The May 2019 USDA agricultural report could upend (or reinforce) much of what the first quarter report determined, but much of this was already foreseen in March (when the first USDA report was finally published).
As reported in an article published by AgWeb on May 9, 2019 (by Sara Schafer), only approximately 23% of the total 2019 U.S. corn acres are currently planted whereas 46% are already in the ground on a normal year. For soybean acres, the factor is even worse. Only 6% of this year's soybean crop is in the ground, compared to an average of 14% on an average year. The culprit - flooding and continued cold, wet weather.
However, even with the flooding and wet weather, the supply residual from the 2018 crop continues to surpass the expected demand for old crop, which keeps a bearish pull on commodity prices for the 2019 - 2020 crop year. Still, traders are encouraging farmers to take tomorrow's USDA crop report for 2019 - 2020 crop with a grain of salt. The statement being made is that producers should pay attention to the demand on old crop and overseas production numbers. This being said, the market is possibly putting a heavy weight on what is eventually accomplished (or not accomplished) as a result of the U.S. / China trade negotiations which are due to be finalized relatively soon.
So, what is expected?
First, market analysts are expecting bearish news in regards to demand for old crop. The demand isn't as high as the supply is, which pulls commodity prices down. Coupled with reduced demand for feed supply from countries being affected by the swine flu outbreak, the reduction in demand could be offset by increased demand from countries that traditionally import U.S. grain commodities (ie. success within the U.S. and China trade negotiations).
Secondly, despite a dryer than average crop season in Brazil, soybean exports from Brazil actually surpassed that of last year and soybean exports from the U.S. actually are 40% lower, year over year, which likely will not recover to meet earlier projections from the USDA by the end of the year. Therefore, the news is somewhat bearish for soybeans. Should developments within the U.S. / China trade negotiations be positive, U.S. producers will see an improvement, but not complete recovery of soybean demand from China within the 2019 - 2020 crop year.
Corn, however, has seen an overall export jump of 76% year over year, which is quite positive news for corn, and a large reason why the USDA is anticipating a shift from soybeans to corn for the 2019 - 2020 growing season. Traders are encouraging producers to take advantage of the anticipated bullish prices between May and July to cement the price hedging for the 2019 - 2020 harvest. Since prices typically dip lower during the harvest season (between August and October), the right time to take advantage of the market for the new crop is rapidly approaching on the tails of tomorrow's USDA report.
Third, a big factor in old and new crop demand will be the results of the U.S. / China trade negotations. After this past weekend's spat between President Trump and China, there is a lot of new uncertainty as to where these trade negotiations will lead. The Chinese economy has seen a strengthening over the past month, which has resulted in China attempting to reposition themselves at the negotiation table; whereas President Trump (and his administration) are attempting to position themselves for even greater concessions from the Chinese Premier. Regardless of the Twitter spat (and rebuttal), both parties are coming to the table this week to continue discussions, which is seen as a positive sign, but with caution. Should the trade negotiations succeed, this could mean a large increase in corn exports to the Chinese, whereas soybean demand will likely continue to be somewhat weak due to increased exports from Brazil and decreased demand due to swine flu.
What is the short of it? Bearish expectations for soybeans with moderate encouragement for corn exports, hedge your pricing for the new crop between May and July to take advantage of best new crop pricing for the 2019 - 2020 crop year.
Ultimately, it comes down to the practicing good wisdom, frugal and efficient planning, and smart marketing.
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