Late this week the outbreak was reported to be escalating in China - again. Grain traders are wondering if China will be forced to reduce expected purchases of US agricultural products, agreed upon at the signing of the partial trade agreement in January, because of the near-term damage the outbreak is inflicting upon the Chinese economy. The wheat markets have sold off from their January highs and near-term technical damage has been inflicted, to suggest market tops are in place. Soybean prices are also trending lower and soybean meal futures are languishing at lower price levels. Corn futures are also trading sideways and choppy at lower price levels. Do not look for significant uptrends to develop in the grain markets in the near term. Look for wheat prices to continue to trend lower, and corn and soybean prices sideways at best. The next likely chance for significant rallies in the grain markets will come several weeks from now, when the US corn and soybean planting seasons come about. There are some long-term weather forecasts calling for a cool and wet spring in the US midsection, which would be a bullish development for corn and soybeans if such actually develops.

The next week’s likely high-low price trading ranges

March soybean meal futures: $286.40 to $297.00, and with a sideways bias.

March soybean futures: $8.78 to $9.00, and with an upside bias.

March corn futures: $3.75 1/4 to $3.88, and sideways bias.

March soft red winter wheat futures: $5.30 to $5.60, and with a downside bias.

February USDA supply and demand report highlights

Following are the highlights of this week’s monthly USDA supply and demand report (WASDE), released Tuesday (11 February 2020).

Wheat

Prices for US wheat classes were mixed during the month of January. Hard red winter (HRW) dropped $7/tonne to $230. Soft red winter (SRW) gained $1/tonne to $252 as supplies of that class remain tight. Both classes showed notable declines toward the end of the month based on favourable rains for 2020/21 wheat as well as on concerns of slowing exports. Soft white winter (SWW) gained $8/tonne to $241 on firm export demand. Hard red spring (HRS) dropped $19/tonne to $259 likely pressured by easing logistical constraints in the Pacific Northwest.

Global wheat production is seen marginally lower. Global wheat trade was raised slightly with stronger demand from China and Turkey. Higher exports for the European Union, Kazakhstan, and the United States more than offset lower shipments from Canada. The projected US season average farm price is unchanged at $4.55 per bushel.

Global wheat exporter prices showed mixed direction during the month of January. Argentina’s price skyrocketed with a rapid pace of shipments. Local supplies are tightening as exporters marketed a large portion of the crop in advance, anticipating a higher export tax. Russia’s prices rose as supplies there have become seasonally tighter. EU prices were steady during the month. US HRW weakened slightly, improving its competitiveness with the European Union and Russia. Canada’s prices dropped but remain elevated based on lingering transportation backlogs. Australia’s prices eased slightly but are still uncompetitive based on tight supplies.

Corn

Since the January WASDE report, US corn bids have drifted lower than those of the other major exporters. Brazilian bids remain seasonally unavailable. Argentine bids are up $5/tonne to $181 and Black Sea bids are up $7/tonne to $183 on strong foreign demand. US bids are up $3/tonne to $178, reflecting sizeable recent sales as evidenced by export sales reports.

World corn production is forecast up with larger crops in Moldova, South Africa, and Ukraine more than offsetting a decline in Vietnam. Global trade is up marginally from last month with higher imports for Brazil and Turkey. Lower exports for the United States are more than offset by higher exports for the European Union, South Africa, and Ukraine.

The US season-average farm price is unchanged at $3.85 per bushel.

Ukraine corn

Near Record Crop Ukraine corn production for 2019/20 is estimated at 35.8 million metric tonnes, up 1 percent from last month, but slightly down from last year. Yield is estimated at 7.16 tonnes per hectare, down 1 percent from last month and down 9 percent from last year’s record. The estimated harvested area is at 5.0 million hectares, up 2 percent from last month and 10 percent from last year. Harvest was completed in November.

Soybeans

The 2019/20 global oilseed production is forecast by USDA at 577 million tonnes, a 2-million-tonne increase from January primarily driven by larger crops of soybean and sunflower seed. Oilseed crush is raised 2 million tonnes to 498 million on higher soybean crush in China. Oilseed ending stocks are revised up 2 million tonnes mainly on higher Brazil production and China stock rebuilding. Protein meal production is up 1 million tonnes from last month to 340 million tonnes primarily on higher soybean meal production in China, Ukraine, and Bangladesh. Protein meal ending stocks are slightly down from December. Vegetable oil production is down 1 million tonnes and oil ending stocks are down 2 million tonnes on declines in palm oil production. The projected US season-average farm price for soybeans is lowered by $0.25 to $8.75 per bushel.

Both US soybean and soybean meal export prices fell slightly in January, while Brazil and Argentina meal prices strengthened. US Gulf FOB soybean export bids in January averaged $361/tonne, down $2 from December. Brazil Paranagua FOB averaged $359/tonne, down $10 from December. Argentina Up River FOB averaged $361/tonne, down $6. The soybean price spread continues to narrow. US soybean meal export bids in January averaged $340/tonne, down $4 from December. Brazil Paranagua FOB averaged $321/tonne, up $5 from December, and Argentina Up River FOB averaged $336/tonne, up $5.

Protein meal production is up 1 million tonnes from last month to 340 million tonnes primarily on higher soybean meal production in China, Ukraine, and Bangladesh. Protein meal ending stocks are slightly down from December.

For the report ending January 30, 2020, US soybean accumulated exports (shipments) to China totalled 11.4 million tonnes and 11.8 million to the rest of the world. Outstanding sales were 611,000 tonnes to China and 3.3 million to the rest of the world. Last year at this time, accumulated exports to China were 474,000 tonnes and 12.7 million to the rest of the world, and outstanding sales to China were 3.0 million tonnes and 12.3 million to the rest of the world. US soybean export commitments (outstanding sales plus accumulated exports) to China totalled 12.0 million tonnes compared to 3.5 million a year ago. Total commitments to the world were 32.3 million tonnes, compared to 30.4 million for the same period last year.

Brazil Soybeans

Brazil’s 2019/20 soybean production is estimated at a record 125 million metric tonnes (mmt), up 2 mmt (2 percent) from last month and 8 mmt (7 percent) from last year. Area is estimated at a record 36.9 million hectares (mha), unchanged from last month and up 1 mha (3 percent) from last year. Yield is estimated at 3.39 tonnes per hectare, up 2 percent from last month, up 4 percent from last year and up 6 percent from the five-year average. Record output is expected this year and soybean area continues to increase at a record pace. This year Brazil is also expected to overtake the United States as the world’s leading soybean producer.