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Midwest Marketing Solutions

January 20, 2020
By Brian Hoops - Columnist , Farm News

Trade agreement is now in effect

The newly approved trade agreement between the U.S. and Japan is now in effect. Tariffs are lifted on more than $7 billion worth of U.S. agricultural goods. This gives 126 million Japanese consumers will have greater access to American beef, pork, nuts, sorghum, sweet corn and others. It also provides a country-specific quota for U.S. wheat. According to the Office of the U.S. Trade Representative, the new terms amount to $55 billion worth of trade.

MFP

There is likely to be a third tranche of Market Facilitation Program payments in January 2020.

"We're working with the Farm Service Agency to make sure they get the third and final payment out in a timely manner," said North Dakota Senator John Hoven.

According to North Dakota Farm Service Agency State Executive Director Brad Thykeson, 75 percent of MFP 2.0 is paid out.

"If we finish this deal on MFP 2.0, we'd be at $714 million we've put into (North Dakota) producer's hands in 2019. That's almost double the first MFP go around. Those are big dollars that have to do with the trade tariffs."

Corn analysis

Corn closed the week $.00 3/4 higher. Last week, private exporters announced sale of 207,000 mts of corn to an unknown destination for 2020/21.

In the weekly export inspections report; U.S. corn exports last week of 21.7 million bushels were a 3-week high.

Cumulative exports of 339 million bushels are down 53 percent from last year's 727 million at this time, with corn shipments needing to average roughly 40.2 million bushels/week in order to reach the USDA's 1.850 billion bushel export projection versus 33.2 million/week from this point forward last year.

The USDA increased corn yields and production while the trade was looking for a small reduction of both. The yields were increased to 168 bushels per acre (bpa), up 1.1 bpa from prior estimates.

Harvested acreage reductions were noted and final production figures are estimated at 13.692 billion bushels (bb). The USDA did indicate they would resurvey farmers that still have unharvested crop, but those changes will have minimal on the balance sheets.

The USDA increased feed usage by 250 million bushels (mb), production by 31 mb and beginning stocks by 107 mb, while lowering exports by 75 mb. This resulted in ending stocks being reduced by a modest 18 mb. This leaves U.S. ending stocks at 1.892 bb with a stocks/usage ratio at 13.4 percent.

This report has to be a disappointment to bulls and bullish farmers that were hoping the USDA would finally lower yield forecasts. USDA reported December 1, 2019 U.S. corn stocks at 11.389 billion bushels, essentially 270 million bushels less than anticipated by the trade.

Strategy and outlook

Overall fundamentals remain bearish and now with the large spec funds holding a net long position, the upside potential appears to be limited unless a weather issue develops in South America.

Soybeans analysis

Soybeans closed the week $.04 1/2 higher. Last week, private exporters did not announce any private sales.

In the weekly export inspections report; U.S. soybean export inspections were a 12-week low of 35.4 million bushels. Cumulative export inspections of 799 million bushels are up 25.6 percent from last year's 636 million, with shipments needing to average roughly 27.0 million bushels/week in order to reach the USDA's 1.775 billion bushel export projection vs last year's 30.6 million/week from this point forward.

The USDA made even less changes to the soybean market than to the corn balance sheets.

Beginning stocks were lowered by a mere 4 mb and yields increased by 1/2 bushel per acre with harvested acres down 600,000. This resulted in a slight 8 mb increase in production to 4.482 bb and usage was left unchanged at 4.008 bb with ending stocks unchanged at 475 mb. The 475 mb is the second largest on record, only trailing last year and the stocks to usage ration is a comfortable 11.8 percent.

December 1 U.S. soybean stocks also were larger than expected at 3.251 billion bushels, coming in 65 million bushels larger than expectations. December 1 U.S. soybean stocks are the 2nd highest on record, with the December 1 stocks/Sept-Nov usage ratio the 2nd highest of the last 11 years.

Production in Argentina and Brazil were left unchanged at 53.0 mmts and 123.0 mmts respectively. This would be new record production if realized.

Strategy and outlook

Futures probed weekly resistance and could test them again if China is a large buyer during the signing ceremony. South America looks to produce a record soybean crop if weather is normal during the next 2-3 weeks. This will surely cut into U.S. exports and limit the upside potential.

This material has been prepared by a sales or trading employee or agent of Midwest Market Solutions and is, or is in the nature of, a solicitation. This material is not a research report prepared by Midwest Market Solution's Research Department. The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Midwest Market Solutions believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such.

Brian Hoops can be reached at (605) 660-1155.

 
 

 

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