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Ukraine corn capturing export market

By Staff | Nov 9, 2018

Secretary of Agriculture Sonny Perdue announced last Friday there would likely be a second Market Facilitation Program payment in December. He went on to say the payments would not vary by region and that producers should not expect a program payment in 2019. Perdue stated that producers should adjust production according to market signals.

The African Swine Fever spread continues in China as it was reported in the Guizhoz province on Friday. U.S. production officials are looking at safeguards to prevent the spread into the U.S. via imported feedstuffs. While the virus is not harmful to humans, Chinese consumer demand for pork is dropping similar to when the U.S. outbreak of hoof and mouth occurred. The virus can be spread to other swine from infected meat products. China has refused to look to the U.S. to supplement pork supplies as the tariff war continues.

Export loadings for the week ending October 25th, totaled 25.7 million bushels for corn. Well below the 48.6 million bushels needed to reach the USDA forecast. Current corn shipments are still running 69 percent ahead of last year. Soybean inspections came in at 47.9 million bu., which was above the highest range of trade’s expectations, yet 185 million below last year. Wheat loadings totaled 14.4 million bu, right in line with expectations.

Harvest progress released Monday October 29th, showed corn harvest at 63 percent complete, in line with the trade expectations. This is up 14 percent from last week, 11 percent ahead of last year and at the 5-year average. Soybean harvest progress is 72 percent complete, up a large 19 percent from last week, and 2 percent over what the trade was expecting. While good progress was made, soybean harvest is still lagging last year and the 5-year average, both at 81 percent.

Ethanol manufacturing for the week ending October 26th was released Wednesday October 31st, it showed an increase in production of 35,000 barrels per day coming in at 1.059 million barrels, with the Midwest still producing the largest amount. Ethanol stocks showed a large decrease of a little over 1.1 million barrels, which was the largest drop in stocks since 2010. Stocks were reported at 22.7 million barrels.

The Ukraine Grain Association recently increased the size of their corn crop estimate to 35 million metric tons (MMT). The USDA’s latest estimate was for 31 MMT. Some sources believe the latest increase by the Ukraine Grain Association is the first of more to come.

U.S. export corn sales have been struggling in recent weeks, currently U.S. corn values are being undercut by Ukraine and Brazil corn. Ukraine harvest is moving along quickly at 68 percent complete, versus last year’s pace of 52 percent. The favorable pricing has showed up in their export sales, at 2.5 MMT, which is 56 percent higher than last year.

With the competitiveness of Ukraine corn, some feel the USDA may decrease export demand in upcoming reports. Not everyone is in agreement as reports of logistic concerns in Ukraine have been surfacing recently.

Not only has cheap Ukraine corn been hindering U.S. corn exports but it’s also being blamed for shortfalls to U.S. milo demand. Current milo sales are reported at 8 million bushel versus last year’s 59 million bushel total. Analysts believe sales will increase as the smaller European Union corn crop could bring Mexico and the EU to the market.

Export sales released November 1st, for the week ending October 25th were below expectations for corn and soybeans and slightly higher for wheat. Corn sales totaled 15.5 million bu, which was higher than last week’s figure but well below the total needed to reach the USDA’s estimate. Soybean sales totaled 14.5 million bu, which was also above last week, yet below the weekly amount needed. Wheat sales totaled 21.4 million bu, which exceeded last week and the needed total to reach the USDA’s forecast.

An announcement by President Trump last Thursday morning sent the soybean market surging higher. According to Trump, he and Chinese President Xi recently had a very good conversation regarding many subjects, including trade. The on again, off again, G-20 discussions between the two are scheduled to take place and for now a positive tone is set. Many traders will have their eyes glued to their twitter accounts for further developments.

For the month of October, the spot December corn contract gained 4 cents, the spot November soybean contract lost 7 cents and fell from the mid-month high by 53 cents. Chicago December wheat closed out the month with a loss of 12 cents. Interior basis values are for corn and soybeans have improved as harvest is wrapping up in many areas.

For more information, you may contact Mick Hoover at (515)-200-5115, or e-mail at mhoover@maxyieldgrain.com. The opinions and views expressed in this commentary are solely those of Mick Hoover. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position. Please visit our Risk Disclosure Page for more information on commodity trading.

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