They say good things come in three’s and over the past couple days, that seems to have applied to the grain and soy markets. Well, at least two and one-third. As I reported yesterday, it all began with encouraging reports from the U.S./Chinese trade negotiations that a “memorandum of understanding” had been compiled on six key trade issues and while nothing official has been confirmed as of yet, it was enough to provide our markets with a solid boost. The meetings are set to reconvene in Beijing next week.
Next up we have news from the USDA Ag Outlook Forum. While the corn acreage projection of 95 million was a bit higher than the trade was expecting, but beans at 85 million were a solid million below expectations. But it was the production and supply/demand projections that provided the most encouraging tidbit of information. Corn yields were pegged at 176 bpa, versus an expected 177.1 so even with the higher acreage, total production was right on target at 14.89 billion. It was the demand side of the equation though that provided the bright spot as after pushing overall usage higher, ending stocks were projected to drop 5% to 1.650 billion. Certainly not a critical level but as I have stated many times, lower stocks should equate to steady to higher prices. The bean yield was also under expectations at 49.5 bpa which equated to a production estimate of 4.175 billion. The trade was looking for around 4.320. This translated to a reduction in ending stocks to 845 million. Of course, any way you slice that number it is still huge, it is just not a huge as was expected. Even wheat had a minor taste of good news as acreage is estimated to be 47 million, versus last year at 47.8.
Last on the list of good things this week are export sales, but as I said initially, this only counts for 1/3rd good news as the numbers were just solid for the corn market. Keep in mind that the report this week is a compilation of six week’s worth of sales, so they all look large, but as I said, corn is the only one that is truly solid. Between January 10th and February 14th, we sold 6,056,500 MT or 238,474,687 bushels of corn. An average of just over 1 MMT or 39.75 million per week. While certainly not a surprise, the largest purchaser was our neighbor to the south, Mexico, with 1.427 MMT, followed by Japan purchasing 1.348 MMT and then Colombia at 712.2k MT. While it is difficult to call beans sales of 6,531,800 MT or 240 million bushels not so much when you consider that 60% of these, 3,922,500 MT were all China and already expected, it certainly does not carry the “zing” for prices you would think at first glance. The second-best buyer on the list was Egypt at 601,500 MT followed by Japan with 377,800 MT. Of course, we already knew that the U.S. has been the supplier of last resort in the world wheat market and the figures released this morning provided verification. Throughout that period, we sold just 3,574,800 MT or 131,300,400 bushels. Nigeria was our top customer with 444.4k MT, followed by Unknown destinations at 400.6k MT and then the Philippines with 303.7k MT.
While it is great to have the reports finally caught up to date and even more so to have received some encouraging news from the trade negotiations and the USDA Outlook but, realistically I do not believe any of it is enough to lift these markets out of the confines that they have been imprisoned within. For now, we are left to wander aimlessly along the same roads as we wait for a new vehicle to carry us into a new land.