Coronavirus has hurt prospects for China’s palm oil imports, and cotton demand, the key Wasde agriculture market briefing said - while keeping other forecasts largely unchanged, except for US cotton.
The US Department of Agriculture - in its flagship monthly Wasde briefing on world ag supply and demand – downgraded by 300,000 tonnes, to 6.90m tonnes, its forecast for China’s palm oil imports in 2019-20, citing “lower demand due to Covid-19”.
That was the only revision that USDA officials directly attributed to the world coronavirus outbreak, although they did hint that the disease was behind a 1m-bale cut to a four-year low of 36.5m bales in their forecast for Chinese cotton demand in 2019-20.
Downgrading their Chinese cotton import forecast too, by 250,000 bales to 8.25m bales, the USDA highlighted “weaker demand” in the country, while noting separately, in market-wide comments, that “concerns over the Covid-19 outbreak have depressed demand and slowed global business activity”.
The comments came in a Wasde briefing which many commentators highlighted for a lack of unexpected and large revisions, with Mike Zuzolo at Global Commodity Analytics saying: “I do not see any major surprises”.
Benson Quinn Commodities said that the USDA “takes a pass this month on most everything”, with no significant alterations to forecasts for US grain and soybean balance sheets.
At RJ O’Brien, Richard Feltes said that it was “quite unusual for [the USDA] to post a crop report with no changes whatsoever in US corn, soybean and wheat balance tables, other than $0.05-per-bushel cuts versus February in 2019-20” on farmgate price forecasts for corn and soybeans.
The forecast for the average US farmgate corn price this season was trimmed to $3.30, but remains up $0.04 a bushel year on year, with that for soybeans lowered to $8.70 per bushel, reducing its year-on-year advance to $0.22 per bushel.
South America harvest upgrades
At a global level, there were few major estimate revisions too, although upgrades of 1.0m tonnes to both Argentine and Brazilian soybean crops did attract some comment.
Benson Quinn Commodities said: “South American soybean production was up 2.0m tonnes and world stocks up 3.0m tonnes,” at 102.4m tonnes, the second largest on data going back more than 50 years.
Nonetheless, soybean futures for May stood in late deals at $8.77 ½ a bushel, up 0.9% on the day, and little changed on their level before the Wasde.
Chicago corn futures stood at $3.77 ¼ a bushel, up 1.2% on the day, in line with prices as the Wasde was published, although soft red winter wheat futures for May stood 0.3% lower at $5.17 a bushel, losing gains of a similar magnitude they held ahead of the report.
The Wasde upgraded by 1.0mntonnes to 35.0m tonnes the forecast for Russian wheat exports in 2019-20, noting a “significant” dent to the country’s export prices - down $14 a tonne to $214 a tonne - from “favourable new-crop growing conditions”.
‘Could be supportive’
Mr Zuzolo said that the combined Argentine and Brazilian soybean production estimates, at 180m tonnes, were “actually on the low-end of the trade range of 180m-184m tonnes”.
This factor “could be… supportive” to prices given that investors were “selling-off hard last week as private estimates were being dialled-in” to futures.
“In addition, we’ve seen two US export sales purchases in the last two days for soybeans. And the Argentina weather is not helping the crop - it’s damaging it in my view.”
Mr Feltes said that the market will see a “more impactful crop report” at the end of March with the release by the USDA of a much-anticipated annual briefing on US farmers’ spring sowings intentions, besides a quarterly briefing on domestic crop stocks as of the start of this month.
He added that some investors “expect poor feed conversion on the 2019 US corn crop”, the quality of which was damaged by a wet harvest period, and a factor which would “translate into higher 2019-20 US corn feed use”, in turn implying a depressed March 1 inventory figure.
Cotton harvest downgrade
However, one area where the USDA did in the Wasde make more significant changes to, domestic, data was in cotton, for which it downgraded the estimate for the 2019-20 domestic harvest by 300,000 bales to 19.8m bales.
It cited updated data on US ginning volumes for the change, which saw the yield estimate downgrade by 12 pounds per acre to a four-year low of 805 pounds per acre.
With the US cotton export forecast for this season kept at 16.50m bales, the harvest revision translated into a 300,000-bale downgrade, to 5.10m bales, in the estimate for US cotton stocks at the close of 2019-20, in July.
Nonetheless, the USDA reduced too its forecast for average US farmgate cotton prices this season, by 2 cents to a multi-year low of 60 cents a pound.
New York cotton futures for May stood at 61.47 cents a pound in late deals, up 0.4% on the day, and little changed on their level ahead of the Wasde’s release.