Risk-off

Risk-off

Dec 06, 2018

The corn and bean trade are staring at the first “real”
pressure day since the U.S and China called a truce last weekend
and while by no means extreme, it would call into question just how
much more we can milk out of the current situation.  As we have
noted before, existing tariffs remain in place, hindering new trade
and it probably did not help that President Trump referred to
himself as “Tariff Man” yesterday and suggested that he may not
even want to cut a new deal with China because the increased
tariffs were generating so much money for the U.S.
coffers.  While I suspect that was little more than rhetoric, it
was not the type markets on thin ice like to hear.

Actually, equity markets appear to take those comments the most
seriously as we witness another sharp breakdown and once again
returned to negative territory for the year.  Granted, this did
not press us into new lows for the year but is still quite a
letdown after all the post-weekend optimism.  Often times I would
view pressure in the equity world as a possible positive sign in
commodities as money could begin to flow in our direction, but I
suspect this action is just indicative of a general risk-off
attitude.

SP

According to the latest release by the Food and Agricultural
Organization (FAO) of the UN, ag commodities should look like a
bargain.  Their food price index dropped from 162.9 in October to
160.8 in November, which is the lowest level witnessed in two
years.  The only subcategory that posted an increase was
sugar.

This morning the IAE Research Institute, (Institute of Agrarian
Economy) from Kiev updated Ukraine crop estimates for this year and
boosted the figures.  They project a record 70.2 MMT total grain
crop, enhanced by what they believe will be a record corn
harvest.

As we wait for the December USDA numbers next week, Stats Canada
has provided an update to mull around. Released just the morning,
they now peg All Wheat output at 31.769 MMT up from 31 MMT on the
last estimate.  The canola crop is estimated to be 20.343 MMT
versus the last estimate of 20.9, corn at 13.855 compared with
14.5, soybeans at 7.267 MMT versus 7.52 and barely at 8.38 MMT up
from 8.2.

Once again, here are estimates for the USDA report next week;
Domestic ending stock for corn at 1.738 billion, compared with
1.736 last month.  Beans at 945 million versus 955 and wheat at
956 million instead of 949 million.  The survey is calling for
Argentine corn production of 42.43 MMT (42.5) and beans at 55.72
(55.50) and for Brazil, corn production at 94.41 (94.5) and beans
120.88 (120.50).  Finally, world ending stocks are expected to
come in at 307.59 MMT for corn (307.51), 112.79 MMT for beans
(112.08) and 266.79 MMT wheat (266.71).

Weekly export sales we will be delayed until tomorrow, but we
did see a nice sale reported this morning in the daily
system.  Mexico has purchased another 198,120 MT of corn. Of
this total, 106,680 will be for the current crop year and the
balance slated for 2019/20.

Source: FS – All – Food and Nutrition Blogs
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