COMMODITY REPORT: November 22nd

11/22/2019

Corn and soybean trading reflected lower prices this past week attributed to:-

 

  • Declining optimism over the non-documented outcome of the October 10/11th Ministerial-level trade negotiations between the U.S. and China. No specific date or venue has been set for signing a "Phase 1" agreement and the parties have not reached an understanding on tariff rescission or structural issues.
  • Prospects of exports of soybeans to China are dampened by the absence of specific details on quantities and prices or an expressed commitment from state-controlled brokers in China.

 

Uncertainties still exist:-

 

  • Traders are responding to the rate of harvesting and yields of both corn and soybeans and the effect of recent bouts of severe weather in the upper Midwest.
  • Brexit and the U.S. relationship with the U.K and the E.U.
  • Unpredictable political situation delaying ratification of the USMCA possibly until early 2020.

 

Compared with close of trading on November 15th the quotation posted for November 22nd trading for December corn was down 0.8 percent or 3 cents per bushel. The January 2020 soybean quotation, vulnerable to trade conflicts with China was down 2.4 percent or 22 cents per bushel. According to the White House, the October 11th negotiations apparently elicited an intention by China to import U.S. agricultural commodities valued at $40 to $50 billion over a non-disclosed time period. This "commitment" was subsequently refuted by the Ministry of Commerce in Beijing. To date no substantial deliveries have been made. January 2020 soybean meal was down 2.6 percent from the November 15th quotation.

 

The promise of successful negotiations to resolve the trade dispute with China is barely glowing, despite alternating White House spin and expressions of intransigence. There is no confirmation of imports from China of their intentions following Ministerial-level talks on October 10 th and 11th in Washington. No date or venue has been set to sign a predicted Phase 1 agreement after cancellation of the Asia-Pacific Meeting in Chile to have taken place this month. Beijing has indicated that a prerequisite for an agreement must be a rescission of tariffs announced in September. Orders for agricultural commodities will only be placed in accordance with the nation's needs and at prevailing prices. Current consensus is that there will not be a Phase-1 agreement on tariffs and agricultural imports in 2019. A comprehensive resolution of the trade dispute involving structural issues is not anticipated before the 2020 U.S. election. The mid-October portion of additional tariffs announced in August was deferred before the October negotiations. No further decision on when and if the proposed second round of escalations scheduled for mid-December will occur. If the U.S. imposes additional tariffs at this time any consideration of a settlement can be abandoned.

The continuous stream of conflicting statements by the White House and to a lesser extent, the Government of China is intensifying. Spokespersons have continuously commented on the progress of negotiations with overtones of Rashomon over the months since the dispute began. This is disconcerting to the commodities market and has contributed to price fluctuation. The absence of a written communiqué after the October meeting was characterized by Michael Pillsbury, interviewed on CNBC on Monday October 14th as, "It is hard to say what was agreed". On November 14th Larry Kudlow, Chairman of the Council of Economic Advisors noted that negotiations were in the "final hardest steps to a deal" and the agreement might be signed by sub-Presidential representatives of the U.S. and China. On November 21st. Vice-premier Lui He invited U.S. negotiations to Beijing to continue talks suggesting that a Phase-1 agreement is far from certain during 2019.

The following quotations were posted by the CME at close of trading on November 22nd compared with values for November 15th (in parentheses).

COMMODITY

 

Corn (cents per bushel)

Dec. 368 (371)

March '20 378 (380)

Soybeans (cents per bushel)

Jan. '20 896 (918)

March '20 910 (931)

Soybean meal ($ per ton)

Dec. 299 (307)

Jan. '20 301 (309)

Changes in the price of corn, soybeans and soybean meal over five trading days were:-

COMMODITY CHANGE FROM PAST WEEK____________________

Corn: Dec. quotation down 3 cents per bushel (-0.8 percent)

Soybeans: Jan. quotation down 22 cents per Bu (-2.4 percent)

Soybean Meal: Dec. quotation down $8 per ton (-2.6 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 0.44 cent per dozen

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

COMMENTS

Subscribers are referred to the comments on the weekly USDACrop Progress Report in this edition and the November 8 th WASDE #594 posted under the Statistics tab .

Prices of commodities will be determined by estimates of ending stocks as influenced by the 2019 harvest, exports and domestic use.

The corn price was influenced by the October 4th decision by the EPA to establish a level of 15 billion gallons of ethanol to be blended into the gasoline consumed in 2020. Existing restraints to sale of E15 will be lifted. Future waivers to "small" refineries will be restrained and the RIN process will be streamlined. Ethanol price trades in a narrow range reflecting declining domestic and export demand and was set at $1.44 per gallon on November 22nd. ($1.34 per gallon on August 30 th; $1.41 on November 1st)

Unless shipments of corn and especially soybeans to China resume in volume, which is highly unlikely in 2019, the financial future for row-crop farmers for the upcoming harvest appears bleak despite the release of two tranches of support funding in 2018 amounting to $12 billion as "short-term" compensation for disruption in trade.

On July 25th the USDA announced an additional $16 million package to support agriculture with Market Facilitation Payment (MFP) funds to be distributed in three tranches. The first payment of $2.5 billion was made with the remainder for the third quarter disbursed through the Farm Services Agency under authority of the Commodity Credit Corporation. A total of $9.6 billion was distributed in September Payments will be based on a value corresponding to the higher of 50 percent of the producer's calculated payment or $15 per acre, provided a cover crop is planted.

The second MFP payment (November 2019) was $3.6 billion. The third (January 2020) payment, presumed to be $3.6 billion, will be decided according to prevailing conditions. Regulations framed in terms of the Additional Supplementation Appropriations for Disaster Relief Act of 2019 enacted in June will determine eligibility. One million applications were received for the initial round in 2018 with 420,000 applications since July 2019 to date.

ration. A total of $9.6 billion was distributed in September Payments will be based on a value corresponding to the higher of 50 percent of the producer's calculated payment or $15 per acre, provided a cover crop is planted.

The second MFP payment (November 2019) was $3.6 billion. The third (January 2020) payment, presumed to be $3.6 billion, will be decided according to prevailing conditions. Regulations framed in terms of the Additional Supplementation Appropriations for Disaster Relief Act of 2019 enacted in June will determine eligibility. One million applications were received for the initial round in 2018 with 420,000 applications since July 2019 to date.






























































































































































































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