Weekly Market Recap


Grains

The US government shutdown is over for now as a bill was signed late on Friday to keep the government open. The prior shutdown is still affecting some of the data that the market follows.  Export sales are still weeks old but next week we get a massive data dump to catch things up.  In their long term ag projections released on Thursday, the USDA is projecting net farm income in 2019 at $77.6 billion, up $8.4 billion from last year.  A drop in cash expenses is expected to more than offset lower gross income.  The St. Louis Fed does not appear as optimistic, as they reported 20 consecutive quarters of declining farm income with only a slight increase expected in Q1 2019. 

Corn

In Brazil, CONAB estimated their corn crop at 91.652 million tons, up 460,000 from their January estimate.  They lowered their first crop estimate but increased the Safrinha (second crop corn) estimate. Currently the USDA is at 94.5 million tons. BAGE estimated that the Argentina corn crop has completed planting and kept their production estimate at 45 million tons, the USDA is currently at 46 million tons.

According to the USDA, farmers have enrolled 86.398 million acres of corn in US crop subsidy programs for 2019 as of January 28th. There were two flash sale announcements this week of 122,000 and 206,000 tons of corn to unknown destinations. Weekly ethanol production was up 62k bpd to 1.029 mil bpd in this week’s report. This is the 2nd biggest weekly increase ever and brings production back in line with previous years. Ethanol margins were positive by a penny after being in the red for the past 20 weeks.

Wheat

US Wheat is competitive again as Egypt bought some US soft wheat in its tender last week.  The interesting part of that transaction was that no Russian wheat was offered and that could be an indication that Russian supplies are now tightening up and raising their values.  The USDA is reporting wheat farmers have enrolled 44.954 million acres of wheat in 2019 subsidy programs. Texas’ wheat crop was rated 31% Good/Excellent, up 4 from last week and 26% was rated Poor/Very Poor, up 5 from last week.

Soybeans

The soybean crop in Brazil has gotten smaller due to weather stress, but recent heavy rains seem to have stabilized the production. Crop estimates started the year between 120 and 125 million tons and are now between 112 and 115 million tons. CONAB reduced their estimate of Brazil’s soybean production by 3.5mmt to 115.3mmt, lowering yields 3%.  Currently the USDA is projecting 117mmt. Argentina and the EU have made an agreement to allow Argentina biodiesel imports into the bloc duty free as long as they sell above a minimum price.

Headlines regarding the trade war between the US and China continues to have a direct influence on the soybean market. The next big deadline is March 1st when additional tariffs are scheduled to kick in.  Both the US and China are negotiating, but both Presidents are not scheduled to meet ahead of the March 1st deadline. The latest NOPA crush data set a January record at 171.63 million bushels. This was also the 4th largest NOPA crush number for any month. 

Livestock

African Swine Fever continues to spread across China. I feel like a broken record relaying this story, but it does have major consequences on world markets.  Less hogs due to disease means less feed needs for China going forward.  The other wild card is do the Chinese kill enough domestic pork that they would turn to the world market for more pork imports than normal. House Ag Chairman Collin Peterson (D-Minn.) spoke with USDA Secretary Sonny Perdue recently to see what the USDA is doing to reduce the risk of ASF spreading to the United States. Cash cattle trade has been extremely light this week with only limited sales up north at levels $1.50 lower than last week.  Expectations were for cash trade to take place at steady to $1 lower this week.

Energies

Expectations for a sharp drop in Saudi production in March along with steady headline support from Venezuela’s demise are driving prices toward fresh year to date highs. U.S. crude production rose 19% m/m to 11.9 million bpd in January, a new record. AAA reports a national average price for gasoline of $2.281, unchanged from $2.281 last week and $2.551 at this time last year.