We have endured another slow week without much positive news to give the market a spark. The headlines have been mostly negative as South America weather patterns have turned wetter benefiting their crops and no good news has come out on trade with some rumors of some serious sticking points on both sides. Corn exports were above expectations but still way behind the pace needed to get to USDA estimates. Some positive news we did get was harvest progress as corn was reported at only 66% harvested, which was slower than most were expecting. Soybean harvest was only 85% complete with many areas in the Northern belt are under snow. Harvest losses will continue to increase.
Everyone is asking why the market does not seem to care about supply issues. The answer is that the demand losses are much easier to see and measure than the supply losses. We get exports reported every week and see how poor they have been. We see ethanol plants shutting down. There is still much uncertainty as to how much supply has been lost so the market stays focused on the demand loss that can be more accurately measured.
Two weeks ago we were told a “phase 1” deal with China was imminent. At that time there was little in the way of confirmed details but there was a noticeable reduction in the sniping by both sides at each other in the press. As time has gone by, the negative comments from both sides have increased and this on top of no official announcement of details has led everyone to believe the remaining issues preventing a deal have grown larger not smaller. Several people in the administration, including the head negotiator, have said we are very close but the market wants to see real progress after being fooled so many times. Right now it is anyone’s guess as to if we are going to get a phase 1 deal. I can say that it appears that both sides still have much more incentive to make a deal than to put it off.
Slow harvest, LP shortages and headlines of corn standing in blizzard conditions has not been enough to give much support this week. Basis in the midwest remains very strong indicating farmers are very reluctant to sell corn and have plenty of space to store this short crop. It may also be an indicator of stronger demand than what the market is trying to price in. Basis in the Southeast is also appreciating. On a positive note, ethanol stocks have dropped significantly to levels last seen in Sept of 2017. That should help keep production from dropping any further. With stronger basis, everyone needs to be a seller at $4. Both old and new crop!
The pictures of soybeans laying under snow have not been able to overcome the much needed moisture in South America and the perceived lack of progress updates from the trade talks with intermittent negative rumors thrown in. The crop was planted late in South America and can recover if the weather cooperates, but may push the harvest dates too late to be able to plant the corn crop behind it. The market will be watching closely to see if the weather continues to improve or turns back dry. Exports have been decent compared to the months of the trade war, but still behind levels from before the trade war.
Basis has gotten stronger in the Southeast. I have never seen our basis improve going into our harvest. We are slow getting started but a smaller than expected crop and an increased export market to countries other than China have greatly benefited our basis. Due to extra space available this year, elevators are bidding more aggressively after soybeans making the end users have to raise their bids to stay competitive. Do not settle for a posted basis this harvest on beans!! There are better bids out there! The market is also offering good carry to keep beans in the bin.
Cotton got the most help from USDA and also had a very large export number today and finds itself trading back close to $0.65. Harvest progress was reported at 65% which is right on normal pace. Quality out of Texas and the major cotton belt is a little disappointing. We have some of the best grades and the bids for recaps has reflected that. If you have cotton to offer make sure you shop the recaps! The lack of trade progress is keeping cotton from being able to move much. We need a trade deal!
Wheat has had more volatility than the other grains, but it cannot get a breakout to the upside. The bitter cold sparked some buying as talk of winter kill hit the headlines. Wheat acres are projected to be down again after the lowest acres last year in over 150 years. However, demand is also shrinking nationally that offsets. Wheat acres will be up in the Southeast but mostly because I do not think they could get any lower than last year due to the poor planting weather.
7 Day Precip Forecast