AgriVisor Market Recap

Thursday, February 20, 2020
All interest in today’s session was on the data stream coming out of the Ag Outlook Forum being held in Washington DC. Much of the data that was released was as expected, although there were a few surprises, mainly surrounding renewable fuels. The USDA was quick to point out that Phase 1 trade numbers were not included in the information that was released. Aside from this, trade continued to focus on elevated production numbers out of South America and a general lack of buying interest in commodities at the present time. 

The initial look at 2020 US corn, soybean, and wheat acres came out pretty much as trade was expecting. For this coming year the USDA is predicting plantings of 94 million corn acres compared to 89.7 million a year ago. Soybean acres are projected at 85 million, up from last years 76.1 million. Wheat acres are forecast to decrease a slight 200,000 for a 45 million total. The main reason for the increase was the return of last year’s unplanted acres. 

In a statement from Secretary of Ag Sonny Perdue, the USDA is going to be implementing new targets for renewable fuel blending. Perdue states the new targets will be “market driven” to a 15% blend rate by the year 2030. This will then increase to 30% by the year 2050. Renewable fuel blending and usage has been a heavily contested issue between US farm groups and the White House, and hopes are this will bring some resolution to the dispute. 

Chinese buyers have started to surface in the markets following the implementation of the Phase 1 trade deal. According to Bloomberg news, Chinese buyers have shown interest in several US commodities, with heavier attention to sorghum and soybeans. Much of this has been price checking though with no fresh sales being announced. This is especially the case on soybeans where the US is outpriced in the global market, especially when compared to Brazil. 

While much of the pressure on US soybean sales is coming from Brazil, we may start to see more from Paraguay in the near future as well. Soybean harvest is approaching the half-way point in Paraguay and production is going to be up from last year’s drought-stricken crop. Thoughts are this year’s soybean crop will top 10 million metric tons in Paraguay compared to last year’s 8.5 mmt. Even though is it often overlooked, Paraguay is the world’s 4th largest soybean exporting country. 

Not only has Paraguay experienced near perfect weather this growing season, so has much of South America. These conditions are expected to continue which is the leading reason for the higher estimates we are seeing on both Brazil and Argentine crops. While there are pockets of concern, mainly in Southern Brazil, production will likely be larger enough in the rest of the region to compensate for any loss. The real question on weather now is if these conditions will persist and benefit the Safrinha corn crop as well. 

The USDA claims China lost a large 195 million hogs in 2019 from 2018 as the African Swine Fever outbreak continued to spread. The USDA is predicting another 80 million hogs in China will be lost in 2020 from the disease. This outlook fueled the opinion that China will soon need to start ramping up pork imports to prevent food shortages in the country. 

While mostly overlooked, ethanol manufacturing data for the week ending February 14th was released today. For the week the United States manufactured 7.28 million barrels of ethanol, a 49,000-barrel increase from the week before. Ethanol stocks increased a large 423,000 barrels and now stand at a record 24.78 million. This compares to the 23.91 million barrels in reserve a year ago.