AgriVisor Market Recap

Friday, February 14, 2020
Much of today’s session was spent with the market consolidating ahead of the long holiday weekend as exchanges will be closed Monday for President’s Day. When trade resumes next week all eyes will be on China to see buying perks following the start date for the Phase 1 trade agreement. Trade will also key in on the Ag Outlook Forum in Washington that will release its data on Thursday and Friday. The coronavirus remains a market topic and tempered any attempt at a rally today as even though experts claim the disease is under control, in just the past 24 hours there were 5,090 fresh cases and 121 deaths from the virus reported. 

Baseline estimates for US trade for the next five years was released by the USDA today. The world market share of corn is forecast to decrease from 29.5% last year to 29% this year and then rebound to 30% for the next five years. The US share of the world soybean market is expected to range from 34% to 35% as competition from South America increases. The share of the market on wheat is forecast to hold between 12% and 13% over this time. Cash values on all three are expected to hold near today’s levels for the next decade according to USDA forecasters. 

The long-awaited implementation period for the Phase 1 trade agreement has ended and trade is now waiting for indications of actual Chinese demand. While hoped for, it is unlikely we will see a sudden increase in Chinese buying given the ongoing coronavirus concerns. The fact Brazil is considerably cheaper than the US on soybeans is also unlikely to bring the US immediate export interest. Phase 1 also failed to erase all tariffs between the two countries which remains an issue. These will reportedly be repealed in Phase 2, but there is no timeline for when that may take place. 

Private analysts in South America have started to update their production estimates. The Brazilian firm Agroconsult has raised its soybean crop projection to 126.3 million metric tons. This compares to the 125 mmt projection the USDA made this week. For corn the firm is projecting a similar number to the USDA at 100.8 mmt. This corn number depends heavily upon the Safrinha crop though, and there remain thoughts that will not be as large as predicted. 

Economists in Brazil are not as positive on their soybean export potential. Improved trade relations between the United States and China and a reduction to global soybean demand are anticipated to cut into Brazil’s soybean exports. Last year Brazil exported 58 mmt of soybeans but this year that total may be no more than 54 mmt. 

Argentine officials have also updated that country’s corn and soybean projections, increasing them 1 mmt from previous projections. The Rosario Grain Exchange is predicting an Argentine soybean crop of 55 mmt, slightly above the 53 mmt the USDA is projecting. Corn production estimates from both groups are at 50 mmt. Argentina has benefitted from favorable weather in recent weeks and these numbers could easily increase. 

While we do not normally hear about Canadian soybean production, sources in the country announced today they will likely cut back on production this coming year. Canada has struggled with less than perfect weather for soybean production in recent years and yields have suffered. Regions of Canada that would normally produce soybeans at 40 bushels per acre have seen yields drop to just 30 bpa in recent years. Others are struggling to yield much above 10 to 20 bpa. Farmers in these areas will shift production to alternative crops better suited for the regions. 

Chinese officials have released another portion of its government stored pork. Today’s release totaled 14,000 metric tons as the country continues to fight low production from the African Swine Fever outbreak. Releases of government pork since January 1st have totaled 133,000 mt, with total reserves being released at 264,000 mt. It is quite likely China will need to make imports to replenish these reductions, but when is the question.