January 23, 2020

Wake Up Call

When Will We See New Chinese Demand?

Good Morning from Allendale, Inc. with the early morning commentary for January 23, 2020.

Grain markets are mixed this morning as traders wait for signs of new Chinese demand by way of overnight export sales notices. With the Lunar New Year holiday next week for all of China, some are concerned sales may still be a way off.

Agroconsult estimates Brazil will harvest 124.3 million tonnes of soybeans this year, up from last year's 119 million tonnes. At this time USDA’s 123.0 million tonne production estimate implies a trend yield of 49.6 bpa. That would be the third largest in history. Allendale’s 122.4 mt production estimate uses a slightly higher 49.9 bpa.

Weekly export sales will be delayed one day this week and released tomorrow at 7:30 AM CST due to Monday's holiday. Ethanol production will be out at 9:30 this morning, also delayed one day this week.

Some key Asian feed makers are having to pay more for higher-quality corn from the Black Sea region as a key traditional supplier, the United States, struggles with a weather-damaged crop. (Reuters)

Our Annual Winter Outlook Conference is less than a week away, January 28th - 30th. Drew Lerner of World Weather, Inc. will kick it off for us January 28th with his 2020 weather outlook. He'll be followed by our grain and oilseed outlooks on the 29th, and our livestock outlooks on the 30th. Get registered to view our latest price outlooks, trade strategies, and more insight to what 2020 will bring to our markets.

Weather in South America is mixed.  Rain is increasing across Brazil and Paraguay and they will continue to see regular rounds of showers.  In Argentina soil conditions are favorable for now but the next two weeks see sporadic rain events, further threatening crop stress.

Chart watchers note that wheat came within ½ cent of the strong resistance level of 593 that was the high on the most active contract back in August of 2018. The recent strong volume mixed with a shooting star candle stick on the day and a potential double top were also noted.

USDA's Cold storage report showed pork stocks at 580.904 million lbs., a little higher than Allendale's projection of 566 million lbs. for the end of December. Beef stocks were reported at 481.012 million lbs., right near our estimate of 483 million lbs.

Cattle on Feed report (end of December) will be released tomorrow at 2 PM CST. Allendale estimates On Feed at 11.987 million head (2.5% over last year), Placements at 1.839 million head (4.1% over last year) and Marketing at 3.9% over last year.

Cash cattle traded at $124 in the country as well as the limited Fed Cattle Exchange. It now marks four weeks in a row of $124.

China will continue selling state frozen pork reserves after the week-long Lunar New Year holiday, said a notice on the website for the China Merchandise Reserve Management Center (Reuters)

Dressed beef values were mixed with choice up 0.45 and select down 1.45.  The CME Feeder Cattle Index is 145.17.  Pork cut-out values were up .55.

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