By: Dan Hueber –
While it is still unclear exactly what crime the corn market is being punished for, the presiding bear judges have evidently decided to show it a little mercy as we begin this new week, with the keyword here being mercy. If this will eventually lead to full clemency or not is yet to be revealed, but it would appear that in the interim, they have elected to direct their disciplinary decrees toward wheat and beans. No doubt most of you have grown weary of hearing me say that these markets should be in the final stages of this downswing and I certainly could not blame anyone, but that is how it always feels when you are reaching for a low. Bad news seems to pile up on bad news, and in turn, shorts just continue to pile on positions, as they did again last week, and it feels as if it will never end. But it does, and it will, and it seldom happens because of an earthshaking event, but rather more often than not, when everything looks the bleakest, and most everyone had lost sight of the fact that we have returned to a place of value. Take note that with the exception of early this spring, you know back when we had no idea that there would be a record number of prevented plant acres and that the majority of the crop planted would be far beyond the optimum date, the levels we have currently reached have been the low end of this markets for the past five year.
As it turns out, bean imports in China jumped nearly 10% last month, due in part to a few more U.S. beans arriving at their ports. Reportedly there were a few cargos that did not clear customs before the end of July. For the month, they unloaded 9.48 MMT, which was above the 8.64 MMT unloaded in June and 9.15 MMT for the same month last year. Even then, for the calendar year to date, total Chinese purchases are down 9.2%. This morning, China also announced one of what may be many programs to encourage farmers to rebuild hog operations. The government will make available subsidies of up to five million yuan or roughly $700,000 to help with the construction of large-scale hog operations. It is estimated that construction costs average between 10,000 and 12,000 yuan per sow. As it is written, the subsidies can account for no more than 50% of the total project investment.
We do have a government report on the calendar this week, and after the experiences of the last few, it is hard to approach it with anything but trepidation. That said, here are some preliminary trade survey estimates; Domestic corn production is expected to come in at 13.672 billion bushels from an average yield of 167.2 bpa. This compares with the August numbers of 13.901 billion and 169.5. Bean production is estimated to total 3.577 billion bushels with a yield of 47.2 bpa. In August the USDA came up with a crop of 3.68 billion from a yield of 48.5. 2019/2020 ending stocks are expected to total 2.002 billion corn, 660 million beans, and 1.016 billion wheat, compared with 2.181 billion, 755 million and 1.014 billion respectively for each crop last month.
Last but not least, 2019/20 world ending stock for corn are expected to total 303.18 MMT, which would be down from 307.72 MMT last month and 328.58 for the 2018/19 crop year. Beans are projected to come in at 100.11 MMT, down from 101.74 last month and 114.53 last year. Finally, global wheat is projected to be 285.71 MMT, up from 285.4 last month and 275.49 last year.