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WEEKLY COMMODITY REPORT

05/11/2019

The following quotations for May and July as indicated were posted by the CME at close of trading on Thursday May 10th together with values for the previous week in parentheses. Last week the commodities market recorded marked declines in the futures prices of corn, soybeans and soybean meal for May and July. This was attributed to the unexpected imposition of tariffs on goods to be imported from China in response to backtracking and lack of progress in bilateral trade negotiations to settle the trade dispute. Optimism leading to increases in commodity prices two weeks ago was apparently premature. The negative effect of the release of the USDA Grain Stocks Report on Friday March 29th documenting soybean stocks followed by the April 9th WASDE #587 confirmed the effect of reduced shipments of soybeans to China. The numerous conflicting statements by White House spokespersons over the months since the dispute began is disconcerting to the commodities market and contributes to fluctuation in prices.

COMMODITY

 

Corn (cents per bushel)

May 342 (355)

July 350 (370)

Soybeans (cents per bushel)

May 798 (830)

July 808 (843)

Soybean meal ($ per ton)

May 286 (292)

July 287 (297)

Changes in the price of corn, soybeans and soybean meal this past week were:-

COMMODITY CHANGE FROM PAST WEEK

Corn: May quotation down 13 cents per Bu         (-3.6 percent)

Soybeans: May quotation down 32 cents per Bu  (-3.8 percent)

Soybean Meal: May quotation down $6 per ton.   (-2.1 percent)

  • For each 10 cent per bushel change in corn:-

The cost of egg production would change by 0.45 cent per dozen

The cost of broiler production would change by 0.25 cent per pound live weight

  • For each $10 per ton change in the price of soybean meal:-

The cost of egg production would change by 0.40 cent per dozen

The cost of broiler production would change by 0.25 cent per pound live weight

COMMENTS

The USDA Crop Progress Report for the week ending May 6th noted that 23 percent of the corn crop had been planted, compared to a five-year average of 46 percent. Six percent of the corn crop has emerged compared to the five-year average of 13 percent.

Six percent of the soybean crop has been planted, compared to the five-year average of 14 percent

The March 29th USDA Grain Stocks Report, issued Quarterly confirmed a 3.2 percent decline in corn stocks in all positions to 8.60 billion Bu. compared to the March 2018 report. Farm storage represented 59.6 percent of this total, 2.5 percent higher than for the corresponding period in 2018.

Soybean stocks increased by 28.7 percent from March 2018 to 2.716 billion Bu. in March 2019. On- farm storage attained 1.270 billion Bu. representing 46.7 percent of all stocks. On-farm storage was 48.5 percent higher in March 2019 compared to 2018 reflecting the intent of farmers to hold stocks in anticipation of a rise in price following resumption of exports to China.

Negotiations with China are apparently at an impasse unless China makes extensive, durable and firm concessions as suggested following shuttles between Beijing and Washington that will continue as high-level discussions in the U.S. this week. Some concessions have been made by China on coercive trade practices and dispute resolution as amplified by President Xi addressing participants in a Belt and Road Conference this past week but apparently not to the satisfaction of the White House. From an agricultural industry perspective the question of delays by China in approving new GM cultivars has yet to be settled. No date has been set for a summit to sign a trade deal. Prices will be influenced by the trend in stock levels, area to be planted in 2019 and early crop progress in the face of possible flooding.

The March 28th USDA projection of plantings based on farmers' intentions suggest that an additional 3.66 million acres will be planted to corn compared to 2018.This increase will be offset by a reduction in soy acreage by 4.58 million acres.

According to the April 9th 2018 WASDE Report #587, 81.7 million acres of corn will be harvested in 2019 to produce 14.42 Billion bushels. The soybean crop is projected to attain 4.54 Billion bushels from 88.1 million acres harvested. The levels of production for the two commodities are based on preliminary pre-planting projections of yield and acreage. Ending stocks were revised based on anticipated domestic use and exports.

See the WASDE posting summarizing the March 8th USDA-WASDE Report #587 under the STATISTICS tab documenting price projections and quantities of commodities to be produced, used and exported from the 2019 harvest.

Unless shipments of corn and soybeans to China resume in volume, as anticipated, the financial future for row-crop farmers appears bleak despite the release of two tranches amounting to $8 billion as "short-term" compensation for producers of commodities.

Mid-May will be make-or-break for negotiations with China. The outcome has profound implications not only for the two antagonists but for the World economy.