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Mark's Market Talk

January 13, 2020

The big report day came and went Friday and once again we were given numbers that will cause a lot of discussion in the days to come. The report would have to be judged more negative than positive and yet we ended Friday 2 to 3 cents higher on all 3 major commodities. Let’s start with corn. They lowered the harvested acres 200,000 but raised the average yield 1 bushel to 168 per acre. This resulted in an increased production of 107 million bushels. From there they adjusted the usage numbers by lowering exports 75 million and raising domestic usage 230 million. This gave us a projected carryout of 1.892 million versus December’s 1.91 million bushels. The carryout moved the right way, but most were expecting something below 1.8. Given these numbers I would expect the local cash market to stay in a 3.50 to 3.70 range until we start to talk planting intentions in this country, or we start to see production numbers from South America. There is still a lot of unknowns or what-ifs to get figured out. Everyone is set to sign a phase one deal, but no one is saying what or how much China will be buying. Its anticipated they will buy large amounts of pork and soybeans, but they may also buy a large amount of ethanol as they try to rein in some of their pollution problems. My guess is they don’t want to announce what they are buying until they buy thinking it will be cheaper. They are probably right on that account. The soybean numbers were similar to corn. They lowered the acres 400,000 but raised the yield half a bushel to 47.4 per acre and that raised total production 8 million bushels. Not a big deal but the trade was looking for less acres than that and a steady or lower yield. After they plugged their usage numbers in the carryout remained at 475 million bushels. So, all in all the whole report was close to neutral. One might ask why we closed higher Friday without the report being bullish. The last week or so it felt like the trade was anticipating a report like this or maybe worse. Right or wrong it seems like we have been disappointed a lot with recent reports. So even though there weren’t any fireworks involved here it could be the trade needed a report like this. We might see some acreage control come out of this as farmers sharpen their pencils and sit down to do cash flows. People raising row crops in areas that weren’t meant to do so will really have to question why they are digging a deeper hole. Since we are having trouble building demand, we need to look at lowering production. But in normal farmer fashion we want the other guy to cut back, not us.         
Posted: 1/13/2020 2:35:28 PM by Rob Matherly | with 0 comments

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