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Weekly review

By Staff | Feb 27, 2020

USDA released 10-year baseline projections for major crop production and usage. Projections for 2020/21 have corn acres increasing 5 million over 19/20 to 94.5 million acres. Feed usage and exports increased to help lessen the increased ending stocks at 2.754 billion bushels. Still more than ample corn stocks added nearly 5 percent to the stocks to use ratio at 18.7 percent.

Soybean projections added 7.5 million acres to 2019/20 at 84 million acres, down 5.2 million from 2018/19 following big prevent plant acres. Usage increased approximately 140 million bushels; carryout still climbs 58 million to 518 million bushels, increasing stocks to use by 1 percent to 12.4 percent. Not friendly news for either corn or soybeans, but acreage increases not a complete surprise.

The Brazilian REAL continues to depreciate to the dollar, giving a significant price advantage. Soybeans delivered into Chinese ports from Brazil are 40-50 cents cheaper. U.S. soybean shipments increased to 36.5 million bushels last week, with 7.5 million bushels going to China. Shipments for the marketing year to date total 1.039 billion bushels, up 164 million bushels from this time last year. Although these numbers are encouraging, the total still lags the seasonal pace needed to hit USDA’s newly revised target by 218 million bushels.

Nearly 700 U.S. ag goods including: soybeans, corn, ethanol and sorghum are eligible for one-year tariff waivers from China with applications for firms starting March 2nd. Some waivers are starting to be issued already but importers will be required to apply for waivers on goods. The markets will to continue to watch how this unfolds and the volume of goods bought.

Soybean values have bounced off recent lows, with values capping due to ideas of record production in Brazil. The latest USDA estimate for Brazilian soybean production is for 125 million metric tons (MMT), which would be the largest production on record and 10 MMT above last year. Private forecasters continue to increase estimates; the firm Agroconsult increased their forecast 2 MMT to 126.3 MMT.

Not only are Brazil’s production estimates increasing, so are forecasts for Argentina. Rosario Grain Exchange increased Argentina’s soybean production estimate to 55 MMT, 1 MMT higher than their previous prediction but 2 MMT below the USDA’s current forecast. Rosario Grain Exchange also increased their Argentine corn production estimate by 1 MMT to 50 MMT which is equal to the USDA’s current forecast.

Thursday started the USDA’s Outlook Forum for the upcoming crop year. The projection for soybean acres was 85 million. The average trade estimate for soybean acres was 84.7 million acres. If that many acres are planted it would be over 9 million more acres planted than last year, but still below the 5 year average. Projections on corn acres were at 94.5 million acres, with the average trade guess at 93.6 million acres. This is a sharp increase compared to last year, but is expected due to the amount of prevent plant acres going back into production. The assumption is that a trend line yield of 178.5 bu./acre will be used, which will increase production of corn year to year. The trade will pay close attention to these numbers since they’ll be the baseline for the initial new crop balance sheet for the year. Some within the trade were hoping that the Outlook Forum would provide optimism in regards to export potential for the corn market due to the recent trade agreement with China.

For more information, you may contact Kristi Guse at (712)-260-6486, or e-mail at kguse@maxyieldgrain.com. 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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