phyllis nystrom

The following marketing analysis is for the week ending April 26.

CORN — Nothing changed as we returned from the Easter holiday with plentiful world supplies, U.S. commodities not competitive with South America, no trade agreements in place, and no one panicking over planting weather.

Funds continued to add to their record net short position which pushed nearby corn prices to fresh contract lows. The May corn contract traded below the December 2018 contract low, hitting $3.42.25 per bushel. Decent weekly export sales and a cooler, wetter early May forecast bounced prices off the new low for a higher daily close on fund short covering.

The week closed on a strong note, but still showed a loss for the third week in a row. The run-up in the U.S. dollar to nearly two-year highs, and plunging Argentine and Brazilian currencies, also lent pressure to the agricultural sector.

Weekly export sales were good at 30.7 million bushels. We are still 9 percent behind last year’s pace with 1.79 billion bushels of commitments. The U.S. Department of Agriculture is calling for a 5.7 percent decline in year-on-year exports. We need to average 22 million bushels of sales per week to achieve the USDA’s outlook. We normally have 87 percent of the USDA forecast sold by this time, but this year we are only at 78 percent. The USDA’s target is 2.3 billion bushels of exports. New crop sales were just 100,000 bushels. Total new crop commitments are 80 million bushels, slightly ahead of last year’s 77.2 million bushels.

Weekly ethanol production fell 32,000 barrels per day to 1.05 million bpd. Stocks were up 71,000 barrels to 22.75 million barrels. Net margins improved 2 cents to 3 cents per gallon.

Corn planting in the United States as of April 21 was 6 percent complete compared to 12 percent on average. The April 29 report is expected to show progress to 15-18 percent complete vs. 27 percent on average. We usually have about 49 percent of the crop planted by the week of May 5.

China’s corn imports in March jumped a massive 561 percent from a year ago to 420,000 metric tons. First quarter corn imports were up 76 percent from a year ago at 980 tmt. Increasing demand from ethanol and poultry producers is anticipated to kick up China’s corn imports to 5 million metric tons in 2019-20, according the U.S. ag attaché.

Argentina’s corn harvest is 28 percent complete, slightly ahead of the 27 percent average. The Buenos Aires Grain Exchange left their corn production outlook unchanged at 46 mmt.  A Reuters poll this week estimated Brazil’s safrinha corn crop at a record 68.43 mmt, — up from the March survey estimate of 66.22 mmt.

The Commitment of Traders report as of April 23 showed funds held a record net short in corn of 334,300 contracts.

Outlook: The weather may finally be a friend to prices with a wet, cool forecast for the first week of May. However, this doesn’t help us get the crop in the ground. Funds were moderate buyers late in the week, but the Commitment of Traders report as of April 23 showed them with a record net short. There is still a tremendous amount of corn in the growers’ hands that will need to move before the next crop is ready to harvest. South American crops are big. The window gets smaller to move those bushels every day. We need demand (China?) and/or Mother Nature to provide an opportunity to catch up on sales. For the week, July corn declined 6 cents to $3.61.25 after setting a new contract low of $3.42.25 per bushel. The December 2019 corn contract fell 5.5 cents to $3.80.75 per bushel after trading as low as $3.71.75 per bushel.  When looking at old crop, don’t forget about new crop. The December 2020 contract settled at $4.10.75 per bushel.

The next World Agricultural Supply and Demand Estimates report on May 10 will include a change. The world balance sheets will break China out separately — showing world totals minus China. We will also get the first 2019-20 marketing year balance sheets.

SOYBEANS — Soybeans essentially followed the same pattern as corn this week, but were unable to bounce late in the week on weather concerns. If acres can’t be planted to corn, it may mean more soybean acres. Funds were sellers of soybeans, sending nearby prices to their lowest point since September. On the latest Commitment of Traders report as of April 23, funds were just 500 contracts shy of holding a record net short in soybeans. They were net short 146,200 contracts on the COT report.

Weak currencies in South America kept U.S. supplies uncompetitive for what little demand is available. Argentina’s peso fell to a new low against the U.S. dollar. At one point, trading of the peso was temporarily halted by the Central Bank to restore order. Farmers there are said to be holding soybeans as a hedge against inflation — selling corn if they need to.

Trade chatter once again suggested a trade deal with China was getting closer, but we have yet to see any concrete agreements. The best guess is a late May or June time frame for a deal. At this juncture, it seems too little, too late to be of much help for this year’s balance sheets. The United States is also working on trade agreements with Japan and the European Union, although the EU is excluding agriculture in the talks.

China imported 4.9 mmt of soybeans in March with 1.5 mmt coming from the United States. This was about half of what they bought from us in March of last year. They satisfied over 56 percent of their bean imports in March from Brazil. China’s Vegetable Oil Industry Association is expecting China’s soybean imports for 2018-19 to fall to 85 mmt vs. the USDA’s 88 mmt projection.

China reported this week that 1 million pigs have been culled since August. The number of sows in March was down 21 percent from a year ago. They predict the price of live hogs in the fourth quarter will hit new historical highs. China’s Ministry of Ag reported as of the end of March, they had 375 million sows, pigs, and piglets vs. 428 million at the end of December. Many in the trade feel China’s hog losses are greatly underreported.

Weekly export sales were within estimates at 21.9 million bushels. Total old crop commitments stand at 1.65 billion bushels, down 17 percent from last year. The USDA is forecasting a 12 percent cut in exports year-on-year. We need to average 12.4 million bushels of sales per week to hit the USDA’s 1.875-billion-bushel projection. Total sales are just 88 percent of the USDA forecast compared to 96 percent on average. New crop sales were 900,000 bushels, bringing total commitments to 29.3 million bushels vs. 168.2 million last year. There were no new pork sales reported to China in this week’s report.

Argentina’s soybean harvest is nearly 51 percent complete. The BAGE kept their soybean production forecast at 55 mmt while the Rosario Grain Exchange raised their number to 56 mmt. There has been some chatter that Argentina is having problems making protein levels. Brazil has sold 290 tmt of soybeans to Mexico from February through April, up from 120 tmt last year in the same time frame.

Outlook: Just a repeat of last week, only more so. A poor close for the week with July soybeans collapsing to $8.67, down 27.25 cents and the November contract falling 25.75 cents to $8.87.75 per bushel. Delayed corn planting will bring up talk of more switching of acres to soybeans. Weak South American currencies keep us uncompetitive for what little demand there is. African swine fever is cutting China’s feed demand, and this is a situation that will not be solved quickly. Sorry to be so negative, but until funds want to take profit and reduce their short positions, it will be difficult to hold any substantial rally.

The daily trading limit for soybeans will change from 60 cents to 65 cents per bushel beginning May 1. Limits are reevaluated twice a year on May 1 and Nov. 1.

Nystrom’s Notes: Contract changes for the week ended April 26: Minneapolis May wheat tumbled 17.75 cents lower to $5.11.75, Chicago was only off 5.75 cents at $4.42.5 and Kansas City dropped 18.25 cents to $4.07.5 per bushel. The Kansas Wheat Quality Tour is the week of April 29. Crude oil for the week was down 77 cents at $63.30, ULSD was 2 cents lower, RBOB rallied 2.75 cents, and natural gas gained 7.5 cents.