-Widespread commodity market sell-off in “risk off” mode
-Russian wheat prices decline for 4th consecutive week
-USDA reports modest soybean sale to Mexico
-China eases U.S. beef import restrictions
-South African corn crop seen sharply higher this year
Commodity markets were widely lower overnight with considerable pressure in soybeans, soybean oil and wheat, while more modest losses were posted in corn and soybean meal. Energy markets are considerably weaker this morning, with crude oil, gasoline and heating oil all seeing 4.0%+ losses at this time. A notable increase in confirmed coronavirus cases outside mainland China (Italy, South Korea and Iran) over the weekend weighed on commodity/equity markets to start the week.
Russian wheat export values fell for the fourth consecutive week, declining $2/tonne to $218 fob for 12.5% protein wheat, but the fall in prices did ease from the previous week’s notable $6/tonne drop. SovEcon sees early 2020/21 Russian wheat production prospects at 83-87 MMT, up sharply from last year’s 73.5 MMT, while Ukraine crop ideas of 26-28 MMT would be down moderately from last year’s 29.0 MMT. At this time, essentially all private and official ideas of the coming Russian wheat crop reflect expectations for a considerable increase from last year barring a spring weather problem.
SovEcon estimates Russian wheat exports in February will be 1.6 MMT, down from previous expectations of 1.7 MMT and down from 1.918 MMT in January and 2.244 MMT last year Feb. 2019/20 marketing year to date (July-Feb) exports of 24.6 MMT compare to 29.4 MMT last year for the same period.
USDA reported the sale of 163k tonnes of soybeans to Mexico for 2019/20 delivery this morning.
Malaysian palm oil futures were sharply lower overnight, falling by more than 3%, on several estimates of Feb 1-20 palm oil production rising from 17-33% from the previous month.
China lifted the ban on U.S. beef from cows more than 30 months old, essentially allowing all beef/product imports to resume. In 2017, China partially lifted a 14-year ban on all U.S. beef in place due to the first mad cow disease finding in December 2013, allowing imports from cows less than 30 months old at the time.
South Africa will release their first estimate of the 2020 corn crop on Wednesday. A wire service poll put average expectations of the crop at 14.5 MMT (13.7-15.0 MMT range of ideas), up 29% from last year’s 11.26 MMT on higher planted area and good weather conditions so far.
Friday afternoon’s USDA Cattle on Feed report saw slightly lower than expected numbers overall with Feb 1 on feed at 102.1% of last year vs the average estimate 102.4% (101.8-103.0 range of ideas) and compares to Jan 1 which was 102.3. January placements we solidly below expectations at 99.4% vs the average estimate of 101.4% (97.8-103.5 range of ideas) and 103.5 in Dec, while January marketings were 101.1 vs 100.7 “expected” (97.6-101.6 range) and 105.2 in December.
Tunisia tendered for 125k tonnes of optional-origin soft milling wheat for March 15-May 25 shipment periods. Offers are due by tomorrow. In their last tender in mid-January, Tunisia bought 100k tonnes with the lowest price at $245.99/tonne c&f.
Saudi Arabia bought 715k tonnes of wheat for April-June arrival periods at an average price of $247.46/tonne c&f. Traders cited Germany and Poland as probable sources for a decent portion of the purchase.
In a tweet on Friday, President Trump vowed additional aid to U.S. farmers if needed, beyond the $28 billion paid over the last two years, “until such time as the trade deals with China, Mexico, Canada and others kick in…”
Friday’s CFTC COT data, for the week ended 2/18/20, showed funds modest net buyers in corn of 10.6k contracts, reducing their net short to 61.5k and were buyers of 2.4k contracts in soybeans, but still net short nearly 90k contracts. Funds were better net buyers in CBOT wheat of 18.8k contracts and are net long 64.7k contracts and buyers of 3.8k KCBT wheat (net long 14.3k). Funds were net sellers of 4.3k contracts in soybean meal to further increase their record net short to 72.5k contracts and were sellers of 13.0k soybean oil, reducing their net long to 39.6k. Funds were sellers of 5.0k contracts in MPLS wheat (net short 11.9k).
Weather A mostly dry forecast is in place for Argentina through the 10-day period. Brazil continues to see regular, abundant rains on a widespread basis.