China Showing Up in Feb. WASDE, Both Phase 1 and Coronavirus

03:27PM Feb 11, 2020
Major exports leaving USDA export ships.
( Farm Journal Media )

Tuesday’s World Agricultural Supply and Demand Estimate (WASDE) was not a market mover, but it did offer a first look at how USDA views impact of the Phase 1 trade deal with China.

Two numbers stuck out to Farm Journal economist and AgriTalk Radio host Chip Flory.

“Number one on soybeans, they increased the export estimate by 50 million bushels which brought the carry-over down 50 million bushels from last month,” Flory said on AgDay TV. “We're sitting at 425 million bushels. And that was the incentive for the world board to take 25 cents off the expected national average on farm cash price for soybeans, which is now down at 8-75. So I I'm glad that they reacted to the lower price by increasing demand. It's not that demand was higher to increase the price, it’s that price was lower to increase demand. So there's still some work that that the World Board has to do to incorporate the Phase 1 agreement if China does try to live up to the terms of that agreement.”

The pork estimate also reflects the influence of China according to Flory.

“The pork export estimate (was) up 275 million pounds from last month, and year-on-year we're now looking at a 17% increase - over a billion pounds more of pork exports are expected in in 2020,” Flory explained “I think there's some coronavirus influence in the report too. They took a million bales off of China's cotton consumption estimate. That's got to be because some of the mills have been shut down for a while and the textile industry is slowing down in China because of the coronavirus. I think that's probably the influence there.”

Market analysts were watching the February WASDE report to see how USDA would approach the remaining unknowns about impact of the trade deal with China.

“Right now they're taking a lead from behind approach. In other words, they'll make some small movements, but they'll make the major ones after we see confirmed sales begin there,” said Rich Nelson of Allendale.

USDA will need to be more aggressive in WASDE projections, however, if there is going to be a big Chinese demand for soybeans later this year according to Nelson.

“I do want to see USDA be more proactive in the coming months, because if we're going to change acreage to adjust to if there is a phase one deal, we've got to have a lot more soybean acres than what's currently being planned by farmers. And that means you've got to have a sharp change in price within the next two, three months here,” he said.

February WASDE 021220
February WASDE Report Analysis 021220