Markets Now with Tyne Morgan: Did USDA Report Hint at Growing China ASF Concerns?
USFR- Roundtable 1 3/13/21
USDA’s latest World Agricultural Supply and Demand Estimates (WASDE) didn’t throw the market much new news.
“I think the market was looking for a little bit of a change maybe in some of these export forecasts, but the USDA decided to wait and see how the South American situation materialized here over the next month before doing anything,” says Brian Basting of Advance Trading.
However, there are a few changes Basting thinks were overlooked at first, and some changes that could be troubling for demand.
“I think the one thing that slipped under the radar a little bit time was they did have some significant adjustments to China, in the context of their domestic crushers reduced, domestic meal consumption was reduced,” says Basting. “So, that's a little bit of a yellow flag there in terms of possible impacts of African Swine Fever (ASF). But otherwise, the market really wasn't that surprised, and we weren't that surprised.”
Growing worries about just how bad ASF may be in China seemed to take hold of the soybean meal market this week, with the meal market experiencing consecutive down days. Prices trended down to levels the market hasn’t seen since December.
While demand questions continue to get raised, there are also some uncertainty about supplies. The weather in South America hasn’t been ideal, but it wasn’t bad enough to prompt USDA to make any large adjustments this week.
“I don't think there's a whole lot of momentum yet for reductions in South America, so the USDA probably does want to take the lead there,” says John Payne, publisher of This Week in Grain and Oilseeds.
Payne says the one change he took note of was the adjustment to hard red wheat demand.
“USDA did drop some demand there,” says Payne. “It fell a little bit and I think that was counter to what we were expecting. So, in the coming months, the real dynamic will be what happens with the wheat crop out West. Did the farmers graze on it? Will they sell it at this price? I think a lot of folks are going to harvest.”
Payne says as USDA prepares for its next big report, which will be the Prospective Plantings report, as well as issuing the latest look at quarter stocks estimates, it’s important to note how the trade reacted to recent reports.
“It's kind of in the M.O. of the trade of late, you tend to see the bid market bid up ahead of th se events, and then kind of take it away,” says Payne. “I look for the same type of action we get into the grain stocks, numbers in the acreage numbers. In fact, those are where really the surprises have come from over the last few years, even going back into like the 2010 timeframe, when we would find the grain stocks just weren't there.”