Morning Commentary

March corn up 3 ½ at $3.8225

March beans up 7 ¼ at $8.8425

The DOW is up

USD is stronger

Crude oil up $1.14 at $51.25

Good morning,

Corn bulls are hoping that continued global competitiveness by U.S. exporters will lead to increased demand, especially if Chinese buyers start coming to the table. At the same time, there’s ongoing hope that the USDA will aggressively trim its production estimate following the resurvey. Bears, on the other hand, point to the possible fallout associated with the coronavirus, especially with the large rapid drop in crude oil prices. A Bloomberg article was circulating inside the trade yesterday that mentioned China could ask for some type of temporary reprieve or grace period in regard to their “Phase One” buying commitments. There’s also more talk circulating and debates arising that U.S. ethanol production could disappoint in the weeks ahead, ultimately creating a headwind rather than a tailwind for U.S. demand. Bears are also pointing to cooperative weather conditions in South America and talk of more U.S. corn acres in 2020.

Soybean traders continue to debate the risk and uncertainty of the coronavirus. Weather continues to cooperate in South America and the Brazilian harvest is moving along at a good clip, meaning there will soon be more export competition in the global marketplace. Keep in mind, several sources have been bumping their Brazilian crop estimate higher based on improved conditions and better than expected yields. The trend is bearish but trade flow suggests a recovery at hand.  Sustain action below 867.5 projects a target 850.25.  Stable action over 901.5 confirms an end to the washout. 

Cattle Inventory report was released Friday afternoon by USDA. Largely the data fell into line with the pre-report estimates and if anything, it might have had a modest supportive tone for deferred contracts. Live cattle basis improved dramatically last week. Futures sold off aggressively as speculative money seemed to be exiting the market. Cash cattle printed a lower weekly price of 122.00/CWT on lighter volume but appeared to keep feed yards current evidenced by smaller show lists for the current week. Spot beef markets ended the week down approximately 1.25/CWT and volumes rolled over in seasonal fashion. Typical beef market lows are not far in front of us, assuming we did not degrade demand to any large extent with the recent rally and widening Ch-Se spread. Slaughter totals underwhelmed the market last week, but Saturday’s kill was revised slightly higher yesterday. Kills typically tighten for the next few weeks as packers work to balance supply and demand. As we continue to deal with historically large slaughter totals and record beef production, it will be very interesting to see how we perform as we work into larger spring and summer cattle supplies. At the end of the day, it is quite possible that futures have topped, and cash may or may not have. Massive long liquidation continues to drag open interest lower and the risk this could continue is certainly real. Cash is being supported to a certain degree by positive packing margins and generally good demand. Futures were beaten up badly last week and seeing Apr20 LC move back up into the 123.00-124.00/CWT area would not shock us before resuming a softer move. Trey Warnock – Amarillo Brokerage Company

USDA announced yesterday  the third and final tranche of 2019 Market Facilitation Program (MFP) payments aimed at assisting farmers suffering from damage due to trade retaliations. Payments will be made by the Farm Service Agency (FSA) to producers of alfalfa hay, barley, canola, corn, crambe, dried beans, dry peas, extra-long staple cotton, flaxseed, lentils, long grain and medium grain rice, millet, mustard seed, oats, peanuts, rapeseed, rye, safflower, sesame seed, small and large chickpeas, sorghum, soybeans, sunflower seed, temperate japonica rice, triticale, upland cotton, and wheat. MFP assistance for these non-specialty crops is based on a single county payment rate multiplied by a farm’s total plantings of MFP-eligible crops in aggregate in 2019. Those per-acre payments are not dependent on which of these crops are planted in 2019. A producer’s total payment-eligible plantings cannot exceed total 2018 plantings. County payment rates range from $15 to $150 per acre, depending on the impact of trade retaliation in that county. Acreage of non-specialty crops and cover crops had to be planted by August 1, 2019 to be considered eligible for MFP payments.

Buyers of liquefied natural gas (LNG) in China are bracing for demand to be shattered by the coronavirus outbreak. With demand already weakened in an economy slowed by a trade war with United States, several LNG buyers in China told Reuters they are considering either delaying cargoes or cancelling them by invoking force majeure, though nothing had been decided yet. Last week, a Chinese international trade promotion agency said it would offer force majeure certificates to companies struggling to cope with the fallout of the epidemic on business with overseas partners. China had already been grappling with a high inventory of LNG as demand had been dented by a winter that was milder than usual and the slower economy. Traders expect the economic impact from the virus to further hit gas demand and cause major delays in LNG cargo deliveries into China, as demand for gas in trucking and industries is expected to slow. Asia spot prices of LNG are already at their lowest in more than a decade and are expected to tumble further as Chinese demand slows, traders said. (Source: Reuters)


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