Weekly market review
Three main events were the focus of the grain markets this past week; a winter storm system moving into the northern Plains and the northern edge of the Corn Belt, the Chinese trade delegations visit to Washington, D.C to negotiate trade issues and the October USDA supply and demand report.
A major weather system moving through parts of the Midwest and Plains expected to hit later in the week. Parts of the Dakota’s are expected to see anywhere from 6-inches or more of snow. Frost or freezing temperateness is possible for the largest production areas of the Corn Belt. There’s an estimated 2.6 billion bushels of corn expected to be harvested between North Dakota, South Dakota and Minnesota, with only 35 percent to 40 percent of the corn fully matured. An estimated 72 million bushels of beans have not dropped leaves yet between Minnesota, and the Dakotas. This has the trade wondering how much production will be lost due to frost or snow.
Chinese Vice Premier Liu and U.S. officials are in Washington, D.C. for trade negotiations. Many believe a comprehensive trade deal is still out of reach at this time, as the two sides remain firm on key issues. It is believed that Chinese officials are hoping on a partial deal to delay further increases to tariffs. This is the 13th round of discussions between the two countries, with the U.S. most recently adding more Chinese companies to the tech blacklist. On October 15th, tariff rates are to increase from 25 percent to 30 percent on $250 billion in Chinese goods and a new 15 percent tariff will be placed on $160 billion in Chinese goods on December 15th. In recent weeks, China has increased purchases of U.S. ag products and offered to further increase purchases if the U.S. will hold off on tariff increases. Speculation remains if these goodwill purchases will be enough to delay tariff increases. On Thursday, a sale of 398,000 metric tons of soybeans to China, many believe was a talking point to help start the negotiation process.
The main story in last Thursday’s trade was the higher than expected corn yield estimate released by the USDA. The USDA forecasted this year’s corn yield at 168.4 bushels per acre, 1 bushel per acre above the pre-report estimate. Trade was also expecting a drop in harvested acres of 500,000 compared to the 200,000 the USDA released. Carryout was reduced by 261 million bushels compared to the trade’s expectation of 406 million bushels.
The poor demand in recent weeks prompted the USDA to make further reductions, which was not overly surprising. Reduced output due to thin margins led the USDA to cut corn usage for ethanol by 50 million to 5.4 billion bushels. The poor start to corn exports and increased competition from South America led to a 150 million bushel reduction in exports to 1.9 billion bushel. The feed/residual category increased for both old and new crop as expected, as the USDA incorporated the September 1st stocks data.
The updated balance sheets were less surprising for soybeans. Harvested acres were 100,000 below expectations. Yield estimates came in below trade’s expectations for the sixth straight year at 46.9 bushels/acre, .4 bushel below the average trade guess. Incorporated September stocks data also led to a drop in carryout in soybeans. Carryout was reported at 460 million bushels compared to 640 million last month and 1.045 billion in June.
For more information, you may contact Adam Suntken at (712)-454-1061, or e-mail at email@example.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.
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