The week got off to a very bearish start when the Chinese government asked state owned companies to stop buying US ag products as retaliation for the newest round of tariffs the US imposed on China. China also took the radical step of weakening their currency which sent global markets into tailspin. For the second week in a row there has been a big increase in the amount of dry areas on the drought monitor. The most concerning area is the eastern part of Iowa and a pretty big area of central Illinois.
The French corn crop was rated 60% good to excellent, down from 61% in the week prior according to the French farm office. Ratings continue to decline as the corn has suffered from extreme heat during pollination. Brazil farmers are expected to increase corn acreage next year. Estimates have ranged between 3 and 8% more, with production topping the 100 million ton mark.
Speculators continue to cut their corn length. In the past 2 weeks, funds have cut their net length in half and now have of a position of 74,000 contracts long. The good/excellent rating on corn dropped by 1% this week to 57%. We are normally above 70% good/excellent at this point. Weekly export sales were 42,500 tons, which was below the estimates between 100,000 and 300,000 tons for the 18/19 marketing year. New crop sales were 197,000 tons, which was below the estimates between and 200,000 to 600,000 tons. The big big big WASDE report is Monday the 12th at 11:00 central time. Here are the estimates: planted acres at 87.998 million (83.494-89.800), harvested acres at 80.050 million (76.114-81.900), yield at 164.9 bushels per acre (161.0-167.2) and total production at 13.193 billion bushels (12.723-13.550). 2018/19 carryout is estimated at 2.392 bb (2.220-2.490) and 2019/20 carryout is estimated at 1.620 bb (1.281-1.900).
Russian firm IKAR lowered their Russian wheat production estimate by 900,000 tons to 75.5 million tons.
Winter wheat harvest was at 82% complete which is behind the 5 year average of 92%. Spring wheat harvest is off to a very slow start at only 2% in the first report of the season. It is lagging the 5 year average of 14%. Spring wheat ratings showed the crop held steady at 73% good /excellent. This is right in line with conditions last year and are about 10% above the 5 year average. Weekly export sales were 487,700 tons, which was within estimates ranging from 250,000 and 500,000 tons.
The French rapeseed crop is projected to be much lower this year at 3.6-3.8 million tons. This is about 30% below the 5 year average. Brazilian farmers are expected to increase bean acres next year by 2-4%. The trade dispute between the US and China has opened the door for more Brazilian production to keep the pipeline to China full.
Soybean export inspections were very strong this week topping the 1 million ton mark. This week’s total is the best in the last 23 weeks. The good/excellent rating for soybeans held steady at 54% this week. This is the 4th week in a row at that value and 6 of 7 ratings this year. Weekly export sales of soybeans were 101,600 tons, which was within the estimates of 0 and 300,000 tons. New crop sales were 318,200 tons, within the estimates of 100,000 to 400,000 tons. Estimates for next Monday’s WASDE are: planted at 81.006 million (78.000-83.500), harvested at 79.890 million (77.300-82.800), yield at 47.6 bushels per acre (46.0-49.0) and total production at 3.800 billion bushels, (3.633-3.974). 2018/19 carryout is estimated at 1.065 bb (0.988-1.124) and 2019/20 carryout is estimated at 0.821 mb (0.607-0.950).
Lean hog futures have had a wild week. When China announced it would halt US ag purchases the market gapped lower to limit down level, but quickly rebounded and almost hit limit up. A massive $8+ range in October futures made for wild trade. Futures chopped the rest of the week and settle about $1 higher for the week. Cattle trade was light this week with values in line with last week. Margins are still excellent at $150/head.
The trade dispute between the U.S. and China has already pressured WTI prices due to worries of a global economic slowdown. China the world’s largest oil buyer was a leading destination of U.S. oil in the first half of 2018. Since then, U.S. crude imports have suffered. The trend should continue as the trade war continues to fall. AAA is reporting the national average for a price of gasoline at $2.684 per gallon. A month ago, prices averaged $2.719 and last year during the same period prices averaged $2.868 per gallon.