China Allows Large Tariff Exemptions on U.S. Goods

Good Morning from Allendale, Inc. with the early morning commentary for February 19, 2020.

Grain markets are mixed after larger-than expected production cuts in Australia’s wheat gave Chicago wheat futures a 20 cent surge yesterday. Traders will continue to see if China is ready to make purchases promised during the Phase 1 trade deal this week.

The coronavirus death toll in China passed 2,000 yesterday although the number of new cases dropped for a second straight day, as authorities continued to tighten already severe containment measures in the city of Wuhan.  The latest data shows the total number of cases in China to over 74,000 with 2,004 deaths, (75% occurring in Wuhan).

China announced it will allow importers to apply for exemptions to additional trade war tariffs on 697 goods from the U.S., including farm and energy products, as the country continues to battle the coronavirus outbreak.  Importers will be able to apply for tariff exemptions starting from March 2, according to China’s Customs Tariff Commission of the State Council.

USDA weekly grain export inspections showed corn exports at 502,000 tonnes (400,000 to 600,000 expected), soybean exports at 795,000 tonnes (600,000 to 800,000 expected) and wheat exports at 992,000 tonnes (700,000 to 1,250,000 expected).

NOPA soybean crush report (for January) showed crush at a record-high of 176.94 million bushels (174.8 mb last month and 171.6 mb last year). Oil stocks rose more than expected to 2.013 billion lbs. (1.757 billion lbs. last month, 1.549 billion lbs. last year).

USDA’s 96th Annual Ag Outlook forum will start tomorrow morning in Arlington, Virginia.  The grain & oilseed outlook will be Friday at 10 AM EST with the livestock & poultry outlook at 1:45 PM EST.  Keep in mind, USDA has gotten the direction of the corn acreage change from the previous year correct the last 9 out of 10 years.  They have predicted the direction of the soybean acreage change from the previous year correct in only 5 of the past 10 years.

Hormel Foods is eliminating a growth drug banned by China from its hog supply, the company said, joining rivals that are seeking to increase meat sales to Chinese buyers grappling with a pork shortage.  “We have been actively monitoring the changing global market dynamics for several years and believe this decision will further position us to meet growing international demand,” Hormel said.

USDA’s cattle summary report for last week’s cattle trading noted a $118.90 average price. This was well under the $119/$120 Allendale expected to see.  It was also a $2 break from the previous week’s $121.05 average.

Iowa/Minnesota cash hog report showed a $2.33 jump to $50.37 on yesterday’s afternoon report (the best price in 10 business days).  The wholesale pork price was up $2.15 yesterday at $65.01 (the best price in six days).

The monthly Cattle on Feed report is due out on Friday at 2 pm. We expect to see placements 1.6% over last year. It would continue five months in a row now of higher placements. We see January marketings, finished cattle leaving feedlots, at 2.4% under last year. Our placement and marketing estimates suggest a February 1 On Feed total at 12.038 million head, 3.0% over last year.

Dressed beef values were lower with choice down 1.13 and select down 2.45.  Feeder cattle index price was at 141.19.  Pork cut-out values were up 2.15.

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