Dec 9 – Can Next WASDE Report Turn the Grain Markets Tide?

Grain markets are mixed ahead of tomorrow’s December WASDE report, with the oilseed complex in the green on fresh soybean exports headlines

“When you get into a tight place and everything goes against you, till it seems as though you could not hang on a minute longer, never give up then, for that is just the place and time that the tide will turn.” – Harriet Beecher Stowe (American abolitionist)

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Can Next WASDE Report Turn the Grain Markets Tide?

Grain markets are mixed ahead of tomorrow’s December WASDE report, with the oilseed complex in the green on fresh soybean exports headlines. Said oilseeds are following last Friday’s close, which saw them find positive gains for the week, whereas cereals and corn prices fell. Going into tomorrow’s WASDE report, the market isn’t expecting too may changes, thinking that the USDA will kick the can on major changes to final report in the January WASDE report.

Grain prices weekly performance in the futures market through Friday, December 6, 2019

December 2019 WASDE report market expectations

With less optimism around a trade war deal getting done last week, the CFTC data out on Friday afternoon showed that managed money sold off their position in soybeans more aggressively than they did when said trade war between U.S. and China first started back in mid 2018. In fact, Karen Braun from Reuters reports that, over the past two weeks, fund managers have sold nearly 117,500 soybean option and futures contracts, compared to the roughly 94,000 lots sold in the first two weeks of June 2018. [1] That said, it’s been suggested that funds were aggressive buyers of soybeans (on the board) in the second half of last week (Wednesday – Friday).

Will December WASDE Report Raise Soybean Exports?

Over the weekend, we got some fresh data from China that showed all those boats of American soybean exports started arriving last month. U.S. customs data showed that total U.S. soybean exports to China in November 2019 jumped 54% year-over-year to 8.28 MMT. [2] This is also about one-third more than the 6.2 MMT of American soybean exports sailed to China in October.

Some dates and datapoint to keep in mind include, since U.S. President Trump and Chinese President XI met in Argentina a year ago and made a trade war “truce”, the U.S. has sold 23.3 MMT of soybeans to China. [3] Further, in September, China exempted tariffs on 10 MMT of U.S. soybean exports. That said, since October 10th, when the “Phase One” trade war deal was announced, 4 MMT of American soybeans have been sold to China.

However, with the Phase One trade war deal not signed yet, China said on Friday that they’re willing to exempt tariffs on further pork and soybean exports to the People’s Republic. [4] Aggregately, for the calendar year (Jan – Nov) China’s total soybean imports stand at a few truckloads short of 79 MMT, which would be down 4% compared to the same 11 months in 2018.

In the November WASDE report, the USDA said that they’re expecting the U.S. to see 48.31 MMT of soybean exports (or 1.775 Billion bushels if converting metric tonnes into bushels). If realized, this would be a 1.5% / 27M bushel / 750,000 MT increase over 2018/19’s American soybean exports. However, through Week 13, 2019/20 U.S. soybean exports are tracking 21% better than a year ago with 15.9 MMT shipped out. Intuitively, you’d think that the USDA would increase their estimate of American soybean exports in tomorrow’s WASDE report, but preserving the status quo seems to be more their modus operandi.

2019/20 US weekly soybean exports through Week 13 are tracking 20% higher than last year

WASDE Report Eyes the Southern Hemisphere

Another reason the USDA may not update U.S. soybean exports in tomorrow’s WASDE report is the decent growing conditions in the southern hemisphere’s 2019/20 soybean crop. The planting of the soybean crop is virtually complete in Brazil and Informa (now known as IEG Vantage) is estimating the harvest there at 124.5 MMT (the USDA estimated it at 123 MMT in the November WASDE report). It’s more of a contrast in Argentina where the analytical firm is estimating the Argentina soybean crop at 46 MMT, compared to the USDA’s estimate in last month’s WASDE report of 53 MMT. While there still are some moisture deficiencies in Argentina, good rains last week is helping farmers there more optimistic. Through last week, the Buenos Aires Grains Exchange was reporting that about half of both the Argentine soybean and corn crops were planted.

Comparably, Bolsa de Cereales says that the wheat harvest in Argentina is about half finished, slightly above the seasonal average. The bigger datapoint I’m watching, however, is that only 4% of Argentina’s wheat crop is good condition and none of it is excellent. A year ago, Argentina’s wheat crop was rated 31% good and 5% excellent. With the wheat crop not looking so great, there are increasing doubts about the exportability of Argentina’s wheat harvest.

Heading to the other side of the world (and as mentioned in last Wednesday’s FarmLead Breakfast Brief) Australia’s wheat harvest 2019 is pegged by ABARES as the lowest in 11 years, at just 15.85 MMT. Back 2007/08, just 13.57 MMT was binned, and that year, Aussie wheat exports totaled less than 7.5 MMT. Considering that Australia’s domestic needs are pegged at roughly 7 – 8 MMT this year, this leaves, at best, roughly 8 MMT that could be exported. This would be literally less than half of the five-year average of what Australia has been exporting. Overall, in tomorrow’s WASDE report, the most significant changes to the world’s agricultural supply and demand tables may come from the southern hemisphere.

To growth,

Brennan Turner
TF: 1-855-332-7653
@FarmLead on Twitter

Due to some travel AND technical difficulties this morning, futures grain markets data is not included in today’s FarmLead Breakfast Brief, but you can review them here.

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECIPIENTS OF THIS POST. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

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