By: Dan Hueber –
I suspect there will be many in the U.S. farming community that will not be disappointed to see this week come to its conclusion after witnessing prices ripped apart as their livelihoods have been used as a pawn in an international game of chicken. At the end of the day, or week in this case, prices for our major commodities remain within a nearly 4-year sideways pattern and the losses may not be as significant as you may think. Were we to close right now, December corn would be down 6 1/2 -cents, December wheat 15 ½-cents and November beans 25-cents. Do note that for that final market, we are 40-cents up from the low of the week and just as important, are again back above the 9.00 level which we have traded above 86% of the time throughout this sideways period. No, there is no guarantee that we have witnessed the final charge of the bear brigade, but once cooler heads have prevailed, ideally on the global trade front first and foremost, but also in markets and will recognize that demand has not halted, we have just shuffled around the players and world ending stocks have not grown any larger as of yet. In addition to this, once focus can be drawn away from the Trade Tariff Terrors, there should be a recognition of the labor/logistical issues that continue to plague Brazil and that that a large swath of the US soybeans and corn crops are sitting in extremely saturated soils. It is difficult for some to break the “rain makes grain” mentality but anyone directly involved in production agriculture understands that crops do not perform well when waterlogged. The damage is certainly not as apparent was when the plant is withering in oppressive heat, but come harvest, can still provide very unpleasant yield surprises.
There is a possibility that we could be witnessing a verification of the old adage that the best cure for low prices is low prices as there may be an uptick in demand. This morning the USDA announced corn sales of 131,300 MT to Mexico (101.3k of this for 2018/19) and 117,000 MT sold to Panama, also for the 2018/19 crop year. There is also talk that a group from the Philippines purchased 220,000 MT of feed wheat. When markets become emotionally and psychologically wrapped up in man-made issues as this have this week, they can lose site of the fact that economics still matter. If US corn, beans, wheat, cattle, hogs, or whatever are competitively priced, there will be buyers.
We do have several important USDA releases coming our way in the next week. We should see industry estimates later today or Monday but on the 29th we will see the final planted acreage estimate as well as the quarterly grain stocks figures. Before then, today is the monthly cattle on feed and then on the 28th the quarterly hogs and pigs. Estimates for the cattle on feed are looking for 3% more on feed and while I yet to have estimates for the hog report, we should be looking at increases in the 2 to 3% range as well. Too often grain/soy traders tend to overlook this livestock numbers as they remain so consistent year in and year out but considering 37% of our total usage (corn) goes to livestock, we should never take it for granted. Higher numbers again are certainly not a negative for the grain and soy markets.