AgriVisor Market Recap

Tuesday, February 18, 2020
The grains led the market today, with most strength coming in the wheat complex. Wheat started its rally overnight on news the Australian crop will be the smallest in the past 12 years from drought and wildfire loss. News that China would be taking tariff waiver requests to comply with Phase 1 trade negotiations was also supportive. Advances were capped by a lack of fresh news and favorable South American weather conditions. 

Chinese officials have announced they will be accepting tariff waiver requests on 697 products starting March 2nd. Ahead of this, importers will need to apply for waivers on goods wanted. Hopes are this will elevate Chinese demand for US commodities, mainly pork and soybeans. While the initial reaction to this news was positive, it was muted by the lack of set volumes being given, which has been a problem throughout the entire negotiation process. 

The National Oilseed Processor Association soybean crush report for January was released today at a record high 176.94 million bu. This was 2.1 mbu above the December total and 5.3 mbu above January 2019. Strong crush margins and elevated export demand were behind the high crush volume. Soy oil stocks swelled with this crushing to 2.01 billion pounds though, the highest amount in 21 months. 

Weekly export inspections for the week ending February 14th were released today with mixed numbers. Corn inspections for the week were a marketing year high at 31.3 mbu, but were still 11 mbu short of trade needs to meet the USDA projections for the year. Soybean loadings remained high at 36.46 mbu which was 9 mbu more than needed. Wheat inspections came in at 18.45 mbu, which was 3 mbu short of needs per week. 

New crop baseline data continues to trickle out of the USDA with projections being made on new crop balance sheets. For this coming year the baseline data indicates US corn acres at 94.5 million and a yield of 178.5 bushels per acre. Soybean acres are forecast at 84 million with an average US yield of 50.5 bpa. Ending stocks for next year are forecast to increase on both crops, coming in at 2.75 billion bu on corn and 518 million bu on soybeans. 

These numbers vary slightly from what is expected to come out of the Ag Outlook Forum in Washington DC this week. Analysts are expecting to see planted acres at 93 million on corn and 84.5 million on soybeans. Ending stocks are pegged at 2.8 bbu on corn and 468 mbu on soybeans. There are several moving parts that will impact all of these estimates, but the bottom line is that US ending stocks are forecast to remain ample for at least another year. 

Brazilian officials have released their 2020 soybean export predictions, putting them at 73 million metric tons. This compares to the current year’s export forecast of 78 mmt. Improved US relations with China and an overall reduction to global demand are behind the lower forecast. Brazilian authorities are only predicting 54 mmt of soybeans will be traded with China this year compared to 58 mmt last year. 

Chinese officials have released 1.32 mmt of corn from government reserves due to the Coronavirus outbreak. The problem in China is moving corn around the country due to travel restrictions. A result of this is feeders in southern regions of the country not getting feed for animals, mainly poultry. This is being closely monitored by the world market, as just the same as with pork, imports will likely be needed to refill the void being created.