- Chicago ag futures are again slightly weaker at midday. The release of the USDA’s 2020 US seedings forecasts have come again without much fanfare, and so the market is back to watching S America and awaiting clarity over potential Chinese demand in the weeks and months ahead. Wheat continues to lead breaks as global trade slows seasonally.
- USDA pegged 2020 corn acreage at 94.0 million, slightly above the trade’s guess but down 500,000 acres from the previously released baseline estimate. US soy seedings are projected at 85 million, up a full million from the baseline release. New crop all-wheat seedings were put at 45 million acres, on par with the baseline forecast. Large US soy/corn crops will be harvested this autumn with normal weather.
- However, equally important is that USDA Secretary Sonny Perdue stated that another round of MFP aid should not be expected. As such, US row crop margins are expected to decline in 2020. Marketing crop and taking advantage of supply, and Chinese demand-based rallies is imperative this spring and summer. Weather in Central Brazil will be monitored closely over the next 60 days but widespread drought remains unlikely there.
- Ag Sec Perdue also was unable to provide a timeline for elevated Chinese purchases, but expects China to comply with its Phase One commitment. Purchases are expected once the impact of coronavirus in East Asia subsides.
- US ethanol production through the week ending Feb 14 totalled 306 million gallons, up 2 million on the prior week and up 13 million on the same week in 2019. Yet, amid weak blend and export demand growth, weekly US ethanol stocks last week were 1,040 million gallons, a new all-time record. Chicago ethanol futures are down $.02/gallon at midday. Futures-based production margins are signalling the need for a brief slowdown in weekly grind.
- EU wheat futures are flat amid further weakness in the €uro. Fob premium and interior wheat basis in Europe remain elevated, but the global wheat market is increasingly looking towards new crop weather for direction. It remains tough find a major problem, with additional soil moisture boosts due in Europe and Southern Russia. Queensland and much of New South Wales in E Australia will see additional rainfall of 0.50-3.00″ in the next 7 days.
- This leaves North Africa as the only problem spot. It is probable that N African wheat imports in 2020 rise 1.0-1.2 million mt to a a near record 28.4-28.6 million mt without a shift to wetter weather in March.
- The midday GFS weather release is wetter in Northern Brazil into March 2, but the overall pattern is consistent with prior runs. S American rainfall in the next 10 days will be funnelled across Central and Northern Brazil while an arid but cool pattern stays intact across Argentina. The GFS forecast now advertises cumulative totals across Mato Grosso and Goias of 4-7″. This is likely overdone but regional delays in harvesting and safrinha corn seeding are probable. Soil moisture will not be an issue for Central Brazil into mid-spring.
- The market lacks the boost it needs from Chinese demand to rally. Yet, amid a wet spring US climate forecast, a more bearish pattern will not emerge until a normal seeding pace is confirmed.