U.S./China move to Phase 2 talksAfter signing Phase 1 of the trade deal with China (details and analysis are on News page 4), President Donald Trump said negotiations for the second phase will start immedi-ately, but Chinese officials have not confirmed. Those talks will include Chinese subsidies to domestic companies and Beijing’s oversight of state-owned firms. Those talks are not likely to conclude until after the November U.S. elections.

For now, China has only agreed to purchases of an addi-tional $200 billion of U.S. ag and other goods/services for the next two years. But both countries “project the trajectory” of increased Chinese buying will continue through 2025.

China 2019 GDP slowest in 29 yearsChina’s economic growth slowed to 6.1% last year — the slowest since 1990 and down from 6.6% GDP in 2018. Economic growth in the fourth quarter held steady with the previous quarter at 6.0% and recent data, along with improved trade relations, have raised hopes China’s econ-omy could be bottoming. But it will take time for the trade deal to take hold on China’s economy. Beijing reportedly set its GDP target at around 6.0% this year.

Phase 1 to give U.S. economy a boostThe trade deal with China is likely to provide extra fuel

for U.S. growth in 2020 and prompt a pickup in business investment, economists surveyed by the Wall Street Journal said. Currently, forecasters expect GDP will expand 1.9% this year, down from forecast growth of 2.3% in 2019.

EU threatens challenge of Phase 1The European Union threatened a challenge of China’s pledge to increase purchases of U.S. goods by at least $200 billion over the next two years. The World Trade Organization’s (WTO) most-favored nation rules require members to treat trading partners equally. The U.S. and China say the deal is WTO-compliant. More importantly, the EU along with the U.S. and Japan proposed more stringent global rules to prevent Chinese companies relying on state support to gain advantage.

Prices drop following Phase 1 signing — Ag markets didn’t respond positively to the long-awaited signing of the U.S./China trade deal. Many analysts and traders questioned whether China would live up to its commitments under the deal since purchases will be “market based.” But we think the naysayers are too pessimistic. China will buy more U.S. ag goods under the deal, though it might take some time before its purchases accelerate. We anticipate meat, valued-added products like ethanol, soybeans and other higher-value items will be at the top of China’s shopping list. But to get to $80 billion of ag buys over the next two years, China will increase purchases of virtually all U.S. ag goods/products. The lower prices drop... the more volume China will need to buy to fulfill its commitment.

Perdue: MFP 2.3 payment comingUSDA Secretary Sonny Perdue told us he “absolutely” expects the third tranche of market facilitation program (MFP 2) pay-ments to be distributed to farmers. Lobbyists and farm-state lawmakers quickly made it clear to the administration the money is needed. He also said you should not expect a third round of the trade-relief program now that the trade deal with China is signed. But MFP 3 can’t fully be ruled out if prices do not strengthen or China takes longer than hoped to initiate purchases. Also remember... it’s an election year.

USMCA just waiting on CanadaThe U.S. Senate easily cleared the U.S.-Mexico-Canada Agreement (USMCA) in a bipartisan vote. Trump will sign the new North American trade pact this week. Mexico’s legislators approved USMCA last month, so all that’s left is for Canada to ratify the deal, which should happen soon after its Parliament returns on Jan. 27.

Next trade agreement: IndiaTrump wants to visit India later this month or in February in hopes of announcing a mini trade deal New Delhi that would include greater access for agricultural produce and dairy products in the Indian market. India wants the U.S. to roll back higher tariffs on steel and aluminum products. The timing of Trump’s trip depends on how long the Senate impeachment trial lasts.

China pork, hog numbers plungeChina’s pork production plunged 21.3% in 2019 to 42.55 mil-lion metric tons — the lowest since 2003. The Chinese hog herd at 310.41 million head was down 27.5% from 2018, but is up nearly 3.7 million head from September. Hog slaughter dropped 21.6% to 544.19 million head last year. However, these “official” numbers from the Chinese government show less dramatic declines than many private estimates.

Chinese beef and poultry output rose 3.6% and 12.3%, respectively, last year to limit the yearly drop in total meat production to 10.2%.

News this week...2 — Hidden demand surprise for corn or false signal?3 — Cold, wet late-winter/early spring forecast. 4 — Phase 1 signed; ball is in China’s court.

January 18, 2020 Vol. 48, No. 3

Go to ProFarmer.com

January 18, 2020 / News page 2

Follow us on Twitter:@BGrete@ChipFlory

@JWilson29@MeghanVick

@DavisMichaelsen@DoaneAg_Nelson

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Big jump in ethanol output, stocks U.S. ethanol production surged 33,000 barrels per day (bpd) to 1.095 million bpd the week ended Jan. 10. That was the highest level since the week ended June 7, 2019, and the fourth highest weekly total on record.

Ethanol stocks increased 544,000 barrels to 23.006 million barrels — the highest since the last week of September. As ethanol margins improved, production has outpaced demand, resulting in nearly a 2.4-million-barrel increase in ethanol inventories since late November, which is tightening margins.

Mexico shoots down E10 ruleMexico’s Supreme Court ruled against the modification of a fuel rule that would have allowed up to 10% ethanol in gaso-line sales nationwide. The ruling means Mexico will contin-ue to allow a maximum of 5.8% ethanol content in its gaso-line blends. The ruling is not only a defeat for Mexican etha-nol producers, along with Mexican growers of sugarcane and sorghum, but also for the U.S. ethanol industry. Higher blending rates would have increased demand from Mexico.

NOPA crush rebounds in December Members of the National Oilseed Processors Association (NOPA) crushed 174.8 million bu. of soybeans during December, easily topping expectations of 171.6 million bu. and shattering the previous December record of 171.8 mil-lion bu. set last year. The December NOPA crush total was the second largest on record for any month, eclipsed only by the 175.4 million bu. processed in October 2019.

Soyoil stocks surged more than 21% in December to 1.757 billion lbs., marking an eight-month high. The strong increase in stocks suggests higher soyoil prices pushed demand toward other vegoils like canola.

U.S. markets driving biodiesel demand Greg Anderson with the National Biodiesel Board tells us the $1-per-gallon biodiesel credit Congress retroactively extended from 2018 and through 2022 gives the industry the certainty it needs to ramp up production as domestic demand grows.

Anderson says 20% of all biodiesel produced in the U.S. goes to California — and the state is wanting more as it tries to achieve net-zero carbon emissions. A rising new market is the Northeast where consumers are “begging” for bio-diesel to blend with petroleum-based heating oil to reduce carbon emissions. The U.S. biofuels industry used one-third of all domestic soyoil production in 2018 and Anderson says that is growing due to increased consumer demand.

Corn feed and residual use could be a hidden surprise for 2019-20 Further analysis of USDA’s Jan. 10 crop report data shows a potential hidden bullish element for corn — feed and residual use for 2019-20. USDA’s Dec. 1 stocks figure implied total corn use for the first quarter of 2019-20 at 4.520 billion bushels. We have good estimates of corn-for-ethanol, industrial use, and exports from USDA data, which we put at 1.912 billion bu. for the first quarter. That means there was 2.618 billion bu. of feed and residual use during the quarter — or 47.4% of the total projected for 2019-20. That would be well above the median of the past five years of 42.1% of total full-year corn feed and residual use in the first quarter of the marketing year. USDA’s 250-million-bu. increase to corn feed and residual use for 2019-20 in the Jan. 10 report seems conservative. Pork, beef and broiler production continue to increase and the poorer quality of this year’s crop means it will take more corn to get the same feed equivalency compared with a “normal” year.

We have raised our 2019-20 feed and residual use forecast to 5.7 billion bu., 175 million bu. more than USDA’s January projection. That would pull our corn ending stocks down to 1.685 billion bu. and the stocks/use ratio down to 11.8%. Implied first-quarter disappearance suggests feed and residual use could be even higher than our forecast.

Where’s the risk in our forecast being wrong?Our feed and residual forecast would be too optimistic if

1) USDA lowers its 2019 corn crop estimate and 2) it also revises higher Dec. 1 stocks.

1) It’s probably safe to say there are 3 million to 3.5 million acres of corn still in fields in Michigan, Minnesota, North Dakota, South Dakota and Wisconsin. Therefore, USDA will resurvey those states this spring. That’s enough to move the needle a little, but not a lot — even if USDA cuts harvested acres and yield. Since 1980, the only times USDA adjusted the previous year’s corn crop in the spring was in 2010 (for the 2009 crop) when it trimmed the estimate by 41 million bu. and in 2016 when there was a minor adjustment to the South Carolina crop. Any revision to the corn crop will likely be small.

2) Revisions to past stocks levels are more common, and this year’s Dec. 1 total included unharvested acres. But far less common were the changes USDA made to last year’s feed and residual use, along with its corn crop estimate and ending stocks for 2018-19 in the Jan. 10 reports. It’s not a concern if these were one-off adjustments. But if USDA has changed its methodology, our concern level would rise.

January 18, 2020 / News page 3

China soy imports hit 19-month highChina imported 9.54 MMT of soybeans in December, which was up 15.3% from November and a 66.8% surge from last year. Stalled cargoes, including some from the U.S., were cleared in December, which helped inflate the total. China imported 88.51 MMT of soybeans in 2019, a slight improve-ment from 88.03 MMT the previous year but still well below the record 95.5 MMT the country imported in 2017 — before the trade war and the outbreak of African swine fever (ASF).

Chinese pork, beef imports surgeChina imported 375,000 metric tons (MT) of pork in December, nearly quadrupling the December 2018 volume and a sharp increase from 229,707 MT in November. Last year, China imported 2.108 MMT of pork, a 75% surge from 2018.

China’s beef imports also soared 80.6% from year-ago to 189,000 MT in December, a marginal increase from the previ-ous month. The country’s imports of beef last year rose to 1.66 MMT, nearly a 60% increase from 2018.

Chinese purchases of foreign meat soared last year as the country tried to offset lost pork production due to ASF

Russia plans to cap grain exportsRussia’s ag ministry wants to set a quota of 20 MMT for grain exports from Jan. 1 to June 30. In the first half of the 2019-20 marketing year, Russia exported around 25 MMT of grain, including around 21 MMT of wheat.

A 20-MMT cap on Russian grain exports the second half of 2019-20 is unlikely to have much impact. Russia’s grain exports typically slow in the second half of a marketing year and they are expected to only total about 15 MMT to 17 MMT this year. Plus, there’s plenty of wheat in the other Black Sea countries and European Union (primarily France) to continue filling the global value-buyer market. It would be much big-ger news if Russia would extend any export quota to the 2020-21 marketing year, though there are no plans to do that. The 2020 winter wheat crop would need to be much smaller than expected for the export quota to extend beyond June.

Russian winter wheat crop not hurt by warm, dry weatherOnly 4% of Russia’s winter grain crop is classified as “bad,”

according to the official weather center, down from 8% last year at this time. While winter crops are handling the unusu-ally warm, dry weather fine for now, it does make them more vulnerable to winterkill if a sharp arctic blast hits.

France leading EU wheat export surgeFrench farm office FranceAgriMer raised its forecast for the country’s 2019-20 soft wheat exports outside the EU to 12.4 MMT. This would be a 28% surge from 2018-19. Meanwhile, Strategie Grains now expects the EU to export 30.5 MMT of soft wheat in 2019-20, up 7.2 MMT (31%) from last year.

Consultant: rains too late for full-season corn in dry areas Areas of Rio Grande do Sul in far southern Brazil received the first good rains since the beginning of December. That should help stabilize the soybean crop that is flowering and starting to set pods. But South American Consultant Dr. Michael Cordonnier says the rains came too late for corn in the state that accounts for about one-fifth of Brazil’s full-season crop. As a result, he lowered his Brazilian corn crop estimate by 1 million metric tons (MMT) to 100 MMT, which would be 1 MMT lower than last year’s production. Cordonnier kept his Brazilian soybean crop estimate at 122 MMT.

Beneficial rains fall across Argentina Rains continue to be uneven across Argentina, but some of the drier areas of the country benefitted from recent precip. Even though not all of the intended soybean acres in far northern Argentina are likely to be planted due to dryness, Cordonnier says the recent rains have been enough to keep his crop estimate at 52 MMT. He also kept his Argentine corn crop estimate at 47.5 MMT.

Repeat of winter/early spring 2019?The 90-day National Weather Service (NWS) forecast con-jures up fears there could be a repeat of last year’s late winter conditions that spilled into spring across the Northern Plains and upper Corn Belt. For the February through April period, the extended NWS forecast shows higher-than-normal odds of below-normal temps from Montana through western Michigan down through the northern half of Iowa and far northern Illinois. Above-normal precip is expected over this entire area and also expected to extend across the eastern Corn Belt and Mid-South.

Odds favor above-normal temps across the far South, including all of Texas during the three-month period. The far western states, including West Texas are expected to see below-normal pre-cip. The remainder of the Southern Plains is expected to see “equal chances” for above-, below- and normal temps and precip.

NWS 90-day Temps

A: Above-normalB: Below-normalEC: Equal chances Feb.-April

NWS 90-day Precip

A: Above-normalB: Below-normalEC: Equal chances Feb.-April

January 18, 2020 / News page 4

It took far longer than expected, but Phase 1 of the trade agreement between the U.S. and China was signed Jan.

15. Depending on who is assessing it, the accord is a land-mark... or a first step. China will determine its success or failure, as our analysis below shows.

Key topics covered in the Phase 1 dealThe package includes protections for U.S. intellectual

property and addresses forced technology transfers and currency issues. It also includes Beijing’s commitment to an additional $200 billion of purchases in U.S. goods and services over two years — $77.7 billion in manufacturing, $32.0 billion of ag products, $52.4 billion of energy and $37.9 billion of services — above 2017 (pre-trade war) lev-els. That would dramatically reduce the huge U.S. trade deficit with China, a key goal of President Donald Trump. To achieve the increase, U.S. exports of goods and ser-vices would have to jump nearly 56% from 2019 levels.

$80 billion of ag product purchases over two yearsAg-related purchase commitments by China are for

$12.5 billion above the 2017 baseline of $24 billion for a total of $36.5 billion in 2020. For 2021, the purchase com-mitments are for China to buy $19.5 billion beyond the 2017 baseline for a total of $43.5 billion.

Beijing agreed to allow more market access for U.S. dairy products, poultry, beef, fish, rice and pet food. It will get rid of certain health standards and relax licensing, inspection and registration rules — both of which U.S. officials say have been trade barriers.

For ag biotech products used for feed or further process-ing, China agreed to reduce to no more than 24 months the average amount of time between 1) the submission of a formal application for authorization of the product; and 2) the final decision on approval or disapproval of the prod-uct. China will also establish an authorization period of at least five years for any ag biotechnology product.

Naysayers and doubters quickly surfaceSome observers pounced on the 60-day bailout clause

in the language while others noted the deal includes some terms China could use to claim the U.S. is at fault if it doesn’t meet the purchase targets. But a senior admin-istration official said the provision just allows for discus-sions and wouldn’t be a basis for China to claim it can’t fulfill its commitments. Others note China’s purchases of

American products will be “based on market conditions.”Many analysts predict China will not buy the targeted

amount of U.S. farm products, with some saying Beijing has reneged on past agreements. But Phase 1 supporters say at least now the U.S. has an enforcement mechanism.

China watchers tells us from a geopolitical standpoint, Beijing will likely fulfill the terms over the two-year peri-od. Reason: China would need at least two years to decou-ple its need for strategic supplies/imports away from the United States. China’s Xi Jinping will take the long view, so the de-escalation in trade policy will allow him and other Chinese leaders to execute their longer-term plans.

Lighthizer: ‘The only arbitrator I trust is myself’The Phase 1 agreement contains a new and accelerated

approach to trade disputes. Under the deal, conflicts will be addressed through three rounds of negotiations between the two sides, ultimately giving the U.S. the right to impose tariffs if it isn’t satisfied with the outcome. If the U.S. acts, China can’t retaliate — or even appeal the dispute to the World Trade Organization — unless it pulls out of the deal. A senior U.S. official said, “This [deal] was designed to avoid them [China] counter-retaliating or challenging us at the WTO.”

Other items of note:• China and the U.S. must issue quarterly reports on exports

and imports, no later than 90 days after the end of each quarter.• If there is a natural disaster or other unforeseen event that

delays timely compliance, both countries will consult. • China agreed to reallocate all unused and returned tariff-

rate quotas for corn, wheat and rice by Oct. 1 of each year.• The Feb. 11 WASDE Report will be USDA’s first assessment

of Chinese buys for 2019-20; initial 2020-21 assessments will be released at USDA’s Ag Outlook Forum Feb. 20-21. USDA will not be given more specifics regarding Chinese purchase intentions.

• China did not lift tariffs on U.S. ag products, but it will con-tinue to grant tariff waivers/exemptions. U.S. tariffs will remain on around $370 billion worth of Chinese products for leverage.

• Hog industry sources expect China’s buys of U.S. pork to help rebuild cold storage supplies. China could use those stocks to tem-per domestic prices and to help lower world prices if values spike.

• The agreement includes a required study of the use of racto-pamine in U.S. beef and pork production.

• China agreed to eliminate cattle age requirements for beef shipments, and will ease limits on the use of hormones in cattle and rules requiring record-keeping on the animals’ origin.

Phase 1 of U.S./China accord: Success is up to Chinaby Washington Policy Analyst Jim Wiesemeyer and Editor Brian Grete

News alert and analysis exclusively for Members of Professional Farmers of America® 402 1/2 Main St. Cedar Falls, Iowa 50613-9985General Manager Joel Jaeger • Editor Brian Grete • Editor Emeritus Chip Flory • Sr. Market Analyst Jeff Wilson • Chief Economist Bill Nelson • Washington Policy Analyst Jim Wiesemeyer

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©2020 Professional Farmers of America, Inc. • E-mail address: editors@profarmer.comFarm Journal CEO, Andrew Weber • Division President Grey Montgomery

Feed MonitorFEED

Corn Game Plan: On Jan. 15 and 16, we advised extending corn-for-feed needs in the cash market through mid-March. Stay patient until the market can gauge Chinese demand for grains.

Meal Game Plan: On Jan. 16, we ad-vised extending soymeal needs another two weeks in the cash market through mid-March. Get current with advice and plan to be patient into early February.

Corn I’20 85% II’20 0% III’20 0% IV’20 0%

Meal I’20 85% II’20 0% III’20 0% IV’20 0%

Analysis page 1

$317.30

$304.10

DAILY MARCH MEAL

DAILY FEBRUARY LEAN HOGS

Position Monitor

HOGS - Fundamental AnalysisFutures tried to follow the stronger cash market and firming pork prices to the upside, but premiums to cash prices capped buying enthusiasm. While pork should be near the top of China’s shopping list now that the Phase 1 trade deal is signed, market skepticism and trader doubts about the timing of purchases limited new buying. China agreed to a new risk assessment on ractopamine, which it currently bans in pork imports. Weekly pork sales jumped to an eight-week high ahead of the deal amid stepped-up buying from Mexico, Japan, Canada and South Korea. Shipments were active, led by Chinese business.

Game Plan: Fu-tures premiums to the cash index have narrowed. The cash hog and wholesale pork markets should strengthen seasonal-ly. Be ready to hedge on the next rally.

BOXED BEEF CUTOUT ($/CWT.)

PORK CUTOUT VALUE ($/CWT.)

Position MonitorGame Plan: The price pause won’t become a concern unless the November lows are broken. A rally near $130 may be the next hedging opportunity.

Feds Feeders I’20 0% 0% II’20 0% 0% III’20 0% 0% IV’20 0% 0%

Initial resistance is at the double-top contract high at $127.90. Above that, bulls would target the $130.00 area.

Initial support is at the 40-day moving average (green line)

near $125.85. It is backed by the Oct. 30

high at $123.375.

Closing above the 40-day moving average (green line)

at $68.70 would target resistance at the July

low at $71.775.

Initial support is at $65.45.Stronger support is at $63.675.

$123.375

DAILY FEBRUARY LIVE CATTLE

$118.325

$71.775

$63.675

CATTLE - Fundamental AnalysisFutures slipped lower even as wholesale beef prices showed signs of bottoming last week. The market didn’t respond to news China will complete a risk assessment for removing a 30-month age restriction on U.S. beef imports, partly because China is not historically a large buyer of beef. Weekly exports did improve to other Asian buyers last week. Slaughter rose about 300,000 head in 2019 from a year earlier. Fed heifer slaughter jumped 7.1% in 2019, even as total fed slaughter fell about 2% on larger cow slaughter. Beef cow slaughter rose 5.4% last year. Slaughter the second half 2020 is likely to be below last year.

$127.90

$65.45

$296.20

January 18, 2020ANALYSIS

Lean Hogs I’20 0% II’20 0% III’20 0% IV’20 0%

Initial resistance is at the 40-day moving average (green line) near $302.50 and is backed by the downtrend near $305.50.

The December low at $296.20 is initial support, followed by the contract low at $295.50.

January 18, 2020 / Analysis page 2

DAILY MARCH SRW WHEAT

WHEAT - Fundamental AnalysisSRW - The rally ran out of steam on worries that China may not be an immediate buyer of U.S. wheat because of high prices. Tighter global exporter supplies are fully reflected in prices, and better U.S. exports are needed for prices to resume the rally. SRW quality concerns remain supportive.

Position Monitor

Game Plan: On Jan. 14, the order at $5.70 in March futures triggered a 10% cash sale for hedgers and cash-only marketers, pushing 2019-crop sales to 80% complete. We also advised making another 10% hedge-to-arrive contract sale for 2020-crop.

Initial resistance is at $5.73 1/2.Stronger resistance is at $5.98 (not shown).

Initial support at the 40-day moving average (green line) near $5.41 3/4 is backed by

uptrending support near $5.35.

$5.73 1/2

CORN EXPORT BOOKINGS (MMT)AVERAGE CORN BASIS (MARCH)

CORN - Fundamental AnalysisFutures tumbled to a one-month low on heavy fund selling amid ideas China may be slow to buy U.S. ag goods. The deal doesn’t lift Chinese tariffs on U.S. commodities, and China won’t buy unless U.S. prices are competitive. U.S. export sales are running 40% behind a year ago and shipments are 51% behind as of Jan. 9, compared with USDA’s forecast for a 14% decline. However, there were reports other global buyers were shopping last week. Weekly ethanol production surged to the highest since June and stocks jumped to the most since September. Much of the stock building was at Gulf terminals, a possible sign of new export demand.

Initial resistance is the 40-day moving average (green line) of $3.97. Tougher

resistance is at $4.04 and $4.11 3/4.

Initial support is the Sept. 9 low at $3.94 1/2. Contract-low support is at $3.87 3/4.

$3.87 3/4

DAILY DECEMBER CORN

$4.11 3/4

$4.04

DAILY MARCH CORNPosition Monitor

Game Plan: Hedgers and cash-only marketers should have a standing order to sell another 10% of 2019-crop in the cash market when March futures hit $4.01. Be prepared to make some 2020 sales when we add to 2019-crop sales. The market will need to see significant new export demand to sustain rallies. We may add to sales prior to the standing order being triggered as the upside is somewhat limited.

Initial resistance is the 40-day moving average (green line)

near $3.83. Stronger resistance is at $4.00 and $4.11 3/4.

Initial support is at the uptrending line near $3.73. Stronger support is the September contract low at $3.65 3/4.

$4.00

$4.11 3/4

$3.94 1/2

’19 crop ’20 crop

Cash-only: 50% 0% Hedgers (cash sales): 50% 0% Futures/Options 0% 0%

’19 crop ’20 crop

Cash-only: 80% 30% Hedgers (cash sales): 80% 30% Futures/Options 0% 0%

January 18, 2020 / Analysis page 3

DAILY MARCH HRS WHEATDAILY MARCH HRW WHEAT

HRW ‑ Firming world prices remain supportive, but the failure of HRW to outperform this week after the larger cut in USDA’s acreage forecast earlier this month has disappointed bulls. Crop conditions have improved with rains in parts of the Northern Hemisphere this month. It’s time for a pause to refresh bulls.

$9.80

Initial support is the 40-day moving average (green line) near $5.33 1/2.

Initial resistance is at $5.70 1/2.Strong resistance is at $5.09 3/4.

Initial support is the 40-day moving average (green line) near $4.59.

$5.00 1/4

DAILY NOVEMBER SOYBEANS

$5.09 3/4

HRS ‑ Prices fell short of reaching key overhead resistance and turned back to the downside. Russia’s quota threat for the first half of 2020 will mean little if weather cooperates and another big crop is harvested. Both Europe and the Black Sea region are expected to get needed moisture this week.

$5.70 1/2

Two closes above $9.80 would target historical resistance at $10.00 (not shown).

Initial support is the 40-day moving averagenear $9.55. Uptrending support is at $9.22 1/2.

SOYBEAN EXPORT BOOKINGS (MMT)AVERAGE SOYBEAN BASIS (MARCH)

WHEAT EXPORT BOOKINGS (MMT)

AVERAGE WHEAT BASIS (MARCH)

SOYBEANS - Fundamental AnalysisNaysayers and were quick to sell soybeans on speculation that China will never adhere to its U.S. ag purchase pledges of $80 billion over the next two years. China’s past failures to live up to trade deals left bears in control after the signing of the new trade deal. China can issue duty-free import licenses to help control supplies for each commodity without cutting its retaliatory tariffs, with U.S. maintaining its tariffs. Bulls have to have confidence the U.S. Trade Representative will hold China accountable when U.S. beans are seasonally cheaper relative to South America. Record crush demand and improving soymeal exports are positive long term.

Initial support is at the August high of $9.22 and backed by the Dec. 12 high at $9.16. Strong support remains at $8.80 1/2.

DAILY MARCH SOYBEANS

$9.70

$9.22

$8.80 1/2

$9.16

$9.61

Position Monitor ’19 crop ’20 crop

Cash-only: 50% 0% Hedgers (cash sales): 50% 0% Futures/Options 0% 0%

Game Plan: Hedgers and cash-only marketers should have a standing order to sell another 10% of 2019-crop in the cash market when March futures hit $9.75. Also plan to make some 2020-crop sales when that order is hit. Time is running out on a major weather prob-lem developing in South America to curb its crop, but there are some areas of concern that need to be watched into early February.

Initial resistance is the 40-day moving average (green line) near $9.26. Stronger resistance is at $9.61 and $9.70.

January 18, 2020 / Analysis page 4

’19 crop ’20 cropCash-only: 65% 0% Hedgers (cash sales): 65% 0% Futures/Options 0% 0%

75.61

TEXT MESSAGE ADVICE ALERTSIf you are not already receiving Pro Farmer advice via text messages, give us a call at 1-800-772-0023 to add it to your membership.

Monthly USDA Cattle on FeedPlacements slowed in December.

FRI 1/242:00 p.m. CT

5

Weekly USDA Export SalesWatching for new sales to China.

FRI 1/247:30 a.m. CT

4

Monthly Milk ProductionDecember output increases.

THUR 1/232:00 p.m. CT

3

Monthly Cold Storage ReportDecember meat stocks decline.

2

Martin Luther King Jr. HolidayMarkets and government closed.

MON 1/201

WATCH LIST

WED 1/222:00 p.m. CT

ing the ceremony last week, he said Chinese firms will buy American prod-ucts “based on market conditions.” That was a reminder to traders that American wheat is still the highest-cost origin. Also, because the deal is based on calen-dar year purchases, China could buy 2019-crop, 2020-crop or 2021-crop wheat, curbing hopes for quick old-crop sales.

U.S. tariffs will remain in place on $370 billion of Chinese goods until Phase 2 of the talks is completed, which won’t occur until after the November elections.

While major exporter supplies are the tightest in six years, we expect the EU, Russia, Ukraine and eastern Europe to remain active sellers into the world mar-ket just as global trade slows seasonally.

We advised increasing cash wheat sales last week as the winter rally reached our price objectives and then ran out of fresh optimism and buying interest.

To reward the strong rally, we added another 10% cash sale for 2019-crop to get to 80% sold on Jan. 14. July SRW futures hit their highest level since late 2018, trig-gering the sale of 10% of the 2020-crop to get to 30% forward priced. Get current.

It looks like much of the positive news has been factored into prices until more can be determined about the potential of the Northern Hemisphere crops this spring.

The signing of the China trade deal probably capped the positive news flow. With China’s Vice Premier Liu He, stand-ing beside President Donald Trump dur-

By Sr. Market Analyst Jeff WilsonFROM THE BULLPEN

Shipping: Global ocean freight rates fell to the lowest level in nine months last week on sluggish trade. The completed U.S/China trade deal along with low shipping costs may boost global trade.

Ocean freight is highly elastic, meaning demand for ships does not have to go down or up much relative to available ships to produce a big price change. That’s why prices dropped the past six months.

The cost of moving grain from the U.S.

GENERAL OUTLOOKWest Coast to Asia has fallen 42% from $31.76 at the end of August to $18.39 last week, the lowest rate since June 2016.

It takes 38 days to move soybeans from Brazil to China by ship compared with about 18 days from the U.S. West Coast.

While Brazil soybean export prices are 40¢ cheaper than U.S. supplies, the lower shipping costs may help to boost Chinese purchases of U.S. soybeans and other commodities.

DAILY MARCH COTTON

Game Plan: On Jan. 15, we advised a standing order to sell 15% of 2019-crop in the cash market if March futures hit 74.50¢. Plan for new-crop sales at the same time.

Position Monitor AVERAGE COTTON BASIS (MARCH)

COTTON - Fundamental AnalysisFutures fell from eight-month highs on increased farmer sales, helping to fill exporter pipelines. Worries new Chinese purchases may wait for lower prices to fill strategic reserves limited new fund buy-ing. The focus shifted to ideas the price rally will spur cotton plantings in 2020.

COTTON EXPORT BOOKINGS (’000 BALES)

The push above the psychological 70.00¢ mark leaves resistance at the gap from earlier this year on the weekly continuation chart from 73.20¢ to 74.65¢ (neither level is marked).

Initial support at 69.07¢ is

backed by the Oct. 30 high at 67.13¢.

WEEKLY BALTIC FREIGHT PANAMAX INDEX

2,729

67.13¢

2,096

69.07¢