This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
USDA’s February Supply and Demand report that came out on Tuesday was very uneventful, as expected. USDA increased corn exports by 100 million bushels since corn exports are going out the door like they are on fire. Our export pace on corn this year is impressive. They made no other changes to demand, so that reduces the carryout by the same amount, bringing carryout to 2.127 billion bushels. I would call that burdensome, but not so big that we can afford to ignore any production issues in the new crop. Exports may still have to be raised again, but USDA has a suspiciously high number filled in for feed demand, so the market expects carryout to still come in over 2 billion. They made no changes on the soybean balance sheet in supply or demand. They raised wheat carryout 5 million bushels due to slower food demand. USDA did raise Brazilian soybean production slightly but left all other South American estimates unchanged from the last report. That was expected, since the last few years USDA has not made any big changes to South American production until March or later.
Harvest continues at a decent pace in Brazil, with good results so far. Second-crop corn planting is also progressing along. There have been some big rains in central Brazil, slowing harvest a bit, but will be beneficial for the second-crop corn. There was some much-needed rain in Argentina over the last few days as well. All in all, there is currently no major weather threat in South America to talk about, but we still have a lot of growing season to go. There has been a lot of production lost by too much rain at harvest in the past, so as we all know too well, the crop is not made until it is in the bin.
Soybeans continue to show strength this week on the relaxing of trade tensions between the U.S. and China. The market is pricing in the real possibility of China buying more U.S. old-crop beans. That is despite the fact it makes zero economic sense. They will be paying a significant premium over Brazilian beans and would only do so for political reasons. The world is not short soybeans, but if China buys 8 million metric tons more from us, we may be. We might have to import beans to satisfy domestic crush. It all seems a bit bizarre, but the market is pricing it in as if it is a real possibility, but that could change at any time. If Trump wants to support the U.S. farmer, there are other commodities we need to sell that he could pressure the Chinese to buy instead of soybeans. But only time will tell.
The USDA outlook conference is Feb. 19-20, and the Prospective Plantings report is March 31. From the outlook conference, we will get USDA’s trend estimates of yield and their economists’ estimates of acreage allocation. The first real glimpse of acres will come on the March 31 Prospective Plantings report, which will be based on actual farmer surveys.