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Morning Markets: Markets pause ahead of USDA Outlook Forum direction


Yesterday’s trading saw wheat slip while retaining most of the week’s gains; soybeans strengthen; and corn fall back. Trade attention now turns to the USDA Outlook Forum conference that starts today, with its projections of US crop areas and supply/demand prospects for the 2020/21 marketing year.


Lacklustre markets are waiting for demand, observed Benson Quinn’s Kim Rugel, with grain values correcting after this week’s supply side rally. The dollar’s reaching a 2½ year high also pressured corn and wheat futures.


Ms Rugel said the USDA Outlook Forum in Washington DC is usually a non-event. But this year, markets are in high anticipation: “The Forum’s supply and demand estimates are the first outlook for the new market year and this will be the first USDA report that will mostly likely address China Phase One export demand for beans, wheat and corn.”


She adds that the USDA baseline projections earlier this month – without the Phase 1 impact included - were largely bearish. High corn and soybean ending stocks are projected as US planted areas and crop yields recover from last year’s challenging spring.


The USDA wheat baseline was 45.0 million acres against 45.2m acres last year, with the trade average forecast 44.9m acres. This points to a US wheat harvest of some 1.86 billion bushels from 2019’s 1.92bn bushels. The decrease could see US wheat ending stocks for 2020/21 at 829 - 975m bushels.


The corn baseline was 94.5m acres, although the average trade estimate is nearer 93.6m. The latter figure points to 2020/21 corn production of 15.11bn bushels (13.69bn in 2019) and ending stocks rising to 2.44bn (1.89bn currently).


US corn and soy supplies to rise, wheat to tighten


The US baseline for soybean plantings is 84m acres, with trade estimates at 84.6m acres. Therefore 2020/21 US soybean production could result in a 4.23bn bushel crop using the trade figure, or 4.20bn at the USDA baseline. The 2019 harvest was 3.56bn bushels with a projected 425m bushel US ending stock. At these figure, the baseline estimate could see a US soybean end stock of 483m bushels, against a trade average of 519m bushels.


“The bottom line recap is that, with a return of normal summer weather, US corn and bean balance sheets will get bigger than where they are at today, while US wheat looks to tighten based on the average of analysts’ estimates,” concludes Ms Rugel. “The wildcard is demand - more specifically China demand. How much does USDA increase export demand from its baseline? And what if any considerations does the USDA make to demand based on coronavirus?”


The CBOT Chicago March 20 wheat contract closed Wednesday slightly down at $5.65¼/bushel, from the previous day’s high of at $5.66¾/bu, ending the sharp rally since the weekend. But it has maintained most of the gain since Friday’s $5.42¾/bu. Funds sold 2,000 lots of wheat.


But early Thursday trades saw the contract slide further to $5.62½/bu.


In Europe, the Euronext March 20 wheat position slipped €0.5 to €195.50/tonne with the September 20 contract losing €1.25 to finish at €185.25/tonne.


Rain in Europe limits winter cereals


CRM Commodities warns “forecasts of further rains in Northern Europe are wiping out any hope of farmers finishing winter plantings as they turn to spring plantings and conduct spring work. UK producers could be looking at a sub 10m tonne wheat crop, unless conditions allow further progress to be made”.


Russia’s ministry reduced its forecast of 2019/20 cereal exports by 0.5 to 1.5m tonnes to a range of 42.7 to 43.9m tonnes – a move that had been expected by analysts who doubted the country could meet its target of 36m tonnes of wheat. This is likely to be closer to 32.8 to 33.8m tonnes of wheat shipments.


Wednesday saw the Chicago March 20 corn position fall back to $380½/bu from the Tuesday $3.83/bu finish. Fundholders sold 9,000 lots of corn. The Euronext March was unchanged at €169.25/tonne. CBOT March corn was $3.80¼/bu in early Thursday trades.


US soybeans gained Wednesday with the CBOT March 20 soybean position climbing from $8.92¼/bu to $8.97¼/bu. Early Thursday saw contracts fall back to £8.94¾/bu. The funds were net buyers for 9,000 lots of soybeans.


Coronavirus shadow over soybean demand


Kim Rugel said soybeans “shrugged off a sharply lower start to end higher on lack of producer selling”. But there is still concerns over future soybean demand as Coronavirus spreads in Asia.


CRM warned that growers in Brazil and Argentina could face soy harvest delays with wet weather forecast for coming weeks.


Europe’s rapeseed futures fell back €1.50 to €401.25/tonne, while the ICE canola contract lost 0.7% to close at Can$468/tonne.


“Rapeseed prices lost ground yesterday in the wake of the palm oil, the latter being affected by a drop in exports, mainly due to the (coronavirus) health crisis,” noted Agritel. “Canola in Canada was also down.”

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