February USDA Report

The Feb supply and demand report generally does not contain many changes in US crop. The market was hoping for some adjustments this year due to unique production issues and also the Chinese trade agreement. We were mostly disappointed. It was not a bearish report, but we did not get the help we would have appreciated.

Corn was considered very neutral compared to expectations. USDA did not lower US ending stocks. Even with the trade deal in place, USDA lowered exports by 50 million bushels and left Chinese imports unchanged. World feed grain demand continues to rise (even with the loss of so many pigs in China) which is bullish long term. Corn cannot find enough momentum to rally but has held support well around 380. We need to have some of our basis march corn sold before the end of the month whether or not we get to our 390 target. Have new crop working at $3.99 vs Dec.

The report was considered fairly bullish compared to expectations, but soybeans were unable to gather any momentum from it. USDA increased exports by 50 million bushels and decreased carryout by the same amount. We hope this is only the first of several more adjustments higher as they also increased Chinese demand. Brazilian production was adjusted higher as they are beginning to harvest. The excessive rains are forecast to start slowing down allowing them to continue bean harvest and get corn planted behind the beans. Absent positive news on the containment of the virus or export announcements, the market will turn focus to South American weather. Basis remains strong on beans and I think we can be more patient than corn. We do have a South American crop coming, but US acres should not be near as much of a threat in beans as it is corn.

The report was very neutral for wheat but you would not have guessed it by looking at the close. With no positive Chinese demand to support, and world stocks sitting at adequate levels, wheat has fallen victim to fund selling. I would not be hedging wheat below $5.50 so be patient on wheat here.

USDA did not make any adjustments to US cotton, but raised world carryout. Areas in China not close to the epicenter of the virus outbreak have started to get back to work and that is a very good thing for cotton. Cotton is more sensitive to economic conditions than the grains and slowing mills on the interior of China were very negative. Look for cotton to rebound back to $70 in both old and new crop.