Free Commentary

We have all heard the expression that the month of March comes “in like a lion and goes out like a lamb,” well for commodity markets in January of 2020, it can now be said we came “in like a bull and went out like a bear.” On the week ending January 3rd, the CRB Index posted its highest weekly close since June of 2018, (back in the early hopeful days of the trade war) and we are currently on track to post the lowest close since November. Indeed, not every commodity has suffered this fate. Gold, playing the role of “safe haven” in uncertain times, is currently up $53 an ounce for the month and at the highest monthly close since March of 2013, and spot wheat is sitting unchanged for the month, but these are the exception to the rule.  March corn is down 7-cents, beans down 80-cents, live cattle down 3-cents cwt, and lean hogs down 10-cents.  I could go on, but you already get the point.  We are off to a rocky start in 2020.  All this said, prices remain entrenched within the major sideways pattern that we have been stuck within for the past five years, and well above the lows recorded last summer when it seemed that there was no hope for the resolution in the trade war, and possibly best of all, we are at a time of year when you often expect prices to swoon.  All the risks and uncertainties of producing another crop lay ahead, which should translate into rebuilding “risk premium” into the price as we move forward, not to mention, we have suffered a psychological hit of a global health scare.  I continue to believe that we have set the stage for positive things to materialize as we move further into this and potentially the next year, so remain patient, as winter, both figuratively and seasonally, should soon be over.

China has finally published the December bean import numbers, and as expected, the shipments from the U.S. picked up substantially.  For the month, they unloaded 3.09 MMT of U.S. beans, which 44 times greater than in December of 2018.  For the year, they imported 16.94 MMT of U.S. beans, which eclipsed the 2018 total by 340,000 MT.  Do keep in mind that they imported 32.85 MMT from the U.S. in 2017.  Total imports of beans for the calendar year came in at 88.51 MMT, slightly higher than 2018, but down from 95.54 MMT in 2017.  This impact of ASF would appear evident.

We have news from the Black Sea region this morning.  The independent consultants IKAR are predicting that Russia could produce 79.5 MMT of wheat this year, which would be one of the largest crops on record.  Over in Ukraine, the State Statistics Service has finalized production for 2019 and come up with a total grain harvest of 75.1 MMT.  This is up from 70 MMT in 2018.  Of this, 28.3 MMT was wheat, 35.8 MMT corn, and 8.9 MMT barley.

It seems that the ink has barely dried on the USMCA agreement, and it would appear there could be trouble brewing between the U.S. and Mexico.  According to reports, the head of Mexico’s National Farm Council received a letter dated January 27th, (two days before the signing of USMCA) from the U.S. that is pledging protectionist measures against tomatoes, berries, and mangos.  Mexico has stated that if implemented, they would retaliate with similar measures.

Finally, in another piece from South of the Border, it turns out that the avocado trade has grown to such volumes and has become so lucrative that criminals are now trying to cash in.  Total avocado production in Mexico reached 1.09 MMT in the 2018/19 crop year, but the big surge in demand happens each January as the U.S. consumers gear up, or is it mix up, for Super Bowl parties and all those bowls of guacamole.  127,000 MT are shipped north for this alone, and for the year, the U.S. will import more than $2 billion worth of those green goodies.  With a steady stream of trucks headed for the U.S., they have become a target for armed thieves who want to take a cut of the action, without all those pesky risks of owning ground, weather, labor, and the like.  Evidently, it has become so rampant in some areas; the police do not even dare venture in to try and stop it.  As one farmer stated, “where there’s money, that’s where the bad guys go.”  I wonder what this says about the financial and healthcare industries?