Pre-December Crop Report - The US/China Trade Talks Overshadowing US Agriculture Markets
Market Analysis
The upcoming USDA December 10 report isn’t sparking a lot of market enthusiasm. With no US corn and soybean crop size update, the US/China trade talks have been the focus. A choppy trade on various rumors has surfaced ahead of the US tariff deadline on Dec 15. This season’s export sales for soybeans & wheat are higher than last year while corn’s pace is sharply lower. This year’s uncertainty about US crop sizes (11% of the corn and 4% of US soybeans still in the fields) and the current trade talks likely going to the wire suggests the USDA could wait until January's final data before making any big stock changes.
In soybeans, the US crush has totaled near last year’s pace while export shipments (99 million bu) and sales (66 million) are higher than in 2018 according to this week’s USDA data. S. America’s current forecast is mixed with Argentina dry while Brazil’ moisture is adequate to good. Given these situations, we and the trade aren’t expecting any big soybean demand changes this month.
This fall’s US corn exports have been hit hard by strong competition from Brazil. Their aggressive sales have limited our commitments to 575 million bu. (off 45% from 2018/19). However, livestock feed needs (meat sales to China) may slice their late-season shipments as supply tighten before next May’s harvest. After a slow Sept, US ethanol output has rebounded to 2018/19 levels in the last month. Argentine dryness and late Brazilian planting of their 2nd crop corn (bean seeding late); plus a likely lower final US crop keeps us from changing corn’s US stocks much next week.
Wheat’s first-half US exports are 32 million bu. higher than last year. With Australia’s drought cutting their crop to 15.9 mmt and Argentina (dryness)/Canada (early winter) having weather issues, a smaller world crops could bring demand to the US. This suggests a 25-50 million bu. small-er US wheat stocks on Dec 10.
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What’s Ahead
In overnight news, China announced the relaxation of it soybean and pork tariffs. No quantities were announced, but this could be the spark for a Phase 1 trade deal that still needs to be worked out. Current cash basis levels suggest commercial needs. Advance sales by 10% if Mar corn’s $3.90-$4.00 level, Jan soybeans’ $9.00-$9.15 range & KC Mar wheat’s $4.65-$4.75 prices are reached to cover cash needs.