Closing comments; Friday, February 21st, 2020
Agrivisor - SETZ - Fri Feb 21, 2:09PM CST

Futures were on both sides today as the market continued to react to numbers coming out of the USDA Ag Outlook Forum. Today’s data included new crop balance sheets estimates that called for a much larger corn supply, but a reduction to soybeans and wheat. Early month-end positioning started to weigh on trade today as it limited fresh buying interest. Losses were held in check by solid weekly exports and a slow-down in the Brazilian harvest pace due to ongoing rainfall. A sharp drop in the US dollar was also beneficial to commodity trade.

Now that all data has been complied, we can put together possible 2020/21 balance sheets according to Ag Outlook Forum information. The Forum is projecting planted acres of 94 million on corn this year. Corn yield is forecast at 178.5 bushels per acre for a crop size of 15.46 billion bu. Given current and projected demand, this will leave the US with a 2020/21 corn carryout of 2.63 billion compared to the 2019/20 ending stocks estimate of 1.89 billion bu.

For soybeans, the USDA is predicting soybean plantings of 85 million acres this year. Soybean yield is estimated at 49.8 bushels per acre and a total crop size of 4.2 billion bu. Projected demand will leave the US with 330 million bu of ending stocks. While this would be a sharp reduction from the current 425 million bu estimate for the 2019/20 marketing year, it is still a comfortable reserve.

Wheat balance sheets are also forecast to tighten this coming year. Planted acres on all wheat are pegged at 45 million for this year. This will give the US a total wheat crop of 1.84 billion bu, down from the 1.92 billion bu grown this year. Ending stocks on wheat are forecast to decline from 940 million bu this year to just 777 million bu at the end of the 2020/21 marketing year.

When it comes to exports, the USDA is expecting an overall increase in sales revenue. The USDA claims the US will export $139.5 billion of Ag products this year. This would be an increase of $4 billion from a year ago. The wild card in this scenario is China, as the USDA left sales to that buyer at $14 billion for now, opting to not include the Phase 1 agreement additions. The USDA would rather wait and see how much business we do see with China and adjust the figure as the year progresses.

The obvious dark horse when it comes to Chinese imports is the Coronavirus. While this has reduced Chinese demand, the reaction in the markets has been mostly emotional up to this point. The fact remains that China will need sizable commodity imports to satisfy demand, the only unknown is the timing of when these take place. China continues to deplete its government reserves which will also need to be replenished as soon as the virus is under control.

President Trump sent a tweet today that caught trade by surprise. President Trump now claims the US farmer may see a 3rd year of subsidy payments. Trump claims the aid will come if the trade packages that have been completed and are still be worked on do not provide immediate price relief. The President claims the funding for these payments will continue to come from the tariffs that are being collected in imports. No details were given on how payments would be based, or if they will actually happen.

While mostly overlooked, the weekly export sales data for the week ending February 13th were released today. Corn sales for the week were well above expectations and the volume needed on a weekly basis with 49.2 million bu. Soybean bookings fell below the volume needed to reach yearly expectations with 18.2 million bu. Wheat sales for the week just missed the volume needed with 12.7 million bu on old crop, but we did see 2.2 million bu of sales for new crop.

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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Karl Setzer Grain Commentary