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Markets Battle Chinese Demand vs Looming USDA Data

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Good Morning from Allendale, Inc. with the early morning commentary for February 6, 2019.

Grain markets trade the ebb and flow of Chinese purchase confirmations met by estimates for this Friday's USDA reports. As government data begins to filter in, traders are trying to make sense of where we're really at with grain stocks and just how much demand is in the world to absorb them.

This Friday is shaping up to be a major USDA report day with the usual WASDE report being joined by the January reports that were missed because of the government shutdown. Corn quarterly stocks are estimated at 12.092 billion bushels, soybeans 3.743, and wheat 1.957. US Ending stocks are estimated at 1.708 billion bushels of corn, soybeans .926, and wheat .989. Total winter wheat is estimated at 32.128 million acres.

World numbers have analysts looking for Brazil's total soybean crop at 116.99 million tonnes, and corn at 93.41. Argentine corn is estimated at 43.09, and soybeans are at 55.14 world ending stocks are seen at 268.09 million tonnes of wheat, 307.06 corn, and 112.67 soybeans.

Brazil's state of Parana 2018/19 soy harvest is said to be ahead of last year according to state ag researcher, Deral. They see 25% of the planted area harvested. Last year 0% had been harvested due to poor weather. They further rate 6% of the crop in poor condition.

Statistics Canada pegs their total wheat crop at 23.2 million tonnes as of December 31. This is a drop of just 0.2% from a year ago levels.

Updated Commitments of Traders numbers showed funds sold 41,746 (net) corn contracts through December 31, 2018 to be long 56,066 contracts. They sold 7,591 soybean contracts and were short 18,136, and sold 15,016 wheat to be net short 32,020. Due to the government shutdown, the CFTC will release the CoT reports every Tuesday and Friday until the numbers are current.

Funds yesterday were thought to be buyers of 7,000 corn contracts, 4,000 soybeans, 1,500 wheat, and 2,000 soyoil. They were sellers of 2,000 soymeal.

Moves by the European Commission to make Britain charge value-added tax on commodity derivatives trading will include ICE Futures Europe, the London Platinum and Palladium Market (LPPM) and the London Metal Exchange (LME), trading sources say. (Reuters)

Japan's swine fever outbreak has spread to five prefectures including Osaka, and more than 10,000 pigs will be culled as part of measures to prevent further contagion, the government said on Wednesday. This is a different strain from the deadly African swine fever China has been battling, an agriculture ministry official said. (Reuters)

The latest Lean Hog Index will be 57.36, and will be released today by the CME Group. This is the lowest LHI reading since January 11.

Bears are pointing to yet another round of winter weather to slow down hog marketings. As they see it, we have more hogs than expected still showing up and we are having regular weather disruptions impeding processing and movement through the system.

Cash cattle bids were reported at 124.50 in Nebraska yesterday. Packers coming out at steady money on a Tuesday may imply they'll be willing to pay up this week.

Funds in livestock were buyers of 8,375 live cattle contracts to increase their net long to 94,634 in the most recent week of data. In hogs they were sellers of 7,705 to reduce their net long to 17,034.

Dressed Beef Values were lower with choice down .63 and select down .31. The CME feeder index is 141.54. Pork cut-out values were down 1.90.

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About the author

Paul Georgy serves as president/CEO of Allendale, Inc., a worldwide agricultural advisory and research firm that provides agricultural commodity price research and risk management alternatives for producers, major food companies, international corporations, foreign governments, and major news vendors.

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