The week in review: mixed direction
Harvest has been anything but predictable, with snow and rain showers scattered throughout the growing areas. Near-term, weather conditions are mixed for much of the Corn Belt. The U.S. harvest numbers from the October 21st report showed the slowest harvest on record since 2009. Corn came in at 30 percent, lagging 17 percent behind the 47 percent average. Which would imply 1.8 billion bushels behind. Illinois is the furthest behind, 46 percent versus 73 percent average. Soybean harvest is 46 percent complete, 18 percent behind the 5-year average.
China approved 10 million metric tons of tariff exempt soybean purchases from the U.S. for its soy crushers before the next round of talks in November. Removing the tariffs on soybeans would put the FOB prices on U.S. soybeans competitive with South America. With these additional purchases on top of the 20 million metric tons of tariff free soybean bought earlier this year, the question now is if China has enough beans to get to the South American harvest. The threat of a large South American soybean crop could provide some resistance to the market.
Chines authorities have reportedly agreed to import $20 billon of U.S. agriculture products in the first year a trade resolution can be made. Then the following year, China will purchase up to $50 billion of U.S. products. China was importing nearly $20 billon of products prior to the trade war starting. The increase in sales potential is welcomed news, however trade is slow to react till more concrete details and signed agreements are seen.
African swine fever
African swine fever has presented an opportunity in the Chinese market. The price of pork in China is over 80 percent higher than a year ago and accounts for 70 percent of China’s total meat consumption. Reports of the disease impact in China, would have killed off the entire European Union’s hog population to put it into prospective. USDA’s Livestock World Market and Trade report is projecting Chinese pork production will decrease another 25 percent in 2020. Also, the USDA is projecting a 35 percent increase in pork imports to China next year. U.S. pork production is expected to increase 4 percent in 2020. Overall, there is a market opportunity for U.S., European Union and Brazilian pork suppliers.
Ethanol continues to be a headline. Although we have been seeing an increase in production, demand worries continue. Ethanol production volumes have been consistently below 1 million barrels per day, for the past several weeks, a dramatic increase in production would be needed soon to prevent the USDA from decreasing expected usage. Demand will need to increase in the coming months to reach the USDA’s expectations, however export sales have not helped. Currently, unshipped corn sales are near a 20 year low. Weekly sales have averaged just 13.2 million bushels over that past 10 weeks, compared to the 5 year average of nearly 45 million. Strong competition from Brazil and Argentina have cut into U.S. market share.
For more information, you may contact Alex Londerville at (515)-341-7040, or e-mail at email@example.com. The opinions and views expressed in this commentary are solely those of Alex Londerville. 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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