USDA report doesn’t surprise
Rumors continue to circulate of more Chinese buying but uncertainty continues with negotiations.
A deal looks to be nearly a month away as tariffs, intellectual property rights, and enforcement details are some of the main hold ups. The Trump Administration wants a signed deal that would reenact tariffs if agreed upon details are not being followed by China.
They would like this language to be upheld for years to come, as China has been notorious for not following through on commitments. Up to this point, China has not been willing to agree to those terms but sources claim they think they may agree soon.
The GMO approval process in China also has been pointed to as a point of contention on the agricultural trade side of discussions. The U.S. certainly wants to avoid another issue like the MIR162/Viptera trait contaminating U.S. corn exports.
U.S. Agriculture Secretary Sonny Perdue stated that talks with China about reducing the tariff on U.S. ethanol products were “positive” but he also cautioned that discussions aren’t over yet. Last summer China imposed retaliatory tariffs of up to 70 percent on U.S. ethanol shipments, making exports to a key market uneconomical. Trade talks are continuing via teleconference this week.
Export loadings for week ending April 4th came in below the weekly needed amount to reach the USDA’s forecast for corn, soybeans, and wheat. Corn loadings totaled 40.8 million bushels, near the low end on the expected range and below last week’s total. Soybean loadings were on the high end of the range above last week’s total at 32.6 million bushels. Wheat inspections totaled 19.8 million bushels.
As expected, the USDA reduced domestic corn demand on Tuesday’s report. Feed usage/residual was the most anticipated cut as USDA incorporated data from the March stocks report, with a reduction of 75 million bushels. Exports were also reduced by 75 million bushels. Ethanol usage was reduced by 50 million bushels. Overall, 200 million bushels were cut from corn demand in this report. Leaving carryout at 2.035 billion bushels, 44 million higher than the average trade estimate. On the soybean side, only minor changes were made, domestic imports were decreased and seed usage was increased leaving a net reduction of 5 million bushels. Carryout now stands at 895 million bushels, 3 million less than the average trade guess going into the report.
Globally, the USDA increased Argentina’s corn production by 1 mmt to 47 mmt, and left their soybean production unchanged at 55 mmt.
Brazil’s corn production increased by 1.5 mmt to 96.0 mmt, 1.17 mmt above the average trade estimate. Brazilian soybean output seen at 117 mmt, mmt higher than the March release. Overall, carryout increases to the global supply was roughly 5 mmt each for corn and wheat, while soybean increases were minimal.
Ethanol production for the week ending April 5th saw an increase of 3,000 barrels per day from 999,000 bpd to a little over a million bpd. Ethanol stocks showed a decrease of 799,000 barrels from almost 24 million barrels to 23.2 million barrels. The only regions to build on stocks were the Gulf and Rockies.
Export sales released for the week ending April 4 were weak for both corn and soybeans. Corn sales for the week were 21.6 million bushels, up just 400,000 from last week and behind the 27.5 million needed per week to meet USDA projections. Soybeans were disappointing at 9.9 million bushels; down substantially from last week’s 72 million and under the 12.5 million needed to meet USDA projections.
African swine fever remains a key topic with traders as the uncertainty of how far the disease will continue to spread and what it means for future feed needs. Since August, more than a million hogs have been culled in East Asia due to the highly contagious disease, and that’s just what has been officially reported. The virus has now reached 23 provinces and cities in Vietnam, while close to 10 percent of Mongolia’s herd has perished or been destroyed and new cases have recently been reported in Cambodia. China’s National Grain and Oils Information Center says soybean meal demand may drop more than 5 percent in 2018-2019, something that hasn’t happened in over a decade. With China being the world’s largest hog producer, this leaves an opportunity for export markets to fill in the void.
According to Brownfield, the 2019 World Pork Expo has been cancelled. The National Pork Producers Council board of directors stated the event has been cancelled due to “an abundance of caution” as African swine fever continues to spread throughout China and other parts of Asia. The World Pork expo is held in June in Des Moines, Iowa and usually host around 20,000 visitors.
For more information, you may contact Kristi Guse at (712)-260-6486, or e-mail at firstname.lastname@example.org. The opinions and views expressed in this commentary are solely those of Kristi Guse. 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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