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Plenty of market factors to watch in early 2020

By Doug Tenney, Leist Mercantile

Uncertainty and risk are the themes at this writing, just days into 2020. The U.S. military bombed Iran, killing a top general the second trading day of 2020. Crude oil rose over $3 upon news of U.S. air strikes as they reached levels not seen since mid-July 2019.

The U.S. and China are expected to sign an historic trade deal in Phase 1 of ongoing trade talks on Jan. 15. Then a 30-day implementation period goes into effect in which China must wait before they can begin to buy U.S. goods. Instead, it will be crucial to monitor the weekly U.S. grain export sales report, which is published each Thursday at 8:30 a.m. It has been way too long since May 2018 when the tariffs began with partial hints along the way of a trade deal just days away, but unsettled for months. China is not expected to remove retaliatory tariffs implemented since the beginning of the 2018 trade war. Rather, they will grant import waivers for U.S. goods they buy.

Part of the Phase 1 trade agreement indicates there will not be an announcement of commodities agreed to buy. Many were disappointed that a “grocery list” of the U.S. agricultural goods China will buy will not be announced at its signing. Weeks ago it appeared they would be buying $40 billion in U.S. goods, topping the $26 billion from 2017. In the days following the announcement of a trade deal, numerous reports attempted to pinpoint the dollars and commodity China would be buying. Some suggested the $40 billion will never be reached while others say it could reach $80 billion sometime in the future. Keep in mind, while Phase 2 negotiations are expected to be underway, don’t expect an imminent announcement of completion. Those talks will bear down on even harder topics which are not expected to be completed until after the November presidential election. Intellectual property rights defined even more than what was seen with Phase 1 will be among the topics for discussion.

The Jan. 10 Crop Production Report is almost here. Corn bulls looking for redemption from the bearish June 28 Acres Report in which corn fell 17-19 cents, could easily be mad, frustrated, and disappointed on January 10. Assuming corn changes very little from the December 2019 estimate of 167 bushels per acre and total production of 13.661 billion bushels, the next opportunity to realize a 2019 “USDA miss,” would be months away with the Sept. 30 Quarterly Grain Stocks Report. Early indications just days into 2020, have 2019 corn production down 60 million bushels with 2019 soybean production down 15 million bushels. When looking at those numbers late December 2019 and early January 2020, it’s easy to see why some are already calling the Jan. 10 report a “dud” and “non-event.”

Corn acres for 2020 are expected to be record large with anywhere from 97 to 100 million acres of corn getting planted this growing season. The current record for U.S. corn acres was in 2012 with 97.2 million acres planted. The drought that year dropped the corn yield to just 123.4 bushels per acre. Last year 89.9 million acres of corn were planted in the U.S. The big unknown for months last summer was the prevented planted corn acres with the planting delays as a result of the wet spring. With record soybean production expected in Brazil this spring along with ever-increasing exports of Brazil soybeans to China, corn remains king as U.S. producers want to ramp up corn acres this year.

March CBOT corn will have trouble moving above $4.05 without significant bullish surprises with the January 10 report. March CBOT soybeans had a two-month high of $9.61 on Jan. 2.

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