Weekly Market Recap


Grains

China issued a new policy statement saying it will stabilize its production of grains, increase imports where there are shortages, and diversify import channels. Newswires reported that China is pledging to spend $30 billion to import US ag goods including corn, wheat, and soybeans. There were no additional details surrounding the headline so hard to interpret the impact of that statement. Negotiators for the US and China continue to meet trying to hammer out a deal ahead of the March 1st deadline when another round of tariffs are scheduled to be implemented. Both sides are trying to get memorandums of understanding on at least six topics.  Comments from the talks say there are major differences on key topics. A trump advisor said the President will follow through on adding the new tariffs despite China asking for an extension. Ag Secretary Perdue said there will be no additional crop aid payments to farmers even if the US/China trade war continues. Acting EPA administrator Wheeler is facing criticism as he rejected a proposal to reduce ethanol use. Some oil industry Republican supporters have threatened to withhold support for Wheeler’s confirmation as permanent EPA leader.  This could bring the battle between big oil and big corn to the forefront.

Corn

The trade war is forcing China to look for additional suppliers of grain.  They will now allow imports of corn and barley from Uruguay starting this month. China auctioned off over 100 million tons of corn last year.  That was up very sharply from the 57 million tons auctioned off in 2017. Brazil is importing corn from Argentina to meet some feed needs at its southern meat plants. A poll of analysts pegs Brazil’s safrinha corn crop at 65.3 million tons which is 21% higher than last year’s crop. Acreage is estimated at 12 million hectares which a 4.2% increase from last year.  As the US and China continue to negotiate, 2 items on the short list of remedies include removing tariffs on US ethanol and DDGs.  

The Ag outlook forum released corn plantings at 92 million acres. Ethanol production was down sharply this week by 33,000 bpd.  Production has had big swings up and down the last few weeks.  Ethanol margins are still positive, but just barely at only 2 cents.  The export sales data dump showed cumulative sales of 6.056 million tons which was on the upper portion of expectations. Mexico continues to be the best buyer of US corn.    

Wheat

Australia’s ABARE has pegged their wheat crop at 17.30 million tons.  This would mark the lowest crop in 11 years. Due to a terrible wheat crop in Australia for a second straight year, some Asian buyers are turning to other origins to secure wheat. Indonesia has purchased 1 million tons of Argentine wheat and Vietnam and Malaysia are also buying. France is reporting that 85% of their soft wheat crop is in good/excellent condition. Egypt bought 360,000 tons of wheat in a tender this week. Half was French, with a cargo each of Romanian, Russian, and Ukrainian wheat.  The US did not have any offers in the tender despite relatively cheap freight rates.

The Ag outlook forum released wheat plantings at 47 million acres. Export inspections for wheat were poor at only 357,000 tons, missing the low end of expectations. The catch up of wheat export sales were 3.574 million tons, topping the high end of expectations.  Egypt was the best buyer of SRW after the US participated in an earlier tender.

Soybeans

A poll of 12 analysts peg the Brazilian soy crop at 114.6 million tons. This is down from the previous estimate of 117 million tons, and well below last year’s record crop of 119.3 million tons.  The USDA ag attaché in Brazil estimates the soybean crop at 115.5 million tons which is below the current USDA estimate of 117 million tons. The soybean crop in brazil is nearly 50% harvested. This pace is about double the average, so this year’s harvest is speeding along. The head of the EU Commission said that if the US levies tariffs on European cars it could mean that Europe would buy less soybeans from the US. China plans to increase acres for soybeans in 2019 by almost 1 million. They plan to boost subsidies in northern areas to increase plantings.   

The Ag outlook forum released soybean plantings at 85 million acres. Export inspections for soybeans were quite good at 1.031 million tons. Inspections have been above 1 million tons in 5 of the past 6 weeks. The export sales data had soybean export sales at 6.532 million tons.  This was on the lower side of expectations.  China was the leading buyer at just under 4 million tons, but there was a significant drop off to the second best buyer, Egypt, at 600,000 tons. 

Livestock

African Swine Fever is spreading through Romania.  This disease is a real problem and the fact that it is spread outside of China is a real threat to global hog supplies. Vietnam has also confirmed the first cases of the disease. Cash cattle trade was light in the $123-125 range with better cash expected. Packer margins are still good at $60/head.

Energies

WTI futures are higher on optimism over the U.S. and Chinese trade talks. The OPEC+ production supply cuts and increasing geopolitical concerns in the Mideast are lending support to prices.  AAA is reporting the national average for a gallon of gasoline at the pump at $2.387 compared to $2.295 last week. Last month during the same period the average price was $2.252.