Closing Comments; Tuesday, May 19th, 2020
Agrivisor - SETZ - Tue May 19, 1:47PM CDT

Trade was mostly quiet today as a lack of fresh news limited interest from either buyers or sellers. Much of what took place was simple consolidation following the recent wide swings we have seen. Corn showed more strength today as the weekly progress report showed there are building areas of concern when it comes to finalizing the planting season. Equity markets were softer today which limited buying in all markets. Building concern over US trade relations with China limited all markets as well, even though China remains and active buyer of US products. The US dollar continues to weaken which benefitted all markets.

The USDA has released the details of its Covid-19 relief package for US farmers. This package will provide $16 billion for US crop farmers and will be based on a per bushel payment. Payments will be based on either 50% of the 2019 production or 2019 inventory on January 15th, 2020, whichever is the least. The package will also contain payments for livestock producers and will be based on production and inventory as well. Payments will also be included for specialty crop and dairy farmers. In addition to these payments, the USDA will purchase $3 billion in commodities for US food distribution programs. Sign up for the program will begin on May 26th.

Corn planting across the United States is in its later stages, but these may be the hardest acres to complete. Much of the remaining area to be planted is in fringe states where weather has been less than perfect. The greatest area of interest is in the Dakotas, where a combined 4.5 million corn acres remain unplanted. This is also where we are seeing standing crops from last year. A quote from this region stated, “I have more old crop in the field than new crop.” While a portion of these acres will still be planted, given the fact we are nearing the final plant date for insurance and current market economics, it is less likely we see the 97 million corn acre prediction from the USDA.

Soybean planting may also slow in the next few weeks, but we have more time to get that crop in the ground, and acreage loss is less likely at this time. In fact, we may actually see more soybean acres than currently projected. Delays to corn seeding is one reason for this, but more favorable returns are another. The current corn/soybean ratio is 2.54:1, which does favor soybean production.

The Brazilian firm Ag Rural has again lowered its Safrinha production estimate. Ag rural is now predicting a Safrinha crop of 66.7 million metric tons compared to 667.9 mmt in March and 69.1 mmt in February. The group is also pegging total corn production in Brazil at 97.7 mmt, well below the 101 mmt the USDA published last week.

Export sales to China in recent weeks has increased considerably from just a few years ago. Over the past 10 weeks China has booked 1.6 mmt of soybeans, 1.19 mmt of corn, and 244,500 mt of pork along with several other commodities. When compared to the volume China booked in 2017 when trade relations started to break down these are increases of 30% on soybeans and a huge 800% on corn and pork.

Chinese interest in future soybean imports from the US has also started to ramp up in recent weeks. China is showing interest in extending coverage from July forward which has been expected by trade. The volume of soybeans China buys may be larger than expected though as there are indications Brazil has been overly aggressive with soybean exports up to this point and may have already affected its domestic needs. The USDA is projecting a robust export number for US soybeans already though, so this demand may not alter long range market supply outlooks.

China’s demand for US grains may increase even more in the near future. China is reported to have issued low-tariff import certificates last week for both corn and wheat purchases. The market failed to react to this news though, as there is plenty of each to sell.

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