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Markets Drop on Trade Deal Doubts

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Good Morningfrom Allendale, Inc. with the early morning commentary for January 17, 2020.

Grain marketpulled back sharplyamiddoubts about whether China will make the purchases from the U.S. they promised in the Phase One trade deal just signed. Corn futures were hit the hardest with additional pressure from favorable South American crop weather increasing chances for larger harvests and poor profit margins for U.S. producers of corn-based ethanol fuel.

Weekly export salesshowed corn sales of 991,700 tonnes (expected 500,000 to 950,000 tonnes), soybeans at 711,400 tonnes (expected 400,000 to 850,000), wheat at 710,200 tonnes (expected 200,000 to 500,000), soymeal at 375,200 tonnes (expected 75,000 to 250,000), and soyoil at 36,100 tonnes (expected 0 to 25,000 tonnes).

Our Annual Winter OutlookConferencetakes place later this month, January 28th - 30th. Drew Lerner of World Weather, Inc. will kick it off for us January 28th with his 2020 weather outlook. He'll be followed by our grain and oilseed outlooks on the 29th, and our livestock outlooks on the 30th.Get registeredto view our latest price outlooks, trade strategies, and more insight to what 2020 will bring to our markets.

Sonny Perduesaid he expectedthe federal government to pay farmersa third and final tranche of2019 trade aid a day after an initial dealwith China was signed, Bloomberg reported. The Trump administration had already spent $12 billion in trade aid for farmers in 2018. Perdue added farmers should not expect a new bailout package this year, beyond the $28 billion already approved.

The Senateapproved the USMCA agreement which will replace the 26-year-old North American Free Trade Agreement. The new agreement includes tougher rules on labor and automotive content but leaves the $1.2 trillion in annual U.S.-Mexico-Canada trade deals largely unchanged. The legislation passed on an 89-10 bipartisan vote, sending the measure to President Trump for him to sign into law.

Strategie Grainsincreased sharply its forecast of E.U. soft wheat exports this season, saying it saw them benefiting from strong overseas demand at a time of reduced availability in other export zones. Strategie Grains now expects E.U. soft wheat exports (excluding durum) to reach 30.5 million tonnes this season (28.7 million in December).

Brazil's 2020 coffee cropis estimated to reach a near-record volume as the area under production grows for the first time since 2012, Conab said. Brazilian farmers could produce between 57.15 million 60-kg bags and 62 million bags, with the midpoint at 59.6 million bags. Just under the all-time output peak of 61.65 million bags reached in 2018.

India'smove to restrict palm oil imports from Malaysia will create a huge challenge for Malaysia (the second largest producer) as India has been its top buyer for the past five years. Last week, India restricted imports of refined palm oil and effectively halted all palm oil purchases from Malaysia in retaliation for criticism by the Malaysian prime minister of India's policy towards Kashmir.

African swine feverhas now spread to Southeast Asia and eastern Europe, with cases found in Vietnam, Cambodia, Laos, Korea, Myanmar, the Philippines, Poland, Belgium and Bulgaria. Around the globe, those countries and others that have so far sidestepped the epidemic are cracking down on travelers, increasing cargo screenings and banning meat imports.

Dressed beef valueswere higherwith choice up .37and select up 1.80. The CME Feeder Cattle Index is 146.35. Pork cut-out values were up .80.

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Allendale Inc. was established in 1984 in a country grain elevator located in Crystal Lake, Illinois. The first-hand experience with agricultural and financial markets has worked with Allendale’s combined foresight, ingenuity and expertise to make it the successful firm that it is today. Allendale’s goal is to provide its customers the expertise and service they need to grow their agricultural businesses. Allendale’s staff is called on to provide their commentary for TV, radio and newswires on a daily basis.

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