Now that is volatile

Published on: 13:25PM May 08, 2019

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Grain and soy markets appear to have settled down after a tumultuous start for the week.  Just as a side note, the action in these markets pale in comparison to what has been happening in the hog trade in response to all the U.S./Chinese uncertainty. June futures opened and stayed at limit lower ($3 cwt) on Monday.  This meant limits were expanded to $4.50 yesterday and were quickly reached in early trade on Tuesday.  From that extreme, we bounced all the way back to as much as $1.60 higher for the session, posting a total range of $5.97 ($2,388 per contract) before settling $.50 lower for the day.  Now that is volatility.   

Hogs

U.S./Chinese negotiations are set to resume in Washington today, and while at face value it would seem that there would be under tenuous circumstances at best, it may not be as tense as you might think.  I understand that late last week, U.S. negotiators received the latest “revised” copy of the working agreement from China and they had struck out all the references to having an official body that would oversee and make sure the parties are living up to the agreement, which in turn prompted President Trump’s weekend tweets.  It would both sides are playing a stepped-up game of rhetoric and posturing.  The positive side of my nature wants to believe that means we are getting close to completing an agreement.  

Having gone this far, we might as well just keep talking about China, as they have released import/export data for the month of April.  Their total bean imports came through at 7.64 MMT, 10.7% above the same month a year ago and 55% above March.  Do recognize that a large part of this increase was due to the fact that there was going to be a cut in a value-added tax on April 1st so many importers delayed shipments that would have arrived in March.  For the first four months of this calendar year, total bean imports stand at 24.39 MMT, down 7.9% for the year.  The overall trade deficit with the United States increased from $20.5 billion in March to $21.01 billion in April but keep in mind that total business was lower. Imports from the U.S. were down 26%, but export to the U.S. were down 13%.  Total exports from China were down 2.7%.  

Weekly export sales will be released tomorrow morning, but unless some type of announcement from the negotiations is released, I suspect the Friday reports will overshadow sales. Once again, here are trade estimates;

U.S. corn production for this year, 14.841 billion bushels derived from an average yield of 175.3 bpa. Beans production is estimated to come through at 4.1985 billion from an average yield of 49.8 bpa, and total wheat is expected to tally 1.910 billion, of which 1.277 billion will be winter wheat. For ending stocks figures, in corn, the trade is expecting 2018/19 stocks of 2.058 billion and 2.132 billion for the 2019/20 crop year. In beans, the average estimate for 2018/19 is 923 million and then for 19/20, 925 million.  Old crop wheat is expected to come in around 1.096 and then slip to 1.060 for 2019/2020. Looking at South American, the average estimate for the Brazilian crops put beans at 117 MMT and corn at 96.7 MMT. Argentine beans are estimated to be 55.7 MMT and corn 48 MMT.  Last but not least, global ending stocks estimates for 2018/19 have corn at 315.7 MMT, beans at 108.75 MMT and wheat at 276 MMT and for 2019/20, 305.75, 110.2 and 277.3 respectively.