March 27, 2020
Missed some grain marketing news this week. We've got you covered. Check out the latest from Farm Futures.
Ag Marketing IQ
As is often the case, producers, in general, want someone to tell them where the futures markets are headed, whether it’s in corn, soybeans, wheat, cattle, hogs, or milk. But just how realistic are forecasts or price predictions? For answers, let’s take a look at recent history.
Lost in the swirl of market mayhem last week was a report on the stuff that usually preoccupies farmers as the calendar turns to spring. Long-range forecasts from the National Weather Service called for the above normal temperatures and precipitation observed over the winter to continue into summer over much of the Corn Belt. The eastern Midwest appears most at risk, following a series of disappointing crops in the region. Above normal summer temperatures could also threaten farms in the South, Southern Plains and Western U.S.
I strongly believe that once we get to the other side of the current issues, the massive printing of U.S. dollars will be inflationary, negative to the value of the U.S. dollar, and will support U.S./global agricultural prices over the next 6 to 18 months. This needs to seriously be considered when you choose what marketing tools you will use with 2020 and 2021 production.
In the last two weeks, the U.S. dollar has had one of its sharpest runs ever, making us question how high it can go. The value of the dollar matters to U.S. farmers because with all of the uncertainty in the world, the U.S. is still seen as the cleanest shirt in the dirty laundry pile. During turbulent markets, capital begins to assemble from around the world, searching for safe havens. The U.S. is still the safest bet, and money comes pumping in, pushing our currency higher. We are trading at the upper end of resistance levels. Why is this a problem? It makes our exports less competitive. While this makes products that are imported to the U.S. cheaper for consumers, at the same time it makes our exports more expensive. This has major implications for agriculture since we depend so much on exports.
The recent wheat rally was in response to the coronavirus panic buying at stores which depleted shelves of bread and pasta. Wheat futures have also rallied in response to demand uptick. Wheat futures have now rallied up to major technical resistance levels on charts. According to the considerably large wheat carryout around the world (287.1 million metric tons), one would think that the wheat rally will come to a screaming halt. And it just might. But that ending stock number is large in part due to a decade long trend of decreased wheat demand for food (here in the United States anyway).
USDA’s weekly grain export inspection report, released Monday morning, showed a mixed but mostly bearish set of data for the week ending March 19. Soybeans fared the best last week, climbing 15% above the prior week’s tally, while corn and wheat volume declined from a week ago.
USDA’s latest weekly export sales recap, covering the week ending March 19, had largely bullish data for traders to chew on. Corn led the charge, climbing to a mar-keting year high, but wheat and soybeans also posted significant week-over-week gains.
Export sales were reported on two days this week. Mexico took 6 million bushels of soybeans, unknown took 9.9 million bushels of corn and South Korea took 44 million pounds of soybean oil.
According to Farm Futures’ latest survey, U.S. farmers intend to plant 96.4 million acres of corn and 82.7 million acres of soybeans during the 2020 planting season. Those surveyed indicate 31.7 million acres of winter wheat had been planted, half a million acres more than USDA’s official estimate. Surveyed growers expect to plant 14.2 million spring wheat and durum acres, up 1% from last year. Farm Futures’ final wheat estimate of 45.8 million acres is approximately 800,000 acres more than USDA’s February Outlook estimate of 45.0 million acres.
Corn futures traded lower overnight, following weakness in the energy complex. Soybeans continued their rally overnight, fueled by strengthening soymeal demand and prices. Steady consumer demand and optimism over the congressional stimulus bill fueled gains in the wheat complex as the Kansas City contract broke past $5.00/bushel for the first time in 13 months.
Grain futures were narrowly mixed Friday amid some uneven technical maneuvering. Wheat prices trended higher on Russia’s call for export quotas, while some news out of Argentina kept soybean prices slightly firm today. Corn, meantime, continues to battle worries over large expected U.S. acres this season and lower ethanol demand, which triggered more technical selling.
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