It has been months since we have seen the USDA crop reportand based off Friday's action for pricing and closes, you would've never thought we had a report. Data adjustments that could have been considered bullish or bearish in each category was offset by another number in that group that tamed it out. So, here's what we had seen yesterday.
USDA's Feb WASDE held few net changes in corn supply/demand.US corn stocks were lowered 46 Mil Bu as lower final yields across most of the Corn Belt more than offset reduced ethanol & feed use. Final US corn yield of 176.4 Bu/acre, which is below the prior year. Total production in 2018 of corn was over 400 million bushels less than total demand. We've known this all along which is why there is a large drop from old crop new crop when we moved into the 2018/2019 crop year. But today's report heightens the need for increased corn acreage for 2019/2020 and good weather to produce trend line yields of near 180 BPA, or we will have heightened pricing for corn next fall if production is the same as this year. This is in spite of Argentina's crop increased by 3.5 MMTs because of favorable weather after a drought year. Add to these potential purchases of corn by China in the coming month or two because the trade negotiations in the background are looking favorable. Corn will continue to find strength on breaks in the 370-375 range for May corn which is soon to become the spot contract.
December 1st US quarterly soybean stockswere reported at 3,736 Mil Bu, up 576 Mil Bu (18%) from a year ago, the largest Dec 1 stocks figure on record. The stocks figure was 50 Mil Bu above expectations, which had CBOT soybean futures under pressure initially from the report's release. The USDA slightly increased their estimate for the US planted acres to 89.2 Mil acres, but lowered the estimate for harvested area to 88.1 Mil. The increased abandonment was related to the late western harvest which also had a drag on yield. The US soy yield was lowered .5 BPA to 51.6 BPA. The USDA raised their estimate for the US soybean crush by 10 Mil Bu, to 2,090 Mil Bu. Exports were cut by 25 Mil Bu to 1,875 million. Year-end stocks were projected at a record large 910 Mil, but were 45 Mil Bu less than December.
Total Chinese demand was lowered from 90 MMTfor the year to 88 MMT. For new crop production, the USDA made expected cuts to the S American crop. Brazilian production was lowered 5 MMTs, while crops in Argentina and Paraguay were each reduced by 500,000 MTs. Total S American production was reduced by 6.3 MMTs. Expectations are that even if the Argentine crop improvement in the next report, it's likely Brazilian yields will be lowered by a like amount because of ongoing dryness.
The USDA's wheat data is mixedand viewed as neutral in the short/medium term. USDA added to US wheat supply via a sizable reduction in feed use. However, this supply was quickly taken away by NASS's new crop winter wheat seeding number. Old crop US wheat end stocks were put at 1,010 Mil Bu on a 30 Mil decline in feed/resid disappearance. This change was made following lower than expected feed use in the Sep-Nov quarter. Total acreage was put at 31.3 Mil down 1.2 Mil from the prior year. With 750,000 acres lost in the southern and central plains. Without record above trend yields crops, US supplies will be in contraction.
The US/China trade talks will be the focus this coming weekwith the USTR Team traveling to Beijing this weekend. Both the US/China need to declare a win in the trade and the negotiations are expected to plow ahead. Expectations are that enough progress will be scored to delay a new round of US tariffs with negotiations continuing into spring. However, in doing so, China will be demanded to secure additional tonnages of US ag & energy. This could be supportive for corn, wheat, and meats into spring.
February bears are upon us,with lower closes noted this past week and corn and wheat with soybeans barely holding near steady on the week. Seasonally downward pressure stays in place till Valentine's Day, if not till options expiration which this month is on the 22nd. The last week of February and the first part of March should start seeing supportive pricing, especially as the Chinese trade talks reveal success even if there have to be extensions on holding back the doubling of trade tariffs.
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