This Week in Agriculture:
A Mixed Bag of Information from the Week that Was: January 25, 2019
· The government shutdown is now working into its second month creating a Ground Hog Day type feel across commodity markets. The lack of official information has opened the door to rumors and uncertainty over what is really taking place when it comes to fund positions, export sales and supply availability as a whole. As a result, markets remain locked in a trading range.
· Chinese trade developments continue to dominate trader attention. What was once discussed as a 50 billion dollar ag package late last week rolled into a several trillion dollar ag package late last Friday. The markets being closed Monday gave traders time to break down what exactly a package like that would look like, and what it would take to make it happen, coming to the conclusion that though China is working towards a resolution by purchasing large amounts of agricultural or energy supplies something of that magnitude is probably not likely to happen.
· Though a trillion dollar ag package is not necessarily in the works, rumors continue over Chinese purchases being made. After hearing about soybean purchases throughout all of December, and corn purchases throughout the first half of January, wheat got its turn to be a part of the rumor mill, with a couple million metric tonnes being rumored as sold. Considering China is holding on to over 50% of the world’s wheat this would definitely be an interesting development.
· Wheat caught some additional support with Egypt reportedly buying and looking to book additional shipments from the US. So far we have seen Egypt import nearly double the amount of wheat from the US than seen the last three marketing years, with upwards of 1.7 mmt of total imports being discussed.
· Egypt buying US wheat is a definite shift in buying practices by the country, but with talk that Russian 12.5% protein wheat is hitting record high values at ports it appears as though price will limit additional exports, not the government as so often rumored these last couple of months.
· One of the few reports we are still getting from the USDA during the shutdown is export inspections. Based on numbers seen this week it appears as though based on historical shipment patterns through the end of the marketing year corn exports could be upwards of 150 mbu higher than current USDA estimates, while soybean exports could be 150 mbu lower. Wheat shipments are also behind what’s needed to meet USDA expectations, but many are holding their breath to see if the increase in Russian values and possible quality issues out of the Southern Hemisphere could cause a significant increase in wheat sales and shipments through the last half of the marketing year.
· We are also getting ethanol production and stock numbers each week as well. Unfortunately, at this point they are not overly supportive to the market as we have only met the production level needed to meet USDA corn use for ethanol expectations 1 out of the last 10 weeks, with ethanol stocks continuing to grow. Based on current usage pace it appears as though the increased export figure will be offset by a lower ethanol usage figure.
· At the close of the week a couple different stories are evolving. First being Chinese trade talks will still take place mid to late next week even though Commerce Secretary Ross says both parties are “miles and miles apart” on their approach to solving the trade issues at hand. At this point it appears as though intellectual property theft remains the sticking point.
· The second developing story is the idea that a temporary resolution to the government shutdown has been met. It appears as though those negotiating decided to find a compromise—even if short-term after some air traffic was grounded due to a lack of available traffic controllers and TSA workers. While details are cloudy at this point, any resumption of normalcy out of the USDA will be welcomed by many in the market.