Closing Comments; Friday, January 24th, 2020
Agrivisor - SETZ - Fri Jan 24, 2:22PM CST

Grain and soybean futures were pressured for much of today’s session as profit taking dominated trade activity. This was especially the case for wheat where futures are leaning towards overbought and have exhausted its fresh news supply. Soybeans were additionally pressured today by the build in South American harvest activity and continued reports of better than expected yields. A lack of Chinese business weighed on the soy complex as well. Corn also struggled today, although losses were limited by another flash sale, this one of 142,428 metric tons to an unknown buyer for 2019/20 delivery.

The delayed export sales totals for the week ending January 16th were released this morning with favorable totals. Corn sales totaled 39.64 million bu which was above estimates and greater than the volume needed to reach our USDA yearly projection. Soybean sales were in the middle of trade estimates at 29 mbu but above the amount needed on a weekly basis. Wheat bookings totaled 25.57 mbu for the week, at the top of expectations, and twice the volume needed per week.

Trade is monitoring the volume of soybeans the US has sold to China. Current soybean bookings total 418 mbu by China, with only 56 mbu of this remaining unshipped. A year ago, China had 110 mbu of unshipped sales at this time, and two years ago the total was 167 mbu. While the fact China is current on shipments is positive, the fact they do not have much forward contracted is worrisome.

When it comes to US corn exports a factor that is being closely watched is quality. We have known since harvest began there were issues with US corn quality this year, and now these are surfacing in the export market. Buyers have reportedly passed on US offerings in favor of those from Ukraine as even though price is higher, the quality is better. This narrows the window for the US to make sizable corn sales prior to the South American harvest.

A trend that is gaining market interest is the decline in world market share on corn trade by the US. The share of global corn trade the US is expected to have in the 2019/20 marketing year is 27%. This is the second lowest volume in recent history, with only the drought year of 2012/13 coming in lower. A record Ukraine corn crop cut into the US market share last year, as did heavy exports out of Argentina ahead of its election and concerns over export tax rates.

Acreage estimates are starting to be released for the upcoming US production season. A well followed analytical firm is projecting US acres at 93.4 million for corn and 86.5 million for soybeans. In the USDA’s baseline estimates from last fall we saw predictions for 94.5 million corn and 84 million soybean acres. This year’s plantings totaled 89.9 million for corn and 76.5 million for soybeans, but these were greatly impacted by the wet spring and flooding that took place. The fact is planting season is still weeks away and accurately predicting acres at this time is nearly impossible given the tremendous number of variables, with weather being a primary one.

The US attaché in Argentina has released a corn crop estimate of 48 million metric tons for this year. This would be 2 mmt under what the USDA is using in world balance sheets. The attaché has also revised its 2018/19 corn export total for Argentina to 38 mmt. Corn exports out of Argentina are expected to decline substantially this year though as farmers are not as worried about tax changes as a year ago. Many farmers and exporters both emptied their inventories to avoid the higher tax rates, which are now not forecast to increase as much as initially predicted.

This commentary is the sole opinion of Karl Setzer, Senior Commodity Risk Analyst for AgriVisor, LLC. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to send an e-mail to ksetzer@agrivisor.com.




 

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