- The USDA February Crop Report held few surprises with US 2019/20 corn end stocks holding steady while US 2019/20 wheat and soybean stocks declined. The report was supportive to soybeans, while being neutral to the grains. It is the February USDA Outlook new crop S&D’s that will more fully reflect China demand based on the Phase One US/China deal. We do not see today’s WASDE report as changing prevailing choppy Chicago price trends.
- WASDE raised China’s 2019/20 world soybean imports by 3 million mt to 88 million. They also raised China’s 2019/20 wheat imports by 800,000 mt to 4.00 million mt. WASDE held steady their estimate of corn imports at 7.2 million mt which fully reflects their TRQ requirement under the WTO. China cotton imports were also unchanged.
- In world crop production, WASDE raised their estimate of the 2020 Brazilian soybean crop to a record large 125.0 million mt with their corn crop at 101.0 million mt. The 2020 Argentine soybean crop held steady at 53.0 million mt and corn at 50.0 million mt. The Brazilian soybean crop was record large at 125.0 million mt with its exports were hiked to a record 77.0 million mt.
- US corn 2019/20 end stocks held steady at 1,892 million bu. WASDE raised us ethanol demand by 50 million bu to 5,525 million while reducing exports a like amount to 1,725 million bu. The annual average farmgate price held steady at $3.85. We note that WASDE chose not to indicate that China would not secure US old crop corn.
- US soybean 2019/20 end stocks fell 50 million bu to 425 million with WASDE hiking US soybean exports by 50 million bu to 1,825 million. WASDE estimated that of China’s increase imports of 3.0 million mt to 88 million, the US would receive about half the business. WASDE cut their estimate of the annual farmgate price to $8.75, even with the Phase One Deal signed and US soybean stocks declining.
- US soyoil end stocks rose 69 million pounds to 1,515 million pounds with domestic use cut 400 million pounds while exports were raised 200 million pounds. Production was also adjusted downward leaving stocks that are still historically tight.
- US 2019/20 wheat end stocks fell 25 million bu based on a like hike in exports to 1,000 million bu. The average farmgate price held at $4.55/bu.
- WASDE took a conservative view of how much China demand will be forthcoming in an old crop position for corn, wheat and soybeans under the Phase One Agreement. WASDE did adjust US pork exports upwards to a record, but like traders, WASDE wants to see/measure/taste Chinese purchases of US ag commodities before raising estimates and making a bold US export statement. Farmers/traders are disappointed, but it is the arrival of real China demand that will spark a Chicago rally. February 15 is only a few days away for the commencement of the 2020 annual China purchase program.
- Chicago is stuck in a price trend that we have been reflecting on for much of the past 10 days. S American crops are huge which will weigh on Chicago prices when US summer row crops are planting in April/May. However, the bears must be careful not to press their luck too much with China demand potentially lurking in the last half of February. Patience is required, but we expect that China will step forward with initial purchases that spark a Chicago rally. It is all about timing.