Coronavirus Keeps Pressure on Chinese Markets

Good Morning from Allendale, Inc. with the early morning commentary for February 10, 2020.

Grain markets are mostly lower though traders are watching fund short-covering with most support coming from optimism regarding additional U.S. agricultural export sales to China.  Traders will be closely watching for any indications of what the USDA might release in tomorrow’s monthly WASDE report.

Last week, March corn futures were up 2.25 cents, March soybeans up 10.25 cents, March wheat up 5.5 cents, March soymeal was up $0.60 and March soyoil was up 97 points.

Chinese President Xi Jinping told President Trump that China would still meet its Phase 1 trade deal purchasing targets despite delays linked to the coronavirus, White House adviser Larry Kudlow said.  He also added that there was no tension between the U.S. and China over the handling of the fast-moving virus outbreak.

Average estimates for tomorrow’s USDA Supply and Demand report show analysts expecting 2019/20 corn ending stocks at 1.864 billion bushels, soybean ending stocks at .443 bb, and wheat at .954 bb. USDA commented that the report will not include Phase 1 trade details about China’s purchase commitments, but that the deal is being factored into the numbers.

Chinese workers slowly started going back to their offices and factories around China as the government eased some restrictions on working due to the coronavirus epidemic that has killed more than 900 people.  Yesterday’s death toll of 97 was the largest in a single day since the outbreak was first detected in December at a seafood market in the province’s capital of Wuhan.

CFTC Commitments of Traders showed funds new net position short -55,990 corn contracts, short -82,358 soybean contracts, long +52,161 wheat contracts, long +55,259 live cattle contracts and long +11,119 lean hog contracts.

U.S. soybean export sales to China was seen at 31.5 thousand metric tonnes and is the lowest number in 5 months.  Meanwhile, China continues to be a strong buyer of Brazil soybeans (21-25 cargoes last week).

The coronavirus outbreak has delayed the launch of new pig breeding facilities and put even more pressure on China’s pork supplies and prices, an official with China’s agriculture ministry said.  China has released 10,000 tonnes of frozen pork from its strategic reserve.  They are also aiming to raise imports to alleviate shortages.

The Philippines confirmed African swine fever infections had spread in the south of the country, which produces nearly a third of the nation’s 12.8 million pig herd.  Several cases have also been confirmed in some northern provinces, the Philippine’s Department of Ag said.

Dressed beef values were lower with choice down 0.81 and select down 2.07.  The CME Feeder Cattle Index is 140.63.  Pork cut-out values were down 0.54.

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