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Image of grain bins with words Grain market week in review with Bryce Knorr and Ben Potter in white. Entire image has red tint.

Grain market week in review, Feb. 22, 2019

Purchase commitments and exports impact grain markets this week.

Audio

Corn and soybean markets are little changed overnight as trading starts after the Presidents Day holiday. There’s a reason futures are treading water. USDA updates its statistical forecast of 2019 acreage at its annual outlook conference on Thursday and Friday, when high-level trade talks between the U.S. and China also resume, counting down towards a March 1 deadline.

Bearish technical traders had a field day Tuesday, returning from the holiday weekend to punish corn, soybeans and wheat on their charts. Futures are trying to stem the tide of that selling this morning, with mixed results so far as markets wait for potentially big news to break over the next couple of days. In addition to high level trade talks with China USDA will update forecasts for 2019 crops at its annual outlook conference.

Grain futures are higher this morning with corn and soybeans continuing yesterday’s better tone. Buying looks to be mostly short covering from bears who don’t want to be caught leaning the wrong way. Plenty of news could be coming from Washington the next couple of days. Negotiators from China and the U.S. are discussing what the outline of a deal could look like while USDA updates its acreage forecast at the annual outlook conference.

Futures are steady overnight, holding on to Thursday’s gains as another eventful day gets underway in Washington. President Trump meets with China’s top trade negotiator and USDA puts out a slew of data that should help set the stage for spring markets. Many growers, of course, are wondering just when spring will begin as they brace for more storms.

Grain markets are mostly steady to a little higher this morning, holding on to Thursday’s rally as traders brace for a very active news day.

Grain markets had plenty to chew on today, from a bevy of USDA acreage and export data to plenty of fresh speculation regarding U.S.-China trade negotiations. 

 

Exports

Weekly grain export inspections for the week ending Feb. 14 didn’t hold much bullish data – especially for wheat, which fell moderately below the prior week’s tally and below the average trade guess, according to Farm Futures senior grain market analyst Bryce Knorr.

China put its money where it’s mouth apparently is, at least with soybeans. USDA filled in some of the data gaps created by the government shutdown by releasing total export sales for the last six weeks, and the news showed large purchases by the world’s largest soy importer.

 

More from USDA

Updated 2019 acreage and price forecasts put out Thursday by USDA at its outlook conference provided a few changes to the agency’s earlier estimates, but are mostly in line with sentiment in the trade. Government economists kept their expectation for farmers to plant 92 million acres of corn, up from 89.1 million in 2018, despite an average cash price forecast of $3.65 for the crop. USDA put soybean seedings at 85 million, up from the November estimate of 82.5 million but down from 89.2 million put for 2019. Farm Futures survey found acreage of 84.6 million, below the average guess from the trade of 86.1 million.

Real net farm income in the U.S. hit a definitive peak in 2013 – topping out at $134 billion – following a commodity price spike spurred by severe drought the prior year. But over the past five years, farm income has fallen dramatically to level out at around $66 billion in 2018. Another year of low commodity prices looms, and that will continue to weigh on farm income, according to USDA chief economist Robert Johansson, speaking at the 2019 Agricultural Outlook Forum in Washington, D.C.

If U.S. farmers plant 92 million acres of corn this year and get trend-line yields, the natural result will be a bin-busting harvest, according to the latest projections from USDA.

 

Deep Dive

It’s no secret that commodity prices are always in flux. It can sometimes be difficult to pick out patterns amid all of the noise. Even so, it can be helpful to take a closer look at the various “rhythms” that tend to occur thanks to a bevy of reports released on a quarterly, monthly, weekly and sometimes daily basis. Find out what reports and patterns we’re most interested in tracking in the latest episode of the Deep Dive podcast.

 

Outlooks

Fertilizer Outlook - Fertilizer is a tale of two markets headed into spring. While retail costs remain fairly firm after slow fall applications, wholesale values continue to head lower for many products. That means growers still looking for supplies may be forced to bargain hard and search far and wide for good prices to avoid a supply chain that could be squeezed in the months ahead.

Basis outlook - March 1 traditionally marked a milestone in the cash market for grains. The day when some farm loan payments were due coincided with the start of deliveries against March futures contracts. Cash flow sales by farmers sometimes swamped the market, weakening basis. Other times low cash prices kept grain bins locked as shippers eyed the start of traffic on the river system on parts of the Mississippi that shut for winter.

Corn outlook - The government shutdown that created a big data vacuum threw longstanding seasonal patterns out of whack. Whether those trends get back on track will go a long ways toward proving whether corn is profitable, both for 2018 inventory and 2019 production.

Energy/ethanol outlook - While most of the petroleum complex is trading near its highest levels in a couple of months, the part of the industry that matters most to farmers is headed in the other direction. Crude oil, diesel and gasoline all rallied this week, but ethanol lagged after production dropped to match its lowest level in more than two years.

Soybean outlook - The market is always right. Even when, as is the case in soybeans right now, it doesn’t make much sense. Fundamentals remain bearish, despite a few helpful trends. Brazil’s crop is getting smaller and is likely around 75 million bushels less than USDA currently projects. China is buying and taking delivery on U.S. soybeans again, as negotiators try to hammer out a trade deal that’s about much more than agriculture.

Wheat outlook - The wheat market had a bright, shining moment last summer, when threats to crops across Europe and into the Black Sea and Australia raised hopes the time was right for the U.S. to begin selling lots of wheat to a hungry world. But yields overseas outside of northern Europe and Australia turned out better than expected, and those sales by and large were slow to materialize. Business finally picked up as the calendar flipped to 2019, but it may be too little, too late for a wheat market on the verge of life support.

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