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E-Visor Reports: Market Watch

 
Friday, January 31, 2020
The main activity in today’s session will likely be month end positioning. While no contracts go into delivery, traders will still want to shore up monthly positions. Heavy selling has taken place over the past week, so to see buying surface would not come as a surprise. At the same time, there is not a lot of reason to buy commodities at this time. The only real reason is that for soybeans, the contract is technically oversold. Trade is also showing interest in the upcoming February WASDE report. While typically a non-event, the possibility of incorporating the Phase 1 agreement into sales potential could be a factor. Trade is also trying to predict what will happen to the Chinese markets when they resume next Monday. There has been talk this closure could be extended but noting has been verified. The Chinese markets have been closed for the Lunar New Year, and not been open since the outbreak and spread of the Coronavirus. Sharp losses are expected for China’s economy from this, but trade is already expecting this and has had time to prepare. It is not out of the question this could be setting us up for a classic case of “sell the rumor, buy the fact” even if just temporarily. The SARS outbreak cost the world economy a reported $54 billion and the Coronavirus is expected to top that. This is mainly from the increase in China’s participation in the global economy since the SARS outbreak in 2002. This is especially the case on global commodity trade. The Chinese economy is also already reeling from the African Swine Fever outbreak. Other influences on today’s trade will be South American weather and harvest activity. Interest is starting to split between soybean harvest and Safrinha planting in Brazil, as both of these are behind normal. While a slow harvest will not impact soybean production, a slow planting pace on the Safrinha crop could easily impact corn production. Expect this to become more of a factor in price discovery of both over the next few weeks, especially if conditions do not change. 

Highlights
* Coronavirus economic concerns continue
* Coronavirus now disrupting China’s commodity flow
* China expected to return to global markets next Monday
* Month end positioning a factor today
* Weak Brazilian Real impacts exports
* Vaccine developed for ASF 
* Crude oil at 5-month low
* US dollar weakens
* Chinese growth may drop to 5%
* Rains forecast for dry regions of Australia 

Corn
* Unharvested acres may be zeroed out
* Dry pattern may develop in Argentina
* US corn competitive through April
* Exports increase, still trail last year by 33%
* Brazil domestic corn +$1.00/bu from US

Soybeans
* Brazil harvest picking up momentum
* Market focused on record Brazilian crop
* Market heavily oversold
* Soybeans down 8 straight days
* Sales slip, still +4.3% on the year 

Wheat
* Global production concerns ease
* Russia will not limit exports
* Exports remain strong, +17% on the year
* Egypt continues to buy, claims needs are covered
* Wheat down 3 straight sessions

Livestock
* Chinese quarantine impacts livestock supply
* Feeders not getting needed supplies
* Beef sales last week 21,747 mt; +45% on the year
* Pork sales 34,090 mt; +67% on the year
* Only 2,560 mt of pork sold to China last week