It may seem hard to believe, but the first day of spring is just around the corner. With that in mind, the grain markets are eagerly anticipating 2019 planting intentions and watching weather forecasts for South America.
“We’re seeing the markets continue to go sideways and choppy for now,” Brian Basting of Advance Trading said in a media conference call hosted by MGEX. “A big factor now is watching the double-crop Brazilian corn crop being planted now and the possibility of a bumper crop this year unless there are weather problems.”
Basting offered insight and analysis of the wheat, soybean and corn markets shortly after the Feb. 8 release of the latest World Agricultural Supply and Demand Estimates by the U.S. Department of Agriculture. The WASDE report, along with others, was delayed by this winter’s shutdown of the federal government.
“Everybody was looking forward to these reports,” he said.
The WASDE report didn’t hold a lot of major surprises, as a lot of the estimates already were built into the trade, Basting said, adding, “They did underestimate corn and soybean numbers, but they were mostly in line.”
The soybean market is focused on the weather in Brazil and Argentina, he said. The anticipated size of the Brazilian crop was lowered in the WASDE report, along with expected imports to China this crop year. As a net result, he said, the USDA lowered estimates for U.S. soybean exports.
Soybean production is estimated at 4.5 billion bushels, down 56 million. Harvested area is estimated at 88 million acres, down fractionally from the previous report. Yield is estimated at 51.6 bushels per acre, down a half-bushel.
The soybean crush forecast was raised 10 million bushels to just more than 2 billion. Soybean meal production is unchanged as the higher crush is offset by a lower extraction rate. Lower supplies and increased crush were partly offset with a 25-million-bushel reduction in exports. Ending stocks are projected at 910 million bushels, down 45 million from the previous forecast.
The 2018-19 U.S. season-average farm price forecast for soybeans is projected at $8.10 to $9.10 per bushel, unchanged at the midpoint. The soybean meal price is forecast at $295 to $335 per short ton, up $5 at the midpoint. The soybean oil price forecast of 28.5 to 31.5 cents per pound is unchanged at the midpoint.
Basting said more information about bean prices will be available after USDA’s 95th annual Agricultural Outlook Forum this week in Arlington, Va., but some reduction in soybean acreage should be expected in 2019.
“We may not see as much reduction in soybean acreage as we thought due to fall tillage issues (last year),” he said. “That seems to be the bias in the market now.”
USDA lowered estimates for last year’s corn crop, along with feed residual and corn for ethanol use expectations.
“Ethanol plants are struggling now with negative margins,” Basting said. “The markets are reacting negatively in corn.”
The newest 2018-19 U.S. corn outlook calls for lower imports; production, food, seed and industrial use; feed and residual use; and stocks. Corn production is estimated at 14.4 billion bushels, down 206 million on reduction in yield to 176.4 bushels per acre; harvested area is down fractionally.
Total corn use is down 165 million bushels to 14.865 billion. With supply falling faster than use, corn stocks were lowered 46 million bushels. The season-average corn price received by producers was unchanged at a midpoint of $3.60 per bushel.
Basting said the market is “overall supportive” for wheat.
“The focus now on the wheat market will be on acreage ... this spring,” he said. “Will we see a reduction or increase in spring wheat acreage, perhaps at the expense of soybeans in the Northern Plains?”
With Russia backing off from its aggressive wheat export program, he said, the U.S. may gain some market share there, especially in hard red winter wheat.
Projected 2018-19 wheat ending stocks were raised 36 million bushels on reduced feed and residual use and lower seed use, according to the WASDE report. Feed and residual use was lowered 30 million bushels on larger-than-expected second-quarter stocks.
Seed use was down 6 million bushels, reflecting 2019-20 winter wheat planted area. Winter wheat planted area is lower than expected on excessive precipitation and cool temperatures during the planting window.
Ending stocks are projected at 1 billion bushels, with the season-average farm price unchanged.