is China. According to data from the financial group Rabobank, China’s food and ag economies will continue to weaken throughout 2020. This is mainly from the country’s slowing economy, high debt levels, and that it continues to battle African Swine Fever.

Brazilian officials have started to adjust their soybean export predictions. Officials in the country now believe soybean exports will be 1.3 million metric tons larger than initially projected. This is from the ongoing interest from China and record production it had a year ago. New crop Brazilian soybean exports have been lowered by 1.7 mmt though as the US and China continue to resolve their trade dispute.

The USDA has announced it will resurvey crops in the five states that had the most unharvested acres leading into the January WASDE report. The production from these acres were counted as farm-stored grain with a yield that was comparable to fields that were already harvested. This generated doubt even before the reports were released as it is thought production will be less, especially if fields remain unharvested until spring. While the USDA has said they will resurvey these regions, it stopped short of claiming it would adjust production or ending stocks as a result.

Chinese officials have released their import data for the month of December. For the month China imported 9.54 mmt of soybeans, a 67% increase from the month of November. This was also above the 5.72 mmt that were imported in December 2018. The high number for December is also a result of several cargoes of soybeans that were being held in port finally clearing customs and being approved to unload. For the 2019 calendar year China imported 88.5 mmt of soybeans. This compares to the 88 mmt that were imported in 2018.

China also released its pork import data. For the month China imported a large 375,000 mt of pork. This compares to the 229,700 mt that were imported in November. In December of 2018 China only imported 95,384 mt of pork showing just how much of an impact African Swine Fever has had on the country’s hog production. Not only does China need pork imports to satisfy current demand, but to start rebuilding government cold storage reserves.

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.

Morning Comments; Tuesday, January 14th, 2020

Now that the January USDA reports are behind us and trade has had plenty of time to digest the data, the market is looking for its next source of fundamental information. This may come at the end of February when the USDA Ag Outlook forum takes place. This will give us a long-term outlook at US ag economics and possibilities. This data tends to reflect the baseline numbers that have already been released. The forum numbers can also be a precursor to the planting intentions that will be released at the end of March. We have already started to hear talk of more acres on corn and soybeans, with some figures indicating a substantial increase from last year. This also tends to put more emphasis on spring weather and what conditions we may see for planting as these will be a significant impact on seedings. We will also soon start to receive harvest data from South America, mainly Brazil. Analysts are predicting another record soybean crop in Brazil this year and estimates continue to rise. The top end of expectations indicate we could see a soybean crop that would be 11 million metric tons larger than last year. While these numbers are being floated around the market, they seem optimistic given the dry conditions in many parts of the country. Actual crop size may come down to plantings and how much expansion has taken place since last year. Trade will also continue to use demand for price discovery, mainly to see if buyers continue to source needs from the US once the South American harvest does get underway.

Highlights

* Brazilian inflation hits economy

* Fires affect Australian farm outlook

* 2019 natural gas values lowest in 3 years

* Not enough trade focus on product exports

* Market continues to question unharvested acres

* Trade looking forward to March 1st grain stocks

* More attention on prospective plantings

* Expectations for Chinese business may be too high

* Trade attention on spring weather

Corn

* World corn use 23 mmt over production

* Global corn demand continues to rise

* Feed demand underestimated

* NASS to resurvey acres

* Quality becoming an issue

Soybeans

* Privates continue to raise Brazil crop est

* Privates also raise Brazil export forecast

* NOPA Dec crush data tomorrow

* Record soy crush is expected

* Global oilseed market corrects

Wheat

* China to raise imports under Phase 1

* Global stocks/use remains adequate

* Favorable Argentine weather

* Winter wheat acres may be higher

* Russia lowers export forecast

Livestock

* Economy impacts demand

* Cattle/hogs held to higher weights

* Chinese demand to build

* Bird flu in Hungry

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.

Closing Comments; Monday, January 6th, 2020

Trade spent much of the first full week of yearly trade mixed with soybeans on the plus side and grains under pressure. Much of what took place was early positioning for the USDA reports that will be released on Friday. Building concerns over Middle East developments weighed on the entire market, but were most negative for wheat, as the United States may lose export demand from that region. Losses were held in check by increased attention to South American weather as dry conditions are impacting Central and Southern Brazil.

Tensions are building between the US and Iran and this has generated mixed trade. For one, it is thought this will impact US export demand. At the same time, we tend to see a “flight to quality” with such developments, which can bring elevated buying interest in commodities. This has already been a great benefit for gold where futures are trading near seven-year highs. We could easily see this buying spill over into other commodities as well.

Export loadings for the week ending January 2nd were favorable for soybeans but light on grains. For the week a reported 21.7 million bu of corn, 35.4 mbu of soybeans, and 12.7 mbu of wheat were inspected for export. The grains were below the volume needed to reach yearly projections while soybeans were well above. For the marketing year, soybean inspections are 26% ahead of last year, wheat is up 15%, and corn trails last year by 53%.

Trade is again becoming concerned with the low export volumes we are seeing on corn. To meet the current yearly export projection set by the USDA we need to see average weekly loadings of 32 mbu. So far, we have only seen roughly two-thirds of this being met. Hopes were we would see this volume rise once Brazil exited the export market. With the number continuing to lag needs, it is possible that buyers have coverage met and do not need as much corn as anticipated.

South American weather is becoming more of a market factor. Recent rainfall has been a great benefit for Argentine crops as soils have been replenished. The question now is if this rain came in time to reverse earlier damage or just prevent additional deterioration. More attention is on Brazil though, as parts of the country remain in need of precipitation with limited events in outlooks. If these are not received in the near future we will likely see production estimates scaled back, even if just temporary.

The crop that may be impacted the most in Brazil is corn, especially the Safrinha crop. Estimates are now calling for a 70.9 million metric ton Safrinha crop in Brazil which would be down 3.1% from a year ago. Firms are also predicting a 98.4 mmt corn crop for Brazil this year which would be down from last year’s record production. The Brazilian firm CONAB will update their official numbers this week, which may give us a clearer idea of the actual corn crop size.

Even with less than perfect weather conditions, forecasters continue to predict a record Brazilian soybean crop, however. Estimates range from 124 to 126 mmt for the Brazilian soybean crop which would be nearly 5 mmt above the previous record. While this is possible, it seems like a stretch under current conditions.

Trade finally received confirmation that a Chinese delegation will be traveling to the US next week to sign the Phase 1 trade resolution. Until now only the US has stated this will happen, but today the Chinese government confirmed the signing will take place. While this is positive news, we still have not seen any details of the agreement. Sources claim that we may never see the actual quantities of purchases being agreed upon. This is taking away some of the positive impact of the agreement.

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.

Closing Comments; Friday, January 3rd, 2020

Sizable losses were posted in commodities today as selling in several markets took place following the US airstrike that killed an Iranian general overnight. The uncertainty of a reaction to this caused many investors to remove monies from the markets. Low export sales added to the negative tone, although much of this was the result of the Christmas Holiday. Profit taking in very thin trade ahead of next week’s USDA reports was also a factor for weak futures. We did see support from South American weather outlooks, as drought conditions in Brazil are gaining market interest.

Export sales for the week ending December 26th were all less than needed to reach current yearly USDA projections. This is not surprising given the fact Christmas fell in the middle of the week this year. For the week, the US sold 20.9 million bu of corn, 12.14 mbu of soybeans, and 11.5 mbu of wheat. New crop interest was also minimal. Next week’s sales may lean toward the light side as well, as they will include the New Year’s break.

The US soybean crush total for November was down slightly from last year. Monthly soybean crush totaled 174.65 million bu, a 1.9% decrease from November 2018. The total was also down 6.6% from the record crush total of 187 million bu in October. Farmer movement of soybeans slowed considerably following the end of harvest this year, which cut into crush volumes.

Not only has crush slowed in the US, but in China as well. For the year Chinese soybean crush is down 7.6% from a year ago. This has caused meal stocks in China to decrease 54% and drop to the lowest level in the past 5 years. This is a direct result of African Swine Fever cutting into China’s meal demand. China has started to see crush margins improve though, which should allow this number to start a recovery.

Attention is shifting towards weather conditions in Brazil. Drought conditions have developed in Brazil with some regions showing less soil moisture than a year ago when soy production was lower than currently estimated. Brazil has rains in the forecast, and forecasters believe that if they do not develop, production will likely need to be altered.

These dry conditions may also be a factor for double cropping in Brazil. This is where Brazil gets most of its exportable corn from; the Safrinha crop. If drought conditions would persist, we would likely see a hesitation to double cropping, and in turn less export competition. This may be even more of a factor this year as Brazil over-extended sales of corn from last year’s crop.

Ethanol manufacturing for the week ending December 27th slipped 1.6% lower than the previous week. An average of 1.06 million barrels of ethanol were manufactured each day of the week, which was still 5.4% more than a year ago. Ethanol stocks declined a large 435,000 barrels on the week and now stand at 21.03 million. This is a 2.13-million-barrel reduction on the year.

Even though China is attempting to rebuild its hog herd, the country is still looking for additional meat imports. These are needed to cover the loss in its hog production and to rebuild government reserves that have been used to cover shortfalls. China has recently turned into the world’s leading beef importer and is now looking at additional pork imports as well. This has led to China easing regulations on pork imports from several sources, including the United States. Some analysts have stated China could take up to 75% of US pork production but are concerned over the impact on the domestic market if they would.

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.

Weekly Market Review; Friday, January 3rd, 2020

Global Commodity Production Monitored

Much of the interest in the market right now is on US and South American production, but global grain reserves should likely be receiving more attention. While reserves of corn and soybeans are both ample, they have shrunk considerably in recent years. Just a few years ago the world corn reserve was 350 mmt, but on Tuesday the USDA estimated it at 300 mmt. The USDA also reduced the world soybean ending stocks from last year by 13.4 mmt. These declines are not from faltering production, but from an ever-growing demand for commodities around the world.

It is quite possible market analysts are paying too much attention to demand of raw commodities and not finished products. This is especially the case for corn where domestic usage has been up in recent weeks. The US has had increased ethanol manufacturing for the past several weeks, but we have not seen an adjustment to corn usage. The same is true for feed demand where animal units continue to rise but usage is holding steady. This could easily set us up for a major correction later in the marketing year.

Current ethanol production is up 2% from the week before, and at a seasonal high. The main reason for this elevated production is a return to favorable margins. At the present time US ethanol margins are a positive 17.6 cents per gallon, the highest they have been in several months. Steady corn values and a rebound in the energy market have allowed margins to improve. There are now some thoughts this will cause idled ethanol plants to come back on line. While this is possible, an increase in manufacturing will likely pressure margins, and again cause financial pressure in the industry.

Trade has noted a slight shift in the El Nino weather indicators. While minimal, we have started to see a move towards an El Nino system developing. While it is very early to add this into forecasts, it does give trade something to talk about. In a typical El Nino year, both the United States and South America tend to see above normal yields. This has a lot of factors that can change though, with how long the system lasts and how strong it gets being the main ones.

Last year’s canola crop in Canada was one of the lowest in recent history according to government sources. For the year Canada produced 18.6 million metric tons of canola, 6% less than the previous year and the least amount in four years. This low production was the result of high moisture, the same as it was for US crops. The US may see less competition in the global oilseed market as a result. Canada projected its wheat crop at 32.3 million metric tons today which was very close to a year ago.

The United Sates has seen record demand for its pork in recent months. Census data shows that in the month of October alone the US exported 520.9 million pounds of pork, a monthly record. Yearly pork exports are already up 37% from last year. Hog values continue to struggle though, as even with this demand, pork supplies continue to grow. Therefore, the market is so anxious to see China lift its tariffs and start making purchases.

Cattle futures have also started to show strength recently. The USDA is projecting US beef production to decline 35 million pounds in 2020. While this does not seem like a large amount, we have already seen a sizable yearly drop in US beef reserves. This comes at the same time global beef demand is forecast to increase as China rebuilds its meat reserves.

Even though they claim to have exhausted their corn reserves, Brazil continues to make exports. Last week Brazil exported a total of 395,000 metric tons of corn, about half of the previous week’s volume. These sales were likely already on the books at higher values than the current market indicates. This allows Brazil to continue exports while importing cheaper corn from Argentina to backfill reserves.

Brazil is starting to see pushback in the global market from some of its traditional trade partners. Buyers of Brazilian products have stepped forward to state they will not purchase Brazilian goods unless they can be proven to come from land that was not deforested for production. Not only is this for soybeans, but from leather manufacturers and cattle buyers as well. It is not out of the question this could sway some interest in the global import market to the US.

Trade is closely monitoring the remaining corn acres in the US to be harvested. Most of this is on North Dakota where the most corn is still standing in less than perfect conditions. Heavy snows have fallen in North Dakota to not only push harvest back even further but have caused crop loss as well. There are now worries over toxin development in this corn which could further reduce it uses and impact price.

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.

Morning Comments; Friday, January3rd, 2020

Commodities were pressured overnight from building tensions in the Middle East. This has caused crude oil to spike higher and weighed heavily on commodities and equity markets. Developments on this situation will have a direct impact on how the market finishes today. We are now one week away from the release of the much-anticipated January WASDE report. As stated, this will contain the final production data for old crop bushels. It will also give us our first official look at the winter wheat crop potential. The quarterly stocks data as of December 1st will also be released and may be more of a factor for the market than the other numbers. Until then, trade will sift through the estimates for the official release. Trade is starting to pay more attention to the outside markets. The US was under pressure to finish 2019 which supported commodities. We also saw a rally in the gold market, with futures hitting 14-week highs. The next few sessions may determine if this was simple year end positioning or a shift in market attitude. The equity market has been on a rally for an extended period of time and to see a correction would not come as a surprise. Now that we are into the new year, we will likely see a change in market focus on a whole. For one, the South American harvest will be underway within a few weeks. That does not mean weather for those countries will no longer be a factor, as now is when we may get an indication of how much double cropping will take place. We will also start to see more interest and attention on the upcoming planting season in the United States. The market has been starved for fresh news, and these changes will start to give it fresh data to work with.

Highlights

* Middle East Tensions Escalating

* Spike in energy complex deters commodity buying

* Trade volume remains light

* Scarce fresh news

* Drought intensifies in Brazil

* China/Russia solidify trade relations

* One week from USDA data

* China to boost economy

* Exports/Ethanol Data today

Corn

* Production expected to be down in WASDE

* Sizable crop loss expected in Upper Plains

* Gulf basis firms

* No confirmation of Chinese interest

* Brazil weather may impact Safrinha production

Soybeans

* India to reduce impart tax on Palm Oil

* Chinese expectations

* Gulf basis firm

* Global oilseed market strength

* China to increase Russian imports

Wheat

* Egypt to increase plantings

* Market reaching overbought

* Acreage reduction expected this year

* EU receives rains

* Ukraine, Russia, Australia remain dry

Livestock

* Chinese beef demand rising

* China now world’s leading beef importer

* US pork plants look for approval for Chinese trade

* 75% of US pork now approved for Chinese import

* Holidays slow slaughter pace

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.

Morning Comments; Thursday, January 2nd, 2019

Today begins the first trading session of the new month and year. Expectations are we will see an increase in volume as new positions are placed. Overall activity may remain subdued though, as many traders seem willing to sit on the sidelines and wait for next week’s USDA reports. While much of the talk heading into the January 10th data is on final production numbers, the real focus should likely be on quarterly stocks. The reason for this belief is that stocks data will be the only concrete number in the data dump, while the rest will be projections. This will include the “final” production data for old crop as a significant portion of old crop corn is still standing in the field in parts of the Upper Plains. While estimates can be made for what these bushels will total, it is impossible to pin them down accurately. Trade will also continue to monitor updates from the White House on the signing of the Phase 1 agreement with China. This was expected to take place this week but has been pushed back to January 15th according to President Trump. There remains a large amount of uncertainty with this agreement, mainly the volumes of purchases and time frames. Sources claim these details may not be known until after the deal is signed, which is generating doubt over the actual benefit it may bring. The US dollar finished 2019 weaker which was beneficial for commodities, especially wheat. How this carries over into 2020 will have a direct impact on how commodities start the year as well. Trade will continue to monitor South American weather to see if forecasted rains develop. Sources in South America claim that without precipitation in the near future they may start to trim their yield estimates.

Highlights

* Trade reopens 8:30 CT this morning

* Phase 1 signing pushed back to Jan 15th

* Details will be available after signing

* China gets 30 days to implement trade deal

* China demand to rise in 2020 even without trade deal

* New year positioning begins

* 7 sessions to USDA data

* Brazil may need ethanol imports

* Concerns remain over SAM weather

Corn

* Corn +6 ½ cents in Dec; +12 ¾ in 2019

* Funds trim short position

* Production losses in N Plains

* Farmers movement is up

* Brazil still shipping corn

Soybeans

* Soybeans +66 ¼ in Dec; +60 ½ in 2019

* November crush report today

* Trade est for 175.9 mbu soy usage

* Oversold canola supports soybeans

* Dry conditions linger in SAM

Wheat

* Wheat +17 cent sin Dec; +55 ½ in 2019

* Funds record short Mlps, long in Chicago

* Market on a whole is overbought

* Ukraine/Russian losses

* Record large India crop

Livestock

* Yearly cattle slaughter at 32.83 million

* Yearly hog slaughter at 128.3 million

* Cattle slaughter +1.2%, hogs +4%

* China to sell 30,000 mt pork from reserves

* Cash cattle remain untested

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.

Closing Comments; Tuesday, December 31st, 2019

Final year end positioning was the dominate factor in today’s trade. Updated news on the Phase 1 agreement was also a factor, as the signing will not take place as soon as expected. Improved weather for South America and technical resistance kept a cap on today’s activity, as did an unwillingness to establish new positions on the final day of the year. We continue to see short covering on breaks though which provided support.

After initially claiming the Phase 1 trade deal with China would be signed this week, the White House now claims the signing will come later. According to a tweet from President Trump, the sides will meet on January 15th for the official singing at the White House. President Trump further stated that work will then begin on a Phase 2 package. Trade has still not received any details on the agreement, causing some to question just how beneficial it may be for the commodity market.

Even without a signed deal in place trade is optimistic on future business with China. China has recently announced they will add GMO varieties of both corn and soybeans to their approved list for import. This opens the door for more US trade. In the past China has used its GMO policy to avoid imports and restrict commodity inflow. This also brings into question how much corn and soybeans China has in storage.

Country movement of corn and soybeans has increased across the US in the past few weeks. This is not uncommon as farmers tend to increase deliveries during this period for end of year cash flow needs. The rally we have seen in commodity futures has also prompted elevated country movement. This movement has started to weigh on interior basis levels though, with buyers showing less urgency in pushing for coverage. Many are also expecting to see deliveries continue through the new year, further reducing their interest in pushing bids.

Even with record production, Brazilian officials claim the country will fall short of demand on ethanol production this year. Brazil producers most of its ethanol from sugar cane during the harvest season. This runs from April through December. Brazil has indicated it may need to start producing ethanol from corn to satisfy demand, which has elevated foreign investor interest in the country.

Trade is looking forward to the November fats and oils report that is scheduled for release on Thursday. This is expected to show a soybean crush figure for November of 175.9 million bu. This would be a reduction from the October total of 187.2 mbu and under last November’s 178.1 mbu. Oil stocks are expected to come in at 1.84 billion pounds for the end of November compared to 1.82 billion at the end of October. Elevated crush demand has been supporting soybean futures, so this report may have more of an impact on the complex than in recent months.

One of the numbers that is jumping out as we finish out 2019 is the slaughter totals on cattle and hogs. For the year slaughter is being estimated at 32.83 million head of cattle which is a 1.2% increase over 2018. Hog slaughter on the year is projected to total 128.3 million head, a 4% increase on the year. The impact of these numbers on pork and beef inventory remains mixed though, with beef stocks continuing to decline while pork inventory keeps climbing.

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.

Morning Comments; Tuesday, december 31st, 2019

Nearly all of today’s session will be spent with final year end positioning taking place. Much of this has already been done, but there are always a few stragglers. The big story in the market is that a delegation from China will be in the US this week to sign the Phase 1 trade deal. This delegation will remain in Washington through the early part of next week for the signing ceremony. Both sides claim this will be a tremendous benefit for trade between the two countries, although we have yet to see details of the package. Hopes are this will elevate export demand of many US commodities, including soybeans, corn, and ethanol. The real question with the report is how much total imports China has agreed to, and how it will be divided. Trade continues to focus on South American weather where forecasts are mixed in their data. Rains are forecast to develop across Brazil in the next week to help replenish dry soils. Argentina is forecast to turn dry according to some outlook models though, which is going to be closely monitored as drought has already impacted the country’s corn crop. Trade will also try and determine what impact the weekend storm in the Plains had on standing US crops. This same system is thought to have brought precipitation to the US Wheat Belt which was needed. Expect thin trade volume today, which could easily increase volatility over recent sessions.

Highlights

* FND on January contracts

* Phase 1 to be signed next week

* Normal trade hours today, closed tomorrow

* Trade reopens 8:30 CT Thursday morning

* Seasonal pressure on exports

* Winter storm losses in Plains

* Harvest all but over for the winter

* Trade still waiting on final USMCA signing

* Low holiday volume continues

Corn

* Argentina to turn dry again

* Ethanol production rises

* Very low trade volume

* Additional harvest unlikely this year

* US farmer 37% sold, was 45% year ago

Soybeans

* China approves more GMO imports

* Global oilseed market strength

* Soy oil highest level in 2 years

* Brazil harvest to begin soon

* US farmer 35% sold, year ago was 47%

Wheat

* China shows interest in US wheat

* Fewer US acres expected

* Weak US dollar benefits exports

* Global production to decline

* Black Sea turns dry

Livestock

* US ships poultry to China

* 1st US poultry to china in 4 years

* China to release pork from reserves

* China also to release beef, mutton

* Cash trade remains light

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.

Closing Comments; Monday, December 30th, 2019

Much of today’s session was spent with traders adjusting positions for month, quarter, and year end. The highlight of the day for news was the announcement that a Chinese delegation is on its way to the US to sign the Phase 1 agreement. The details of this remain unclear though, which is tempering its impact on futures. Fresh news remains sparse this week which is not a surprise as everything is still in holiday mode. It would not be surprising to see low trade volume until next week, and possibly until the release of the January USDA reports on the 10th.

The big story of the day was the report that China has accepted an invitation to the US to sign the Phase 1 trade deal. Sources claim the package could be signed as early as the end of the week. While this is positive news, the vast uncertainty that surrounds the plan is a negative factor. We still do not know the details of the trade deal, including the total amount of purchases or how they will be divided between the commodities.

The obvious commodity that is expected to benefit from Chinese trade resolution is soybeans. There are thoughts that ethanol will be a beneficiary of the trade deal too, with possibly as much as 1 billion gallons of demand being included. Another commodity that may benefit is wheat, with some estimates for demand to nearly double. Meat exports are also expected to improve, with most emphasis on pork. China has also resumed US poultry imports, with the 1st container headed to the country in the past 4 years.

Last week’s US ethanol production was up 2% from the week before, and at a seasonal high. The main reason for this elevated production is a return to favorable margins. At the present time US ethanol margins are a positive 17.6 cents per gallon, the highest they have been in several months. Steady corn values and a rebound in the energy market have allowed margins to improve. There are now some thoughts this will cause idled ethanol plants to come back on line. While this is possible, an increase in manufacturing will likely pressure margin, and again cause financial pressure in the industry.

Export loadings for the week ending December 26th were down from previous weeks which is not a surprise given the holiday break. For the week a reported 16.1 million bu of US corn was inspected for export, well below the 42.5 mbu that is needed on a weekly basis. Wheat inspections also missed the needed amount per week with 11.5 mbu. Soybean inspections topped the 28 mbu needed per week with 33.5 mbu being readied for export.

Data shows US farm sales of corn and soybeans are down from a year ago. So far this marketing year US farmers have marketed a reported 35% of last year’s corn and soybeans. Last year farmers had sold 45% of their corn and 47% of their soybeans by this time. Smaller crops and elevated storage capacity have allowed farmers to hold off on sales. The Market Facilitation Payments have also generated enough cash flow to allow farmers to limit their sales.

Chinese officials have announced they will be releasing more meat from government storage facilities ahead of the upcoming Lunar New Year. Not only will this include pork, but also beef and mutton. China has already released 100,000 metric tons of pork since mid-December to help satisfy demand following the fall in production following the African Swine Fever outbreak. This generated a shortage of available pork in China and drove the values of the commodity up 100%. This caused food inflation to hit an 8 year high in November, causing financial strain on the country’s population. The release of meat from government storage will help ease this situation as well.

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.

Morning Comments; Monday, December 30th, 2019

Nearly all attention in the market over the next two sessions will be on getting final positions in place for year end. Much of this has already been completed, but there always remains a few traders who hold out until the end. This will be another short week for trade with the market trading normal hours Monday and Tuesday, but be closed all day Wednesday. Trade will then resume Thursday morning at 8:30 CT and hold normal hours the remainder of the week. We will soon start to see estimates for the upcoming USDA reports on January 10th and these will give the market fresh news to work with. The most attention will likely be on the quarterly stocks data as of December 1st, as these are the only numbers that can be verified. Although the production numbers in the WASDE report are termed the “final” figures, its is hard to state them as fact with crops still in the fields. Trade will also be trying to determine how much damage has been caused by the weekend winter storm that moved through the Upper Plains bringing over a foot of snowfall. There is little doubt this has caused additional production losses. The commodity market may be more sensitive to the equity markets this week as well. Investors will be realigning positions both this week and next, and that could easily cause swings in market values with little fundamental reason.

Highlights

* Year-end positioning

* FND is tomorrow

* Normal trade hours today, tomorrow

* Trade closed Wednesday, normal hours Thursday and Friday

* Slow start to new crop export program

* Investors show more interest in financials

* Russian grain stocks nearly equal to year ago

* Weaker Brazil currency supports soy values

* Winter storm hits Corn Belt

Corn

* Argentina drought losses reported

* Corn condition continues to decline

* Gulf basis firms

* Corn values following wheat

* Ethanol production at seasonal high

Soybeans

* Soybeans at six week high

* Chinese demand rising

* Brazil shipments to China -24% in Nov

* Brazil/Paraguay need rain

* China remains top buyer of US soybeans

Wheat

* Global production questioned

* Fewer US acres expected

* Russia lowers export forecast

* EU wheat values -7% from year ago

* China may triple wheat imports

Livestock

* Very limited fresh interest

* China to invest $7 billion in hog production

* Vietnam pork imports double

* ASF still cutting hog numbers in Asia

* Pork supplies a concern

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.

Morning Comments; Friday, December 27th, 2019

Trade is expected to remain thin today as the market continues its holiday mode. The market continues to search for fresh news to work with, which is quite sparse. If there is a time for limited fresh news, now is it, as most traders are not interested in establishing fresh positions anyway. Any progress with the Phase 1 trade deal with China would be welcomed by the market, but that is likely still a few weeks away. Weather is becoming more of a market factor as another major winter storm is being forecast for the Upper Plains this weekend. Parts of the Dakotas and Minnesota are expected to receive over a foot of new snow which will undoubtedly cause another halt to harvest. Some areas of this region had resumed harvest as fields finally froze, but this system will again stall activity. There is little doubt this will bring additional production loss as well. South American weather will also be a factor to see of forecasted rains for Brazil start to develop. Without these we could see some analysts start to scale back crop estimates. We are also seeing some concern over the Argentine corn crop following the release of pictures showing drought impacted fields. Aside from these topics, trade will be focused on the delayed weekly export report to see if demand is building as hoped, especially for corn.

Highlights

* China sources commodities from several sources

* Jan options expire today

* Chinese soy demand highest in nearly 2 years

* Winter storm forecast for Plains

* More crop damage is expected

* Rains continue for Argentina

* Scattered precip for Brazil

* Buyers tighten import regulations on Brazil

* Ethanol/Export data today

Corn

* Brazil crop at 102 mmt, Argentina at 47.5 mmt

* Higher feed demand likely

* China to increase feed grain imports

* Brazil still loading out corn

* Argentine drought losses, even with rains

Soybeans

* Brazil crop at 123 mmt, Argentine at 52 mmt

* Global oilseed strength

* Palm oil at 2 year high

* Chinese soy imports from Nov at 2.6 mmt

* Nov Chinese imports 2x October

Wheat

* EU/Ukraine demand is up

* More buyers surface

* Rains to benefit western US crop

* State ratings start next week

* Buyers cutting import duties

Livestock

* Very limited fresh interest

* Feeders pressured from higher feed grains

* High market hog numbers

* Hogs fed to higher weights

* Pork supplies a concern

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.

Closing Comments; Thursday, December 26th, 2019

Holiday trade patterns continue to dominate the commodity markets. We continue to see a lack of fresh news and traders seem more willing to simply shore up positions ahead of year end and wait until the USDA reports in early January before adjusting their investments. Trade also wants more clarification on the Phase 1 deal with China and is willing to wait for the details before altering positions. Trade volume remains thin, which could easily cause volatility to build, creating pricing opportunities in the cash market.

Traders are asking more questions on the details of the proposed Phase 1 deal with China and receiving few answers. Both the US and China claim this will be a good deal for both sides, but that is the extent of the clarification. The deal is expected to bring the US $40 billion in exports, but the details are questionable. This is because there are many moving parts that would allow China to reach that volume of imports. The bulk of this is expected to be soybeans, but there are several other products that we could see included, including DDGs and ethanol. There is also some doubt over China’s requirement to buy from the US if the market would allow cheaper purchases from other suppliers.

Even without a trade deal in place the United States has seen elevated soybean demand from China. In November China imported 2.6 million metric tons of US soybeans. This is over twice the volume that was imported in October and compares to no imports in November 2018. The November import total was also the most between the two countries in the past 20 months. Slow sales out of South America and improving relations are the two main factors for the elevated business.

Not only did China increase soybean imports from the US in November, but from all sources. For the month China imported a total of 8.3 mmt of soybeans. This compares to 6.18 mmt in October. The jump in US imports were a factor for this, but an overall increase in soy demand was the primary reason. China has seen its crush margins improve recently, and also witnessed a build in feed demand as the country starts to replenish its hog herd following the African Swine Fever outbreak.

The Argentine Minister of Ag has announced the country may be altering is recently instituted export tax rates. Soon after President Fernandez was sworn in he raised export taxes on soybeans and grains. This was met with a large amount of opposition from farmers who claim they will become unprofitable at the new rates. Now a proposal has been made that will reduce export taxes for farmers who live further away from export facilities. By doing so, it will increase revenue for those farmers, and hopefully prevent the country’s production levels from falling.

When these tax rates were changed Argentina immediately saw a drop in export offerings. Since then we have seen a resumption of corn being offered for export. The asking price on this is 10% higher than before though, which has deterred many buyers. One importer that is showing interest in Argentine corn is Brazil though, as that country has oversold its corn supply.

Brazil may miss its ethanol production forecast for 2019/20 marketing year. The country is projecting ethanol manufacturing of 1.69 billion liters for the year, a 14% increase from a year ago. Through the 1st half of December Brazil had only produced 235 million liters though, which is down 66% from 2018. This decline is the result of a scarce corn supply and its impact on manufacturing. In turn, this is generating less competition for the US in the global market.

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.

Morning Comments; Thursday, December 26th, 2019

Now that the Christmas holiday is behind us, trade will start to position itself for the end of the month. Not only is next week the end of the month, but of the quarter and calendar year as well. To see elevated volatility during this period would not be surprising. Once traders return we will likely start to see increased positioning ahead of the January WASDE report. Not only will the balance sheets be updated, but the quarterly stocks data and the initial look at winter wheat production as well. Many traders may exit the market this week and stay on the sidelines until that data is released. The most activity over the next few sessions may be on January soybeans as that contract goes into delivery. As for fresh news, trade will be looking for indications on the details of the Phase 1 deal with China and how much additional demand this will bring the US. We are also seeing more interest on South American weather as dry pockets are forming in Southern Brazil and Paraguay. No major precipitation is forecast until mid-January which will definitely be needed by then.

Highlights

* Warm weather keeps US rivers open

* Trade wants Phase 1 details

* Many moving parts to reach $40 billion

* Investors going to equity market

* Year end positioning to increase

* Argentine export taxes may be adjusted

* Trade attention to upcoming USDA reports

* Mostly favorable weather for SAM

* Sparse fresh news

Corn

* Phase 1 includes corn/ethanol

* Yearly inspections -370 mbu last year

* Lack of competition to benefit US sales

* China buys corn from other sources

* Additional harvest activity limited

Soybeans

* Trade uncertain over Chinese details

* Yearly loadings +144 mbu

* SAM harvest just weeks away

* Analysts leave crop estimate unchanged for SAM

* Chinese crush holds near break even

Wheat

* Yearly loadings +68 mbu

* Russian wheat up on currency exchanges

* EU exports +67%

* Ukraine exports +35%

* Morocco to suspend 35% customs duty

Livestock

* US pork supply to grow

* US beef supply shrinks

* Hopes build for Chinese business

* High placements to build cattle supply

* Limited cash trade

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.