Closing Comments; Tuesday, December 3rd, 2019
Agrivisor - SETZ - Tue Dec 03, 2:13PM CST

Trade was mixed for much of the day session today as new month positioning continued. Much of what we witnessed today was consolidation in the market, although we did see some speculative money leak back into the commodities from the outside markets. Concerns over the remaining acres to be harvested in the US and dry conditions in South America added to the market support. Advances were capped by future commodity demand, mainly soybeans to China. Wheat futures suffered a set-back today as Egypt bypassed the US in favor of Russian wheat, and booked 295,000 metric tons from them.

As of December 1st, the US corn harvest stood at 89% complete. This leaves roughly 9 million corn acres to be harvested, with the majority of these in the Upper Plains and Midwestern states. This leaves nearly 1.5 billion bu corn still in the fields. Much of this may be left through the winter months given current weather and field conditions. Soybean harvest on December 1st was at 96% leaving 3 million acres left in the fields. This figures out to 142 million bu remaining to be harvested. This may be harder to get to, as soybeans cannot withstand heavy snow the way corn can.

Chinese officials have announced they have used up their tariff-free soybean import quotas on US exports. The Chinese government granted 10 million metric tons of tariff-free import quotas to crushers and these have been fulfilled. Trade doubts we will see additional business with the China as a result, as Brazilian soybeans are now considerably cheaper for these crushers. Reports that China already has 60 to 70% of soybean needs covered for the first half of 2020 will also limit their buying interest.

Global trade tensions increased today as the US has indicated it is in no hurry to resolve issues with China. President Trump has stated he believes the trade war could last past the 2020 election. President Trump also stated he is comfortable with waiting and will sign a deal on his own terms. This makes it more likely we will see the additional Chinese tariffs go into effect on December 15th. President Trump is also considering a 100% tariff against France in response to the country’s digital tax.

We are seeing more estimates released on the size of Brazil’s soybean crop. According to a poll of analysts, Brazil’s soybean crop is going to total 122.7 million metric tons this year, up 6.7% from a year ago. More favorable weather and a 2.5% increase in plantings are the primary reasons for the elevated production forecast. Brazil’s government is only forecasting a 121 million metric ton soybean crop according to its last estimate. Analysts are holding Brazil’s soybean export forecast steady, but that could change if trade tensions between the US and China do not subside.

It is likely that we will see an increase to old crop soybean exports out of Brazil. The USDA is currently predicting 70 million metric tons of Brazilian soybean imports for the marketing year that ends in February. By the end of November Brazil had already sold more than this figure, with bookings crowding in on 71 million metric tons. This volume would still be a 15% reduction from a year ago though as China returned to the US for soybeans, and the global appetite for soybeans on a whole is down.

After a big slide in November, Chinese hog values have shown signs of rebounding. Hog values in November slipped 20% as the government opened its reserves to help combat high consumer costs. This came at the same time Chinese consumers opted for lower valued meats, mainly poultry. Chinese values have now rebounded 1% as the country starts to prepare for the Lunar New Year at the end of January, which tends to be the country’s biggest period of pork demand.

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.




 

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Karl Setzer Grain Commentary