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Competition seen in export markets

By Staff | Mar 7, 2019

Corn balance sheets look to tighten using trend line yield and demand assumptions released by the USDA at the Ag Outlook Conference. Some of the lack of enthusiasm is that the USDA fell short of final yield by over four bushels per acre each of the past five years. Since 2004, the USDA forecasted yield has fallen short of the final number 60 percent of the time. Weather always remains the wild card for yield and that can vary greatly over the next 11 months until the final production number is released in January.


Ethanol manufacturing data released for the week ending February 22nd, showed an increase of 33,000 barrels per day from the previous week of 1.028 million barrels per day. Even with the increase in production, stocks dropped by 204,000 barrels and now stand at 23.71 million barrels. Margins have increased in recent weeks putting most plant margins back in positive territory.


Export sales week ending February 21st, were at or above the high end of trades expected range for corn, soybeans and wheat.

Corn sales tallied 48.8 million bushels, slightly above the high end of the expected range.

Soybean sales totaled 80.7 million bushels, over twice the volume expected, with 66 million bushels being sold to China.

Wheat sales totaled 17.5 million bushels.

Questions are starting to arise about corn demand as exports had been robust earlier in the marketing year but are now starting to fade. The USDA’s catch-up sales report showed 238 million bushels sold during the government shutdown. The total was in line with expectations but was well below last year’s total for the same timeframe of 411 million bushels. Corn exports are now a meager 30 million bushels ahead of a year ago.

The U.S soybean export program is a bit muddled as one looks at the numbers after the government shutdown. Some of the recent Chinese purchases were reported at less than previously announced.

At a minimum, exports are estimated to be lagging close to 300 million bushels. If the latest Chinese sale announcement of 10 MMT from the U.S. soybeans occurs, it could help get the balance sheet closer to being accurate. Nevertheless, the fact still remains that the U.S. has the largest soybean carryout in history at over 900 million bushels.

Last week’s export sales showed large Chinese soybean purchases hit the books. Uncertainty remains with these sales as offerings from Brazil are well below those of the U.S. China has purchased U.S. soybeans in good faith from on-going trade discussions. Reports that discussions are positive continue, but the lack of a confirmed deal makes these sales very vulnerable. China has been notorious for cancelling sales, and in this instance it makes more economic sense for them to source soybeans from South America.

U.S. trade negotiators have asked China to reduce tariffs on U.S. ethanol as part of the latest round of trade talks. According to Reuters, Ag Secretary Purdue, mentioned he would like to see tariff levels below 15 percent, but he did not mention what exact level trade officials were looking for. China’s current tariff on U.S. ethanol tallies up to 70 percent, which has effectively stopped any ethanol exports into China.

U.S. Trade Representative Robert Lighthizer, discussed how the trade talks with China were going with the House Ways and Means committee last week. He stated President Trump is committed to protecting the American workers, farmers, ranchers, and economic system from the unfair trade practices of China. While he also stated that progress has been made with China, but it is too early to predict the outcome of the negotiations. One of the biggest areas being addressed during negotiations has been the non-tariff trade barriers. Lighthizer is hopeful they made some headway. President Trump is insistent on an agreement that is enforceable and would also like to see changes in the pattern of practice in several areas. Optimism still surrounds the idea that an agreement will be reached, but it will take time and will consist of multiple agreements as they work through pressing issues.

A recent poll of analysts shows that expectations for Brazil’s Safrinha corn crop will see a large increase of 21 percent over last year’s crop at 65.3 MMT. Acreage is said to be at 12 million hectares, which is four percent higher than last year. The soybean survey for Brazil showed a drop in production from last year’s record crop of 119.3 MMT. The average results were for 114.6 MMT, which is also below the previous estimates and the USDA’s latest 117 MMT forecast.

African swine fever continues to spread throughout China and was confirmed in Vietnam in late February. The highly contagious disease was confirmed in two more provinces near the border shared with China. In Vietnam, pork accounts for three quarters of the total meat consumed in the country, leading officials to try to find ways to keep the disease from spreading.

Corn, soybean and wheat futures saw significant pressure the month of February. The spot March corn contract fell 16 cents, while the new crop December contract lost 10 cents. March soybeans finished the month with a loss of 20 cents and November soybeans lost 13 cents. Wheat values fared the worst losing 71 cents on the March contract. Winter weather pushed nearby basis values in, but not enough to compensate for the losses.

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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