Back to Basics: Supply and Demand Takes Control

February 22, 2019 05:00 PM
 
 

The corn and soybean markets ended the week on a positive note, both slightly higher. This followed an eventful week. 

U.S. and Chinese negotiators met for another week of intense trade talks and news outlets in China report a deal is coming soon. During talks this week, Bloomberg said China is proposing to buy an additional $30 billion a year of U.S. agricultural products including soybeans, corn, and wheat. On Friday, Feb. 22, Secretary of Agriculture Sonny Perdue tweeted Chinese officials have committed to buying an additional 10 million metric tons of U.S. soybeans.

Additionally, USDA held its at 2019 Agricultural Outlook Forum in Arlington, Va., releasing its first look at production, price and supply-and-demand data

For 2019, USDA predicts U.S. farmers will plant 92 million acres of corn, which is a 3% jump from last year, and 85 million acres of soybeans, which is down 5% from last year.

As for prices, USDA forecasts a slight improvement in 2019 for all major crops, except cotton. This year’s season-average price for corn is forecast at $3.65, up 1% from 2018. The season-average price for soybeans in 2018 is forecast at $8.80, a 2% increase from 2018. 

“USDA was a little less on beans and a little more corn than what some people thought, but not enough to make a big difference,” says Jerry Gulke, president of the Gulke Group. “And, of course, that's a fluid number. There’s still a chance to move acres. The March Planting Intentions report is going to be better than the one that came out this week.”

Now that we have all this information, will the grain markets be back to business as usual? That’s the big question, Gulke says.

The estimates from USDA, as well as USDA’s acknowledgment it will take time for the U.S. to work through the burdensome soybeans stocks that resulted from trade disputes with China, provide some insights into price direction, Gulke says.

“It doesn't tell me necessarily how low prices will go, but it probably tells me where they are not going,” he says. “I think the idea of getting a sustained move above 10 bucks, even with a weather problem this spring in the United States, is probably a figment of our imagination. We have to keep that in perspective.”

On the flipside, how low could soybean prices go? “Some fundamentals suggest beans could go under $8,” Gulke says. “We don't have a lot of volatility—the markets have been kind of dead for a while and in a sideways range.”

Gulke suggests farmers look through the commentary and charts from the presentation this week by USDA Chief Economist Robert Johansson. View Johansson's slides and read a transcript of his presentation. 

Look for Gulke’s “Technically Speaking” column next week, which will further dive into USDA’s forecasts. Find it and more at AgWeb.com/gulke

 

Read more coverage from USDA’s 2019 Agricultural Outlook Forum:

USDA: Corn to Be King Again in 2019

USDA Outlook: Highlights for Corn, Soybeans and Wheat

9 Ag Statistics to Know in 2019

Ag Leaders Offer Limited Answers with USMCA Tariff Timeline

USDA: Soybean Plantings Will Decline, Corn Will Rise in 2019

 

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Comments

 
Spell Check

Dave
Auburn, IN
2/23/2019 10:52 PM
 

  Whoa there PJ, those phony, counterfeit, lying comments you spit out smell like , as usual , you can't see the truth, your hoof in mouth disease is getting the best of you, how's that work for you? Good luck with that, MAGA

 
 
ck
bad axe, MI
2/23/2019 07:02 AM
 

  Jerry if Trump don't get then the trade deal he wants another round of 10% tariffs kick in on the 500 billion China imports into the US every year. That's 50 billion in tariffs that's more than what our whole soybean crop is worth for 2019 . Trump is going to take some of the 50 billion and pay us until he gets this settled. Trump not going to smoke the farmer in an election cycle, the Midwest is his base. AGweb puts these articles out everyday that contradict each other just to divide us.

 
 
WESLEY HITCHCOCK
SPARKS, NE
2/23/2019 08:04 AM
 

  Help me with the math... 1 metric ton is 2,264 lbs.. 10 million metric tons is 22,640,000,000 pounds. The test weight of soybeans is 60 lbs per bushel. China is committing to buy 377,333,333 bushels of soybeans. The last I saw USDA was projecting a 200 million bushel carry over. Doesn't a purchase of 377 million bushels more than offset a 200 million bushel carry over?

 
 

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