The Beginning of Big Ag Purchases?

Good Morning from Allendale, Inc. with the early morning commentary for March 20, 2020.

Grain Markets are higher as traders look for official confirmation of rumored Chinese buying of U.S. soybeans and wheat. Many hope this will be the start of the promised big ag purchases in the phase 1 trade deal. This comes as the globe continues to battle coronavirus.

The results of our annual acreage survey were released yesterday morning. Our survey expects to see corn acreage at 94.631 million acres, soybeans 83.740 million, and wheat 44.465 million. Implied production is 15.369 billion for corn, 4.163 billion for soybeans, and 1.874 billion for wheat. For more details, check out our survey release video here.

CME Group is raising the maintenance margin rates for some wheat contracts after recent sharp moves. Front month Chicago wheat futures will see their margin rates increase by $175 per contract to $1,425. The margin rate for KC Wheat will increase by $200 per contract to $1,450. The new rates will be effective with today’s close.

Corn export sales this week totaled 960,597 metric tonnes, 904,524 for 2019/20. This was within the 650,000 – 1,350,000 trade expectation. Soybean export sales totaled 701,166 metric tonnes, 631,577 for 2019/20. This was within the 460,000 – 1,100,000 trade expectation. Wheat export sales totaled 482,142 metric tonnes, 338,334 for 2019/20. This was within the 150,000 – 400,000 trade expectation.
Many U.S. ethanol plants have slashed production over the past week or idled entirely as the coronavirus outbreak cut into fuel consumption and cratered margins to refine the corn-based fuel, the head of a biofuel trade group said on Thursday. Renewable Fuels Association Chief Executive Geoff Cooper said on a conference call he expects ethanol production to fall further. (Reuters)

The Buenos Aires Grains Exchange noted that recent rains in Northeastern Argentina have stabilized the soybean crop in the region, but that other parts of the country could use rain. For the week, they left their crop estimate unchanged at 52 million tonnes, but did not rule out additional cuts.
IAE estimates Ukraine’s 2020 grain crop will fall 10.3% vs. 2019 to 67.4 million tonnes. Specifically, they see winter wheat down 12.5% to 24.2 million tonnes and corn down 10.3% to 32.2 million tonnes.

Demand for U.S. meat at grocery stores will likely exceed supplies for at least another week, the chief executive of Tyson told Reuters, as the coronavirus pandemic fuels panic buying among shoppers. “Once we are able to replenish supplies, which is probably going to take another week or so, then I think that we’ll be back in better equilibrium between supply and demand.” (Reuters) The demand has led to sharp increases in cut out values.

Allendale, Inc. has released their Cattle on Feed estimates for the report being released today at 2:00 PM.  Allendale estimates On Feed (as of March 1st) at 0.2% under last year at 11.775 million head, Placements at 8.8% under last year at 1.694 million head and Marketing at 6.2% over last year at 1.787 million head.

Cold Storage (end of February), out Monday at 2:00, is expected at 673 million lbs. according to our estimates, total pork storage (five-year average at 622 million lbs., 574 million lbs. previous month).  Beef stocks are estimated at 456 million lbs. (487 million lbs. five-year average, 490 million lbs. previous month).

Pork export sales totaled 35,650 metric tonnes. That was 22% over last year in the same week. Year to date sales of 775,705 tonnes are 66% over last year. China was responsible for 15,724 tonnes of today’s buy. Beef sales totaled 21,188 metric tonnes, 14% over last year in the same week. Our year to date sales are still strong at 337,282 tonnes, 17% over last year.

Dressed beef values were higher with choice up 2.63 and select up 2.56. The Feeder cattle index is 123.36.  Pork cut-out values were up 4.03.

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