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Here's what happened this week in the US grain market

The grain market bulls continue to be squelched by the coronavirus outbreak and its implications on worldwide demand for grains.

14 February 2020, at 12:47pm

Late this week the outbreak was reported to be escalating in China--again. Grain traders are wondering if China will be forced to reduce expected purchases of US agricultural products, agreed upon at the signing of the partial trade agreement in January, because of the near-term damage the outbreak is inflicting upon the Chinese economy. The wheat markets have sold off from their January highs and near-term technical damage has been inflicted, to suggest market tops are in place. Soybean prices are also trending lower and soybean meal futures are languishing at lower price levels. Corn futures are also trading sideways and choppy at lower price levels. Do not look for significant uptrends to develop in the grain markets in the near term. Look for wheat prices to continue to trend lower, and corn and soybean prices sideways at best. The next likely chance for significant rallies in the grain markets will come several weeks from now, when the US corn and soybean planting seasons come about. There are some long-term weather forecasts calling for a cool and wet spring in the US midsection, which would be a bullish development for corn and soybeans if such actually develops.

The next week’s likely high-low price trading ranges:

March soybean meal futures--$286.40 to $297.00, and with a sideways bias

March soybean futures--$8.78 to $9.00, and with an upside bias

March corn futures--$3.75 1/4 to $3.88, and sideways bias

March soft red winter wheat futures--$5.30 to $5.60, and with a downside bias

Latest US Department of Agriculture (USDA) reports

Weekly export sales report

USDA Thursday released the following export highlights in its export sales report for week ended February 6.

US WHEAT: Net sales of 643,100 metric tons for 2019/2020 were up 90 percent from the previous week and 10 percent from the prior 4-week average. Increases primarily for Nigeria (130,800 MT, including 51,700 MT switched from unknown destinations), the Philippines (104,800 MT), South Korea (91,100 MT), Vietnam (81,000 MT, including 10,000 MT switched from unknown destinations), and Mexico (79,200 MT), were offset by reductions for unknown destinations (50,900 MT), Bangladesh (3,000 MT), and Costa Rica (200 MT). For 2020/2021, net sales of 44,000 MT were for the Philippines (24,000 MT), unknown destinations (11,000 MT), and Peru (9,000 MT). Exports of 506,300 MT were up 25 percent from the previous week and 26 percent from the prior 4-week average. The destinations were primarily to Nigeria (98,800 MT), Bangladesh (87,000 MT), Mexico (69,400 MT), the Philippines (65,800 MT), and Japan (59,800 MT). Optional Origin Sales: For 2019/2020, the current outstanding balance of 56,000 MT is for the Philippines.

US CORN: Net sales of 968,800 MT for 2019/2020 were down 22 percent from the previous week and 9 percent from the prior 4-week average. Increases primarily for Japan (383,000 MT, including 60,300 MT switched from unknown destinations and decreases of 21,300 MT), South Korea (193,500 MT), Colombia (110,700 MT, including 75,000 MT switched from unknown destinations and decreases of 1,400 MT), Saudi Arabia (61,700 MT, including 70,000 MT switched from unknown destinations and decreases of 8,300 MT), and Mexico (52,600 MT, including decreases of 100 MT), were offset by reductions for unknown destinations (14,700 MT) and El Salvador (7,900 MT). Exports of 782,800 MT--a marketing-year high--were up 31 percent from the previous week and 41 percent from the prior 4-week average. The destinations were primarily to Mexico (228,700 MT), Japan (203,800 MT), Colombia (189,700 MT), Saudi Arabia (61,700 MT), and El Salvador (29,600 MT). Optional Origin Sales: For 2019/2020, options were exercised to export 50,000 MT to Israel from other than the United States. The current outstanding balance of 524,900 MT is for South Korea (466,000 MT), and Egypt (58,900 MT).

US BARLEY: No net sales for 2019/2020 were reported for the week. Exports of 1,000 MT were down 21 percent from the previous week, but up 14 percent from the prior 4-week average. The destinations were Japan (900 MT) and Taiwan (100 MT).

US SORGHUM: For 2019/2020, net sales of 17,600 MT resulting in increases for China (72,600 MT, including 65,000 MT switched from unknown destinations) and Japan (10,000 MT), were offset by reductions for unknown destinations (65,000 MT). Exports of 84,300 MT were up noticeably from the previous week and up 59 percent from the prior 4-week average. The destinations were China (72,600 MT) and Mexico (11,700 MT).

US SOYBEANS: Net sales of 644,800 MT for 2019/2020 were down 8 percent from the previous week, but up 2 percent from the prior 4-week average. Increases primarily for China (132,000 MT), Egypt (120,000 MT), Bangladesh (60,900 MT, including 56,000 MT switched from unknown destinations and decreases of 1,100 MT), the Netherlands (56,000 MT, including 60,000 MT switched from unknown destinations and decreases of 4,000 MT), and Japan (48,400 MT, including 29,700 MT switched from unknown destinations and decreases of 1,200 MT), were offset by reductions for Costa Rica (100 MT). For 2020/2021, net sales of 6,300 MT were for Japan (6,100 MT) and Hong Kong (200 MT). Exports of 611,300 MT were down 58 percent from the previous week and 50 percent from the prior 4-week average. The destinations were primarily to Bangladesh (85,900 MT), Mexico (73,000 MT), China (69,000 MT), the Netherlands (56,000 MT), and Taiwan (50,800 MT). Exports for Own Account: For 2019/2020, the current exports for own account outstanding balance is 2,100 MT, all Canada.

US SOYBEAN CAKE AND MEAL: Net sales of 234,200 MT for 2019/2020 were up 10 percent from the previous week, but down 44 percent from the prior 4-week average. Increases primarily for Morocco (37,000 MT), the Philippines (35,400 MT), the Dominican Republic (25,000 MT), Canada (22,600 MT), and Ecuador (22,600 MT, including 7,000 MT switched from unknown destinations and decreases of 400 MT), were offset by reductions for Nicaragua (5,500 MT) and Belgium (900 MT). Exports of 268,200 MT were up 56 percent from the previous week and 27 percent from the prior 4-week average. The destinations were primarily to Spain (60,900 MT), the Philippines (50,700 MT), Mexico (45,500 MT), Libya (27,500 MT), and Canada (17,100 MT).

February USDA supply and demand report highlights

Following are the highlights of this week’s monthly USDA supply and demand report (WASDE), released Tuesday.

Wheat

Prices for US wheat classes were mixed during the month of January. Hard red winter (HRW) dropped $7/ton to $230. Soft red winter (SRW) gained $1/ton to $252 as supplies of that class remain tight. Both classes showed notable declines toward the end of the month based on favorable rains for 2020/21 wheat as well as on concerns of slowing exports. Soft white winter (SWW) gained $8/ton to $241 on firm export demand. Hard red spring (HRS) dropped $19/ton to $259 likely pressured by easing logistical constraints in the Pacific Northwest.

Global wheat production is seen marginally lower. Global wheat trade was raised slightly with stronger demand from China and Turkey. Higher exports for the European Union, Kazakhstan, and the United States more than offset lower shipments from Canada. The projected US season average farm price is unchanged at $4.55 per bushel.

Global wheat exporter prices showed mixed direction during the month of January. Argentina’s price skyrocketed with a rapid pace of shipments. Local supplies are tightening as exporters marketed a large portion of the crop in advance, anticipating a higher export tax. Russia’s prices rose as supplies there have become seasonally tighter. EU prices were steady during the month. US HRW weakened slightly, improving its competitiveness with the European Union and Russia. Canada’s prices dropped but remain elevated based on lingering transportation backlogs. Australia’s prices eased slightly but are still uncompetitive based on tight supplies.

Corn

Since the January WASDE report, US corn bids have drifted lower than those of the other major exporters. Brazilian bids remain seasonally unavailable. Argentine bids are up $5/ton to $181 and Black Sea bids are up $7/ton to $183 on strong foreign demand. US bids are up $3/ton to $178, reflecting sizeable recent sales as evidenced by export sales reports.

World corn production is forecast up with larger crops in Moldova, South Africa, and Ukraine more than offsetting a decline in Vietnam. Global trade is up marginally from last month with higher imports for Brazil and Turkey. Lower exports for the United States are more than offset by higher exports for the European Union, South Africa, and Ukraine.

The US season-average farm price is unchanged at $3.85 per bushel.

Ukraine Corn

Near Record Crop Ukraine corn production for 2019/20 is estimated at 35.8 million metric tons, up 1 percent from last month, but slightly down from last year. Yield is estimated at 7.16 tons per hectare, down 1 percent from last month and down 9 percent from last year’s record. The estimated harvested area is at 5.0 million hectares, up 2 percent from last month and 10 percent from last year. Harvest was completed in November.

Soybeans

The 2019/20 global oilseed production is forecast by USDA at 577 million tons, a 2-million-ton increase from January primarily driven by larger crops of soybean and sunflower seed. Oilseed crush is raised 2 million tons to 498 million on higher soybean crush in China. Oilseed ending stocks are revised up 2 million tons mainly on higher Brazil production and China stock rebuilding. Protein meal production is up 1 million tons from last month to 340 million tons primarily on higher soybean meal production in China, Ukraine, and Bangladesh. Protein meal ending stocks are slightly down from December. Vegetable oil production is down 1 million tons and oil ending stocks are down 2 million tons on declines in palm oil production. The projected US season-average farm price for soybeans is lowered by $0.25 to $8.75 per bushel.

Both US soybean and soybean meal export prices fell slightly in January, while Brazil and Argentina meal prices strengthened. US Gulf FOB soybean export bids in January averaged $361/ton, down $2 from December. Brazil Paranagua FOB averaged $359/ton, down $10 from December. Argentina Up River FOB averaged $361/ton, down $6. The soybean price spread continues to narrow. US soybean meal export bids in January averaged $340/ton, down $4 from December. Brazil Paranagua FOB averaged $321/ton, up $5 from December, and Argentina Up River FOB averaged $336/ton, up $5.

Protein meal production is up 1 million tons from last month to 340 million tons primarily on higher soybean meal production in China, Ukraine, and Bangladesh. Protein meal ending stocks are slightly down from December.

For the report ending January 30, 2020, US soybean accumulated exports (shipments) to China totaled 11.4 million tons and 11.8 million to the rest of the world. Outstanding sales were 611,000 tons to China and 3.3 million to the rest of the world. Last year at this time, accumulated exports to China were 474,000 tons and 12.7 million to the rest of the world, and outstanding sales to China were 3.0 million tons and 12.3 million to the rest of the world. US soybean export commitments (outstanding sales plus accumulated exports) to China totaled 12.0 million tons compared to 3.5 million a year ago. Total commitments to the world were 32.3 million tons, compared to 30.4 million for the same period last year.

Brazil Soybeans

Brazil’s 2019/20 soybean production is estimated at a record 125 million metric tons (mmt), up 2 mmt (2 percent) from last month and 8 mmt (7 percent) from last year. Area is estimated at a record 36.9 million hectares (mha), unchanged from last month and up 1 mha (3 percent) from last year. Yield is estimated at 3.39 tons per hectare, up 2 percent from last month, up 4 percent from last year and up 6 percent from the 5-year average. Record output is expected this year and soybean area continues to increase at a record pace. This year Brazil is also expected to overtake the United States as the world’s leading soybean producer.