Weekly Market Recap


Grains

The details regarding Phase 1 of the trade deal revealed that China "shall ensure" additional purchases of U.S. agriculture products by $32 billion over two years, the deal says, including $12.5 billion above the corresponding 2017 baseline of $24 billion in 2020 and $19.5 billion above the baseline in 2021. This means China is targeting purchases of $36.5 billion in 2020 and $43.5 billion in 2021.  The average of those 2 year is $40 billion which has been the figure talked about for a long time during the negotiations. In the baseline year of 2017 China imported $24 billion of US ag products.  Of that total soybeans accounted for $13 billion. Currently, China has NOT announced a reduction in tariffs on US agriculture products. One of the caveats says that market conditions may dictate the purchases and having tariffs in place may make non-US origins cheaper. The market sold off hard after the announcement as it is unsure that China will actually fulfill their commitment. The total sum they have agreed to buy is huge and the skeptics are saying that the loophole where purchases are made due to market conditions will allow China to not buy the full amount. Also, Chinese tariffs are still in place on US ag products. However, a massive rally on Friday erased the steep losses in corn and some of the bean losses. U.S Agriculture Secretary Sonny Perdue announced yesterday that he still expects farmers to be paid a third and final tranche of the 2019 trade aid, even after Phase 1 was signed.

Corn

The weekly ethanol production report showed that production increased by 33,000 bpd this week to 1,095,000 bpd, the highest production rate for this marketing year. Net ethanol margins were 2 cents lower this week and are now at 11 cents negative.

Corn sales of 785,000 tons were good, coming in above expectations. This is best sales total in a month.

Wheat

Russian agriculture consultancy IKAR cut its 19/20 wheat export forecast to 33.5 million tonnes. The USDA also lowered their Russian wheat export estimate from 35 million tonnes to 34 million.  Russian wheat exports decreased to 29.2 million tonnes for January-November of 2019, vs 40.2 million tonnes the year prior. Egypt’s GASC purchased wheat via tender from $248.85 to $249.90 per tonne c&f, which was up $3 to $4 from the Egyptian tender on January 8th. Strategie Grains cut their 2020 EU soft wheat crop forecast from 140.5 million tonnes to 139.8 million. They also raised their 19/20 EU soft wheat exports from 28.7 million tonnes to 30.5 million.

Soybeans

Rains in northern Brazil and northern Argentina will continue for the next 6-10 days, further improving soil conditions for the growing areas, however, more rainfall is needed to completely end the dryness. China customs vice minister Zou Zhiwu stated that Chinese imports of U.S soybeans and pork rebounded in November and December, with the December soybean imports seen at the highest levels since May of 2018. Chinese saw a 67% increase in soybean imports during the month of December, they brought in a total of 9.54 million tonnes of soybeans compared to 5.72 million tonnes in December of 2018. Chinese soybean imports for 2019 came in at a total of 88.51 million tonnes, compared to 88.03 million tonnes in 2018. Chinese agriculture ministry official Tang Ke stated that Chinese imports of soybeans will rise in 2020, and although ASF curbed soybean demand there are measures in place to boost pig production.

Export sales for beans were well within expectations but the total of 711,000 tons is well below the million tons + we saw all throughout the 4th quarter.  Soybean meal sales were outstanding posting the highest total of the marketing year.  Soybean oil sales were also very strong with the 3rd best sales of the year.

Livestock

A case of the H5N8 bird flu has been reported in northwestern Hungary, resulting in the culling of 50,000 turkeys. According to Chinese customs data, China imported 375,000 tonnes of pork in December of 2019 vs just 95,384 tonnes in December of 2018. November imports were seen at 229,707 tonnes. Official data showed that China’s pork output for 2019 was at a 16-year low due to ASF, the output data came out at 42.55 million tonnes, down 21.3% from 2018. Beef packer margins have bounced a little this week after falling into single digits last week.

Energies

China’s crude oil throughput hit a new record high in December. Refinery runs in December averaged 13.78 million bpd, up from 12.07 million bpd in 2018. The current national average price for retail gasoline is $2.56. Gas prices rose 1.4% globally in the fourth quarter according to Bloomberg data. Prices for retail gas averaged $2.55 a month ago in the U.S. according to AAA.