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Mixed week: mixed direction

By Staff | Mar 19, 2020

The Federal Reserve made a surprise move by cutting its benchmark interest rate by 50-basis points, just weeks ahead of its normally scheduled meeting. The Fed is standing by the idea that the economy remains strong, but want to get ahead of the economic risks from the coronavirus. It was unanimous decision among the committee, it was the first move outside of a regularly scheduled meeting since the financial crisis of 2008.

As we make our way into March, February crop insurance values have rolled in. The average corn futures price for fall of 2020 is $3.88 versus last year of $4.00. Also, the average soybean futures price for fall is $9.17 versus a $9.54 last year.

Markets will start turning their attention to the March planting intentions report and eventually planting pace. Parts of the country has started planting, mainly in the south. Texas is already at 12% planted on corn compared to 6%, which is the five-year average. Some analysts are expecting to see a substantial corn acreage increase this year, but this will mostly depend on weather and price action. South America is still being watched, with the lack of rainfall in Brazil slowing planting progress of the Safrinha crop. Planting progress is around 50% of the intended acres, with farmers hoping for rains to develop in dryer areas.

As harvest continues in South America, parts of Brazil are gaining attention due to continued rainfall. Soybean harvest in Northern parts of Brazil have fallen 10% behind last year’s pace and is behind the 5 year average. Although the rain is slowing soybean harvest, the concern is if it will affect their second corn crop. If the rain persists, it will likely have an impact on corn acres planted due to pushing pollination back to a time of the year where warmer temperatures occur and affect yield negatively.

However, Southern Brazil has been affected with drier conditions over the course of several weeks. Although production estimates have been decreased in this area throughout the year, changes have not been made as of recent. Analyst are still questioning the impacts the dryness will have yields and it would not be surprising if production cuts occur if conditions continue.

Dryness has also made its way into Argentine over the last couple of weeks. There hasn’t necessarily been warm weather, so it has limited crop stress. Traders and analyst have drawn comparisons between this year and 2018 when Argentina’s soybean production dropped significantly late into the growing season. The USDA reduced estimates nearly 25 million metric tons, soil moisture was less and larger portions of the production area was affected compared to this year. The USDA currently estimates production at 53 million metric tons.

Argentina is expected to increase their export tax on soybeans, soymeal, and soyoil by 3% to 33% as soon as the middle of March. Argentina is the world’s largest soybean product exporter. Corn and wheat export taxes look to remain at 12%. These policies are similar to the former President Cristina Kirchner. Soybeans were taxed at 35% and suppressed agricultural production.

For more information, you may contact Alex Londerville at (515)-341-7040, or e-mail at alonderville@maxyieldgrain.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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