2019’s Smaller US Crop And The US/China Trade Deal Lend Support

Market Analysis

The US soybean prices & crop have had many dramatic ups and downs during the 2019 growing season. Ongoing US/ China trade tensions cutting US soybean export demand and last spring’s historic excessive rainfall delaying a major portion of US row crop planting until June lead to a 12.7 million acre drop in US bean seedings. This 14.25%.drop and a 3.7 bu. lower national yield has cut the US 2019/20 supplies by 400 million bu. even with a doubling of the US beginning stocks last fall. After over 18 month of trade rhetoric, the recently concluded Phrase 1 of a new US/ China trade agreement offers optimism about the potential of Chinese buyers strongly returning to the US soybean and protein markets in the next two years.

Beijing waiving its US soybean tariffs as it resumed trade talks with the US last fall helped boost US overseas sales by 8% vs. 2018 by early December, This year’s 1st quarter shipments are projected at 615 million bu., up 113 million bu from 2018 when China stayed out of the US export market because of its self-imposed 25% import tariffs on US soybeans. This year’s 22% higher shipments is a positive demand sign, but US indications that China has committed to purchase upwards of $40 billion in US crops and agricultural related products suggests more demand is forthcoming if the upcoming trade deal is signed in January.

Despite November’s NOPA crush report of 164.9 million bu. being 2 million less than 2018’s pace, it looks like this year’s US fall quarter domestic crush will likely be 526 million bu. This would be only 5 million bu less than 2018/19’s record demand. The USDA may leave its yearly outlook at 2.1 billion bu,, but Argentina’s largest processor having financial problems could up this demand later this year.

Utilizing these demand numbers & a fall residual level of 150 million bu. because of 2019’s late W.. Midwest harvest and a more normal seasonal level, a 3.14 billion bu. Dec 1 quarterly stocks seems likely, similar to 2017/18’s level.

What’s Ahead:

A slightly smaller US final soybean crop & continuing optimism about the US/China Phase 1 trade deal could lift soybeans on fund short-covering. Skepticism remains if China will buy $40 Billion of ag products, but doubling or tripling 2019’s $9 billion level will be supportive. S. America’s January weather will be a big price influence. We look to advance sales to 70% on March rallies in the $9.65-$9.80 range.