USDA crushes hopes and dreams
The farmer’s reaction to last week’s reports went as well as one could imagine with the market closing down 17 cents on the May contract.
With farmers selling next to nil, end-use markets have moved sharply higher as many were caught off guard. Many areas are showing inverted cash bids as coverage has remained extremely thin. With planting season right around the corner, transportation and labor resources will be in high demand and partially allocated to agronomy services. The probability for some of the best basis opportunities will remain very high moving forward through this spring season.
Soybean prices have been firming lately as Chinese officials are back in the states to try and hammer out a deal. Continued reassurances from the current administration has led many trade analysts to remain unsure of whether progress will actually be made. The large increase in on-farm soybean stocks remain burdensome, as farmers seemed to store more soybeans than previously thought. Corn planting progress will be closely watched moving forward as it may be the best indicator for more or less soybean acres.
A sale of soybeans to China announced Monday helped soybeans gain back more than double the loss on Friday. Along with the sale from Friday what went unnoticed in the shadow of the USDA reports, the total is shy of 59 million bushels of fresh soybeans sales to China.
Export Inspections for the week ending March 28th, were higher for both corn and wheat and lower for soybeans. Corn inspections came in at 49.6 million bushels, up from last week’s 39.2 million bushels. Mexico and Japan were the top export destinations for corn. Soybeans were at 26.9 million bushels, with China being the top destination. This is down compared to the 31.2 million bushels from the prior week. Wheat was at 15.4 million bushels, that’s up compared to last week’s 14.1 million bushels.
Trade talks will continue this week between the U.S. and China on Wednesday in Washington. Last week’s talks were viewed as “constructive,” according to U.S. Treasury Secretary Steven Mnuchin and new progress was made according to Chinese officials. Beijing’s official news agency reported the negotiators with both countries are studying the text of a possible final agreement between the two countries. According to Bloomberg, China is determined to prevent an escalation of the frictions that have hurt its economy, even though measures of enforcing the trade deal are still a key topic in negotiations.
Fund traders bought back half of the corn contracts they sold on Friday, giving the market back less than one-third of what it lost. Friday’s commitment of traders still shows the fund/speculative trader holding their large short position. Looking further into the acreage numbers, there could be 1 million acres of corn at risk with all the river flooding issues along the Missouri and Mississippi rivers. River levels are dropping along the Missouri, but have not crested on the Mississippi as high water moves farther south towards Cape Girardeau.
Early planting progress out of the southern states show most states at or above the 5-year average except Arkansas.
Recently, U.S. Agriculture Under Secretary Bill Northey, U.S. Senator Chuck Grassley, and Iowa’s Agriculture Secretary Mike Naig toured areas in Iowa that were affected by the flooding. According to Reuters, Northey stated there is nothing the U.S. government can do under the current laws or disaster-aid programs about the millions of bushels of grain damaged. The USDA has no mechanism to compensate farmers for damaged grain in storage, due to never seeing a problem like this or to this level of damage before. Even though some members of congress have expressed interest in pursuing legislation for providing aid for damaged grain that is stored, Grassley stated it would be a lengthy process even with the urgent need.
Indigo Ag, an agriculture technology company, identified 832 on-farm storage bins in the flooded areas of the Midwest and estimates the bins contain 5 million to 10 million bushels of corn and soybeans.
China is not only battling African swine fever but now an outbreak of a highly pathogenic strain of H5N1 bird flu has hit a farm in the Liaoning province, according the Ministry of Agriculture and Rural Affairs. It hasn’t been stated yet which type of poultry was at the farm. So far over 25,000 birds have been culled since the outbreak.
For the week ending March 29th, ethanol production saw an increase of 24,000 barrels per day from 975 thousand to 999 thousand barrels per day. Total ethanol stocks saw a large decrease of 456 thousand barrels from 24.45 million to 23.99 million barrels. According to Reuters, 13 percent of total U.S. ethanol production has been taken offline with the majority of the plants sitting in eastern Nebraska. Ethanol futures have reacted accordingly moving sharply higher. It remains to be seen what the total amount of damage the flooding has caused.
Six to 10 day maps show a slightly below normal outlook for what is considered normal temperatures in the Midwest. The precipitation maps also shows a growing probability of increase rainfall over the next 8-14 day period. Most of the major corn growing areas will see normal to below normal temperatures and higher chances for precipitation. Although still early, a good portion of Iowa and Minnesota will need a good stretch of weather to get agronomy applications done in a timely manner.
For more information, you may contact Brock Beadle at 515-341-7040, or e-mail at email@example.com. The opinions and views expressed in this commentary are solely those of Brock Beadle. 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.
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