To no surprise, China reported its December soybean imports at 60 percent of the previous year. It appears the Chinese have been successful at rationing protein demand during the trade war.

China’s soybean crush is at the lowest rate since May of 2018, down over 5 percent. Poor hog prices and demand loss from African Swine Fever are the likely culprits. Currently the U.S. soy export program is running 440 million bushels behind the USDA forecast with ending stocks at 955 million currently.

China’s Agriculture Ministry recently stated they estimate that 916,000 pigs were culled after 100 cases of African Swine Fever have been reported since August 2018. This number seems to be extremely low given the large amount of commercial farms that broke out with ASF the last few months.

The geographical footprint of ASF outbreaks is quite large in China, and some private analysts believe the cull numbers to be much higher. While this is a very large figure, in 2017 China slaughtered 700 million hogs for market. Many in trade are questioning the feed impact of the ASF to Chinese demand. The latest estimates have hog feeding is down 15-20 percent, which many believe this is largely understated, as new cases are discovered daily. A developing ethanol industry in China is helping offset some of the lost corn demand.

Speculation still surrounds the current trade situation with China. After the latest announcement stating they will be buying “substantial amounts of U.S. products.” Most expecting purchases of U.S. soybeans but the economics also work for China to purchase U.S. corn. While nothing has transpired, some in trade speculate that 8 to 12 million metric tons (mmt) could fit into China’s needs. If realized, that volume would help an already tightening U.S. carryout.

Rumors late in the week reported that U.S. Treasury Secretary Steven Mnuchin discussed lifting some or all punitive tariffs imposed on China. Those were in fact just rumors, and no such discussion took place. Further trade discussions are expected between the U.S. and China on January 30th.

Weekly export inspections were at 1.013 mmt for corn, nearly double this time last year. Corn exports are currently running ahead the of the USDA’s projection for the year of 2.4 billion bushels. Soybeans were a bit better this week at 1.085 mmt. The weekly export inspections report is one of the few reports unaffected by the government shutdown now past the record 24 days. However, export sales news and the January supply and demand report that was scheduled for January 11th, is on hold indefinitely until the government day-to-day business resumes. The January report will post the final production estimate for 2018 by the USDA.

As we get closer and closer to March 1, acreage shift discussions continue to provide a mixed bag of numbers. For the soybean complex, even a large shift of 6 million acres away from soybeans does little to solve soybean carryout. That is assuming exports resume to pre Chinese trade war levels over 2 billion bushels. Acreage shift away from soybeans lends to thoughts that a significant amount of those acres will go to corn. As one would expect, increased acres add production and thus adds to corn carryout as well.

Ethanol production for the week ending on January 11th noticed an increase in total output. Production week over week saw an increase of 51,000 barrels of ethanol. This comes as ethanol producers see slightly better margins as we head in the last half of January. This would be the largest week over week over week increase since September. Total U.S. ethanol stocks saw an increase of 97,000 barrels.

Soybean spreads continue to push wider and remain at extremely wide levels not seen in the last ten years. The cash market does not seem to have a sense of urgency even with the recent crop reductions in Brazil when you consider the size of the crop in relation to past records. More attention is focuses on incoming yield reports, as South American countries move closer to gut slot harvest.

Weather in South America, in particularly Brazil, remains volatile as is has been as the crop is in a critical period for moisture. Brazil has been garnering much of trade’s attention due to the lack of rainfall in much of the growing areas. Argentina is dealing with exactly the opposite situation.

It is estimated that 60 percent of the growing belt has received over 150 percent of normal rainfall for the month of January and forecasts are indicating that more is on the way, likely setting a new monthly record. Soybean crop estimates in Brazil are down about 5 percent from initial estimates in November. However, the Western Hemisphere soybean supply is still much larger than the previous 5 years. U.S and South American supplies are nearly 140 million bushels larger than last year and 117 million bushels more than the previous year.

The National Oilseed Processors Association (NOPA) released their monthly crush number for December of 171.759 million bushels. This is the third highest level on record and the most ever for the final month of the year. This is well ahead of the 166.959 MB processed in November. Soy oil stocks were 1.498 billion pounds and Soymeal exports were 826,404 tons for the month.

For more information, you may contact Adam Suntken at (712)-454-1061, or e-mail at asuntken@maxyieldcooperative.com. The opinions and views expressed in this commentary are solely those of Adam Suntken. 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.