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E-Visor Reports: Market Watch

 
Monday, March 23, 2020
Last week the market basically shrugged off all supportive fundamental news and focused instead on the spread of the Coronavirus and its impact on equity markets. The main source of supportive news is the reduction we are seeing to South American crops. The Brazilian soybean crop is now projected to be 121 mmt by many crop scouts. While this would still be larger than last year’s crop, and a record, it is to the point where reductions could drop soybean production under a year ago. Last year’s crop was 119 mmt according to USDA figures. We are also seeing smaller projections on corn in both Brazil and Argentina. These cuts should actually be more of a market factor than the ones on soybeans as world corn production is already under projected usage, and this will just create a larger deficit. While parts of South America will see improved weather for the early part of this week, stressful conditions will return by week end. Trade is also overlooking much of the impact from US weather at this time and how it is not conducive to the large acreage that is currently being predicted. The question with all of these figures is if demand has been reduced enough to compensate for any loss of production. This is especially the case on corn where ethanol manufacturing is dropping due to poor margins. Several US ethanol plants have slowed operations and more have suspended production altogether. There are thoughts this could add over 300 million bu to the US corn supply. While exports have showed more activity in recent weeks, they will not negate a loss this large in the ethanol sector. As this week progresses, we will start to see estimates for next week’s quarterly stocks and prospective plantings reports, but these could be overlooked if the equity market continues to act as they have in recent weeks. 

Highlights
* Stimulus packages stalls in Congress
* US sees elevated demand for wheat
* Coronavirus continues to spread at rapid rate
* More favorable weather for late spring
* Ethanol production to drop
* Gulf basis showing strength
* Exporters concerned with Brazil export pace
* Closures taking place to SAM ports
* Despite sales, US vessel line-up lowest in 32 months
* Spring flood risk considered high
* USDA says no delays to report releases

Corn
* China corn buying highest in 6 years
* Corn continues to follow crude
* South Korea remains an active buyer
* Feed production picks up in China
* 87% of Chinese feed mills now operational

Soybeans
* Brazil unable to export meal
* Argentine suspends exports at some ports
* SAM crop is shrinking
* Argentine crop 35% G/E; -4% last week
* Soy meal in China at 5-month high 

Wheat
* EU crop reduced
* Global wheat supplies adequate but shrinking
* China books US wheat
* Weather hurting Black Sea production
* Surge in demand for wheat products; IE flour, pasta

Livestock
* March 1st cattle on feed 100% of 2019 at 11.8 million head
* Feb placements -8% from 2019
* Feb marketings up 5%
* China auctions more pork from reserves
* US consumers turn to poultry