USDA has announced round two of direct payments as support for farmers impacted by trade disruption.

The 2019 Market Facilitation Program (MFP), which includes the Food Purchase and Distribution Program (FPDP) and Agricultural Trade Promotion Program (ATP) is explained in a Farm Press article by Jacqui Fatka which notes that the aid avoids skewing planting decisions with direct payments at county, not commodity level. It also includes $1.4 billion for domestic food aid and $100 million for market development. Here is a link to the article: https://bit.ly/2wmRPEv

Regarding crop insurance I am preaching to the choir, but producers need to work directly with their crop insurance agents in making prevented planting decisions. I know some of the best crop insurance minds in the U.S. and the answer is to always work directly with your crop insurance agent.

Demand Destruction

I have written extensively about the demand destruction for U.S. row crop producers’ products, especially soybeans, due to anemic global growth and the ongoing array of U.S. and global policy disputes with emphasis on the U.S. and Chinese policy disputes which include, but not limited to, non-tariff barriers and the theft of intellectual property.

Chinese supremacy: China’s regional and global ambitions are not a secret. The Chinese leadership have well defined goals and they are simply working toward achieving global economic, technological, financial, and military supremacy all by the turn of the century: First, economic and technological supremacy goals in the minds of Chinese leadership are achievable by 2025 only six years away; Second, this would clear the way for China to achieve global financial supremacy by 2035 (Shanghai, China replaces New York as the world’s financial center); Third, if these goals are achieved then global military supremacy would have a high probability of achievement by 2047.   

Anemic global growth: Anemic global economic momentum has global governments and central banks being highly creative (historic for modern times) with their supportive and stimulative fiscal, monetary, and trade policy activities. These factors coupled with the ongoing catastrophic excessive storm, rain, and flooding events are placing a real financial burden on a significant population of our U.S. row crop producers and their respective agricultural sectors.

Corn: U.S. 2019 corn production uncertainty continues giving lift to corn prices, as the U.S. grain heartland has, is, and forecasted to face at least the next week and beyond continuous storm systems moving through.

Wheat: Soft Red Wheat prices have been the beneficiary of rising corn prices, due to U.S. corn production uncertainties, but wheat price gains likely has its limits given the global wheat balance sheet’s adequate supplies.

Soybean: Soybeans prices are simply left in limbo with 2018/19 and 2019/20 prices suppressed, due to current and anticipated building burdensome supplies as U.S. and China policy disputes appear to have no near term resolution, which has the Chinese favoring our competitors’ bean products.

Long Grain Rice: Though U.S. long grain rice planting is lagging near term historic averages to date. That said, incentives remain to achieve planting goals on non-flooded land as planting windows of opportunity emerge.   

Market Dynamics and Outlook for the Week Beginning May 27, 2019

Interest Rates: The 10-Year U.S. Treasury Yield trend remains sideways with a downside bias, some correction of the downside is warranted, Charts A1 to A4.

The 10-Year U.S. Treasury Yield or interest rate May 24, 2019 was 2.32 and presently my contention, is given time, has the potential to revisit the July 2016 low of 1.43. The November 2018 high was 3.24. That said, we need to take this market a week at a time as we analyze global geopolitical dynamics.

U.S. Dollar Index: The U.S. Dollar Index simply remains in a slowly rising sideways to up trading pattern, which will likely be sustained for a period, Charts A5 to A8.

The dollar is currently at 97.48 on May 24, 2019. Consider the following about the U.S. dollar:

Soybeans: Near term soybeans prices remain sideways with a downside bias. The potential trading range remains $7.77 to $9.30 per bushel given U.S. planting uncertainties, May 24, 2019 close $8.30 per bushel. If support at $7.77 is lost then serious weakness to $7.00 becomes a real possibility, Charts B10 to B13.

Corn: Continuous rain delayed planting has corn prices advancing. If Midwest planting remains sporadic the week of May 27, 2019 then corn prices are likely to move into the $4.50 area or higher on weather issues. That said, swine flu, global policy disputes and competition, lagging exports, and other geopolitical uncertainties are weighing heavy on this market, May 24, 2019 close $4.04 per bushel, Charts B14 to B17.

Long Grain Rice: Near term rice remains in a sideways trading range. The primary trading range presently is July $10.34 to $11.52 per cwt. or $4.65 to $5.18 per bushel, May 24, 2019 July close $11.55 per cwt. or $5.20 per bushel, Bearish domestic and global fundamentals remain problematic for this market, but “HOPE” remains March 29, 2019 planting intentions will fall significantly short. That said, Delta rain pressures are giving way to potential heat waves and extended planting opportunities, though late in the planting season, Charts B18 to B20.

Cotton: Price weakness remains problematic. Cotton prices need to hold above .64-cents the week of May 27, 2019 or serious price weakness could emerge, May 24, 2019 close .68-cents per pound, Charts B21 to B24.

Wheat: Price weakness remains. Wheat prices need to close the week May 27, 2019 above $5.08 per bushel for me to consider a stronger near term price advance, May 24, 2019 close $4.89 per bushel. We will adjust our estimates as market dynamics unfold, Charts B25 to B28.

Global Equity ETF-ACWI: A bearish interpretation for this ETF continues to develop. If support at $71.00 does not hold then a further correction is likely, a slowly rising dollar will likely put additional downside pressure on price strength.

Global equity market performance as measured by the All Country World Index ETF-ACWI, a broad range of international developed equity and emerging market companies, Chart A19B, on May 24, 2019 had a value of $71.49. Its previous all-time high was $75.94 in January 2018 and its near term low was in December 2018 at $60.92.

Emerging Markets: Global emerging market performance is dangerously weak, which is a near term function of U.S. dollar strength, rising global economic momentum, debt burdened emerging economies and global geopolitical uncertainties.  

Emerging Markets ETF-EEM, Chart A20, made a high in January 2018 of $50.98, a low in October 2018 of $37.02, May 24, 2019 price was $39.95. The dollar’s near term slowly unfolding strength, China’s aggressive policy actions negative impact on global economic activity, coupled with European Union economic uncertainties are three key factors, which could limit near term potential upside to this ETF.

S&P 500: Interesting building weakness as prices move from all-time highs of 2954 on May 1, 2019.

May 24, 2019 the S&P 500 is at 2826, up from the December 2018 low of 2347. The S&P 500 still has the potential to make new all-time highs from current levels, but if global economic momentum remains problematic, then this index likely starts the process of defining a trading range in coming months.   

$CRB Index: This index likely moves sideways the week of May 27, 2019 with a downside bias, as market participants continue to digest global economic and geopolitical uncertainties, May 24, 2019 close 178.6.

With global deflationary forces, remaining problematic; with many of the world’s commodities still surplus burdened; with the ongoing global realignment of the world’s currency, bond, equity, and commodity markets; and with a number of key global policy disputes, there simply remain limitations to this index’s near term upside, unless oil prices regain their upward advance, due to a Middle East conflict. Charts B1 to B5.

$WTIC Light Crude Oil: Light crude oil needs to hold $55.74 the week of May 27, 2019 or price weakness to $45 becomes a consideration, May 24, 2019 close $58.63 per barrel, Charts B6 to B9.

Geopolitical dynamics coupled with supply uncertainties make this market challenging for analysts, so be respectful of price action.

Market Outlook Webinar Video

Title: USDA’s 2019/20 U.S. and Global Forecasts for Rice, Grains, Oilseeds, and Cotton with Rachel Trego, International Economist, U.S. Department of Agriculture Foreign Agricultural Service, May 23, 2019

Description: Rachel Trego presented the new 2019/20 forecasts that USDA published on May 10 for rice, grains, oilseeds, and cotton. The presentation included U.S. production, use, and exports, as well as global trends and developments with key competitors and markets. In addition, Ms. Trego highlighted data and analysis resources available from USDA and accessible on the FAS website.

Video link: https://bit.ly/2Qqctgg

Rice Outlook Webinar

Title:  U.S. and Global Rice Outlook with Dr. Nathan Childs, USDA ERS Rice Economist, Thursday, May 30, 2019 at 10 AM CST

Description: The May 30 webinar will examine the outlook for the U.S. and global rice markets in 2019/20 based on the May 10 World Agricultural Supply and Demand Estimates report.  For the U.S., total supplies are projected to be up more than 6 percent, a result of an extremely large carryin more than offsetting a smaller crop.    U.S. prices are expected to face downward pressure throughout 2019/20 due to the supply build-up and near-record global production.  U.S. exports are expected to increase in 2019/20, a result of the larger supplies and lower prices.   Despite expanded total use, U.S. ending stocks are projected to again increase in 2019/20 and would be the highest since 1985/86.  In the global rice market, production is projected to drop slightly from the 2018/19 record, mostly due to smaller crops in China and India.  Global rice trade in 2020 is projected to be up more than million tons from this year, with the Middle East and Sub-Saharan Africa accounting for most of the import growth.  India and the U.S. account for most of the expected export growth in 2020.  Ending global rice stocks in 2019/20 are projected to be record high.

Link to register: http://bit.ly/UAEX-USDA-Rice-Market-Outlook-Childs-2019

No Crystal Ball

Since no one has a crystal ball or knows the future always consult an investment professional or professionals before making investment decisions. The world’s most talented speculators, investors and money managers are challenged by today’s global business environment.   

Bobby Coats is a professor and extension economist in the Department of Agricultural Economics and Agribusiness, University of Arkansas System, Division of Agriculture, Cooperative Extension Service. E-mail: [email protected].

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