Traders Await WASDE Report Update

Good Morning from Allendale, Inc. with the early morning commentary for February 11, 2020.

Grain markets were mixed overnight as traders await the USDA report later this morning and try to factor in what impact the Phase 1 deal might have on the numbers. The same may hold true post report if the numbers don’t reveal Chinese intentions.

USDA Monthly Supply and Demand report will be released today at 11 a.m. CST.  Analysts are 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.

China reported 108 new coronavirus deaths yesterday (a daily record) bringing the total number of people killed in the country to 1,016, but the number of new cases fell.  There were 2,478 new confirmed cases in China yesterday (3,062 the previous day) bringing the total to 42,638, the National Health Commission said.

USDA weekly grain export inspections showed corn exports at 769,000 tonnes (500,000 to 800,000 expected), soybean exports at 604,000 tonnes (700,000 to 1,350,000 expected) and wheat exports at 524,000 tonnes (300,000 to 600,000 expected).

Over 300 Chinese companies are seeking bank loans totaling at least $8.2 billion to help cope with the virus disruptions, two banking sources said.  Chinese cities have become virtual ghost towns after government officials ordered strict  lockdowns, cancelled flights and closed factories and schools.

USDA hinted last week that its monthly supply and demand update is unlikely to include any big changes that may be expected following the Phase 1 deal, primarily a boost to U.S. exports.  The agency also cited the trade deal’s lack of details as limiting, namely the absence of commodity-specific purchases.

South Korea’s Major Feedmill Group (MFG) has issued a tender to buy up to 140,000 tonnes of corn for May arrival, according to a bid document.  (Reuters)

Oil prices fell to their lowest level since December 2018 on weaker Chinese demand and as traders waited to see if Russia would join other producers in seeking more output cuts.

Vietnam has culled tens of thousands of birds to contain an outbreak of H5N6 bird flu detected at several farms in its northern provinces, an agriculture ministry official said.  Apart from culling the birds, the authorities have also disinfected the farms and put a ban on poultry transport from the infected zones, the official said.

Friday’s 64.81 price for wholesale pork was the lowest of the year. It is also 14.03 off the recent 78.84 peak from 1/23. Virus fears are a major issue here. The second issue is the well-known oversupply in US production. We’re seeing kills 7% over last year instead of the +4% to +5% forecast from the December Hogs and Pigs.

In the short term the US hog/pork trade is concerned that China’s pork demand has fallen due to coronavirus concerns. It’s quite hard to quantify but you could cut from 5% to 20% if you played with the numbers. But that does not really do much to satisfy the massive production deficit in place. (Rich Nelson’s Hog Comments)

Last week’s cash cattle traded lower. The $121 action was not too much of a surprise. It was $1 lower than the prior week. There is now a little distance from the $124 peak from last month. Dressed movement was noted at $193 vs. last week’s $195.

Dressed beef values were lower with choice down 1.21 and select down 0.19.  The CME Feeder Cattle Index is 140.41.  Pork cut-out values were up 0.21.

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