The week in review
The Brazilian Real has dropped to new lows versus the U.S. dollar in recent sessions. This has helped Brazil stay competitive in the soybean market. Even with the currency making new lows, U.S. soybeans are 15 to 20 cents cheaper than Brazil delivered to China for January shipment. However, China continues to buy soybeans from Brazil, having bought 40 cargoes of South American soybeans and only 3 cargoes from the U.S. last week.
Currently, rumors are circulating that Argentina’s export tax could increase after their new president takes office in December. At this time, export taxes on soybeans is 18 percent, corn 4 percent, and wheat 7 percent. There is an expected increase of 35 percent on soybeans and 15 percent for both corn and wheat. Argentina started to see financial struggles since their current president cut taxes. The rumored new tax increase with the new president would provide around $2 billion in revenue. Crop acres will more than likely be effected, as well, due to the increased export taxes.
Trade talks continue to influence the markets as ongoing uncertainty of a trade deal continues to be questioned. U.S. and China have both stated they have had productive talks over the phone in recent days. China’s Commerce Ministry, stated both sides reached a consensus on properly resolving issues. Analysts remain skeptical if a phase one agreement will happen yet this year as this rhetoric has become quite common with the trade discussions.
Recently released economic data, from China, continues to show incentive to reach a phase one trade deal. Chinese industrial profits fell year-over-year for the month of October by nearly 10 percent, which is the largest drop in eight months and compares to a 5.3 percent decline in September. The decline is being attributed to reduced demand from the U.S. consumers due to trade war and tariffs. Double digit food inflation is also attributing to the reduction as consumers have less discretionary income.
Harvest progress increased 8 percent for corn on the week to 84 percent complete, which is still 12 percent behind the five-year average. This leaves roughly 14 million acres or around 2 billion bushels remaining in the field. Iowa is estimated to have 350 million bushels unharvested. Four states still are below 85 percent complete; North Dakota at 30 percent, Wisconsin at 57 percent, Michigan at 56 percent and South Dakota at 68 percent complete.
Soybean harvest improved 3 percent on the week, now only 3 percent behind the five-year average at 94 percent complete. It was estimated that over 200 million bushels of soybeans remain in the field. Wisconsin and Michigan are the two states with nearly 20 percent left to complete.
Debates are taking place, regarding yield, on the impact of leaving corn in the field past traditional harvest timeframes. There is only limited information that contains actual plot data available on the matter. The University of Wisconsin had two years of data, one which showed minimal corn yield loss and another with significant loss. This study showed that of the two years studied corn harvested in March had an average yield loss of 32 percent. The reading stated that many variables affect actual loss with the snow cover being a large contributor. Another study done by The Ohio State University, stated that in three of the eight experiments performed, yield losses between October and December harvest dates ranged from 21 percent to 24 percent. In five other experiments, yield losses ranged from 5 percent to 12 percent.
In the end, both studies agreed that the numerous variables make it hard to generate a solid determination, but ultimately, both showed losses. Analyst’s state that bushel loss from delayed harvest this year will potentially range somewhere between 5 percent to 25 percent, or 100 to 500 million bushels. So far, the reaction to this has been limited as the market remains focused on sluggish corn demand.
For more information, you may contact Mick Hoover at (515)-200-5115, or e-mail at email@example.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.