Ag Headlines and Forecasts for Thanksgiving and Beyond - Tuesday, 21 November 2017

Now that we are mostly done with harvest across the U.S. the focus of the market is turning to other seasonal issues.  Some of the headlines to watch as we move through the next few months:

  • Building La Niña weather pattern and possible effects on the South American crop during their growing season.
  • Funds are short the corn market at near record levels which is the greatest potential the market has at this time. (231,000 corn contracts, 116,000 wheat the Funds are long 28,000 soybean contracts)
  • Rumors that China is in the market for U.S. grain has added some strength to prices. This will only offer support if we see continued buying because these early purchases are already factored into the balance sheets.
  • 20 cargo loads of ethanol were reportedly sold to China last week.
  • Concerns mount over possible changes to NAFTA
  • Locks are beginning to close along the Mississippi River.
  • Basis values are beginning to improve across the Corn Belt.

Typically there is a seasonal tendency for corn to find the bottom of the market during late November to early December. Recent sales to China and weather concerns in Argentina are now prompting some traders to move to the sidelines and take their profits. With the Christmas and New Year’s holidays quickly approaching it’s possible that many of them will stay out of the market to see what the weather does across South America before re-entering the market.

Soybean quality in the U.S. is less than ideal.  Processors are finding decreased levels of oil in the soybeans, some in the market believe this may cause the USDA to raise their domestic crush estimates.  Others are worried that this quality concern may shift Chinese business away from U.S. soybeans and to South American soybeans instead. There has been some speculation that China may be preparing to increase their soybean crushing volume by 2 to 3 times current levels by next year.  If this rumor is correct exports to China could continue to move higher.

The maps below give a visual comparison between the 2016 and 2017 total production for both corn and soybeans by state.

 

 

Agriculture exports out of the U.S. are at the third highest level on record according to World Grain. The article reports that the U.S. Department of Agriculture shows exports from the U.S. during the 2017 fiscal year reached $140.5 billion. The U.S. Ag sector also had an annual trade surplus of $21.3 billion which is an increase of 30% from fiscal 2016. The article also included a list of our biggest agricultural customers according to data from the USDA these the top 10 buyers: China $22 billion, Canada $20.4 billion, Mexico $18.6 billion, Japan $11.8 billion, European Union $11.6 billion, South Korea $6.9 billion, Hong Kong $4 billion, Taiwan $3.4 billion, Indonesia $3 billion, Philippines $2.6 billion. 20% of farm income in the U.S. comes from exports.

51 million Americans are expected to travel during this Thanksgiving holiday week. Warmer than average temperatures are expected across much of the western portion of the country while cooler than normal conditions are predicted in the east. The upper Midwest and northern Plains have been dealing with colder than normal temps most of November due to a continued southward dip in the jet stream, (It is very possible that Minneapolis may not see a 50 degree temperature during the entire month of November, this would be the first time in 20 years this has happened) this is expected to allow another unwelcomed blast of arctic air is forecast to arrive in the Midwest and East after Thanksgiving.

 

The National Science Foundation is predicting an exceptionally cold winter thanks to the return of the Polar Vortex.  Their forecast calls for “an extended period of severe winter weather” forecasters believe temperatures in the northern U.S. will stay below average for months.  A link has been found between Siberia and Northern Hemisphere winters which would suggest the breakdown of the Polar Vortex (an enormous area of cold air that typically hovers over the poles) later this winter which would allow an extended period of winter weather. The southern regions of the U.S. are expected to find slightly warmer than normal temps this winter.


Everyone at Ag Performance would like to wish each of you and yours a very Happy Thanksgiving!!

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