Markets, Exports and Weather Outlooks - Thursday, 22 March 2018

Update for March 22nd, 2018

Rain in Kansas and Fund liquidations of long positions have turned crop markets lower.  The Funds spent about 6 weeks increasing their long market positions, ultimately purchasing over 1 million contracts during that time. This is about as large of a long position as the Spec Funds ever have for corn and soybeans. So it’s safe to assume the sell-off that has begun will take some time to complete.

U.S. shipments of corn for the marketing year that runs from September-August 2017/18 shows that of the top 10 destinations for U.S. corn,  Mexico is in the lead.  Mexico has imported 267 million bushels of corn which is 18 million bushels more than 1 year ago.  A few of the other top destinations of U.S. corn are falling below last year’s shipment totals for this period. Currently Japan is 50 million bushels short of the previous year with 113 million bushels shipped, South Korea has imported 51 million bushels which is less than ½ of a year ago. Saudi Arabia and Taiwan are also behind last year’s pace having imported less than 1/3 of last year’s bushels at this same point of the marketing year.

 


Weekly inspections of U.S. soybean exports continued their normal seasonal decline down to 18.1 million bushels last week.  This total falls behind trade estimates and is 1/3 lower than this same period a year ago.  This reduction is more than 200 million bushels less than last year, the USDA expects that this gap will narrow bringing the deficit for this trade year closer to 100 million bushels.

Below are a list of some of the headlines influencing prices:

  • Concerns are mounting regarding Global Trade issues (further information below)
  • China has been booking all April/May soybeans from Brazil
  • Exports for corn are 150 million bushels behind last year and soybeans are 250 million bushels off last year’s pace
  • Soybean crushers have needs covered through the summer
  • Funds are long 184,000 corn contracts and 193,000 soybean contracts

 

Bloomberg reports that people close to the situation expect President Trump will announce around $50 billion in tariffs as well as limits on Chinese investments as soon as this week, possibly after the markets close today. These possible actions are in retaliation for intellectual-property violations that are estimated to have caused the U.S. economic damage.  The article reports, “Trump instructed U.S. Trade Representative Robert Lighthizer last year to investigate allegations that China steals U.S. intellectual property and forces American companies to transfer their technological know-how to Chinese firms as a condition of doing business in the Asian country. “ Many large U.S. companies like Walmart and Amazon have warned that such actions could raise consumer prices and negatively affect the stock market. The Chinese Premier Li Keqiang reportedly said Tuesday, “The nation will further open its economy, including the manufacturing sector, and pledge to lower import tariffs and cut taxes.” In addition they won’t demand foreign companies to transfer their technology to their domestic companies and will protect the intellectual property as well. The House Ways and Means Committee Chairman Kevin Brady is warning against such a move by the U.S. and is urging more discussions before any action stating, “it’s not about backing down, it’s about hitting the target”.

It’s interesting to consider this global trade situation from the prospective of Chinese grain producers. On March 20th the Chinese paper, Global Times, ran an editorial regarding “How subsidized U.S. soybeans hurt Chinese farmers”. The article ended with the final paragraph, “It’s pleasing to see that there is a consensus in the country.  Strong restrictive measures need to be taken against the massive subsidies and dumping of soybeans by some countries on China.  This can reduce the adverse effects of imported soybeans on the Chinese market and provide a fair and sound environment for the sustainable development of the Chinese soybean industry.”

Some of the driest parts of Kansas wheat territory received some much needed rainfall last week.  Unfortunately the storm system only brought ¼ of an inch to most of the state but fortunately the 6 to 10 day extended outlooks shows a pattern change that will bring above normal precipitation to the severely dry southern Plains region as well as the Corn Belt and Delta.

 

 

Beyond that the 8 to 14 day forecast shows the central and western Corn Belt will move into a drier pattern.  The Plains and Delta will remain in the wetter pattern which will halt any early planting progress in the Delta region.

 

 

 

 

 

 

 

 

 

 

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