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ENSO Summer Weather-What it Means & Hoarding Soybeans

Update for June 17th, 2020

U.S. Secretary of State Mike Pompeo is meeting today with China’s top diplomat, Yang Jiechi. The meeting, which is being held in Hawaii is the first high-level U.S./China meeting since January 15th when the Phase 1 trade deal was signed. Immediately following the completion of the agreement reports began to emerge regarding the coronavirus in China which then grew into a world-wide pandemic. There has been lots of speculation surrounding China and their commitment to fulfill farm purchases agreed to in the trade deal. Will they reach their quota in a timely manner, or at all? In response to this question more than 180 organizations and companies in the U.S. ag sector joined together to share with President Trump their stance on the current situation and what they view to be the benefits and status of agreement for U.S. farm products. In a 13 page letter to the president they wrote, “As you know, the U.S.-China Phase 1 Trade Agreement is critical to both the near- and longer-term success and growth of American agriculture – and the millions of American jobs the agricultural sector sustains…While the current pace of U.S. agricultural exports to China is below the pace needed to meet the Phase 1 goals, American Farmers, ranchers and rural communities remain optimistic that the purchases under this agreement will accelerate and be fulfilled by China, and that as a result, the America agriculture sector will enjoy important market opportunities.”


The trade had been expecting the weekly crop condition report to show unchanged or a slight improvement in GD/EX ratings for corn from the previous week. Actual GD/EX corn ratings were downgraded from 75% last week to 71% this week. Some states that suffered the most significant losses:

  • Colorado GD/EX sits at 26%, this is a -26% drop from last week vs 78% a year ago.

  • Nebraska GD/EX rating fell by -12% to 71% vs 77% last year.

  • Texas saw a -10% decline in GD/EX ratings and are now lower than last year.

  • North and South Dakota GD/EX ratings each dropped by -5%.

  • Iowa, Illinois and Indiana each fell by -2%.

A few states saw improvement in their GD/EX ratings this week:

  • Missouri and Ohio both improved by +2%.

  • Minnesota, North Carolina and Pennsylvania all improved by +1% each.

The U.S. soybean crop saw little change in this week’s USDA’s crop conditions report with 72% of the crop rated as GD/EX. States that received a down-grade in ratings were similar to those that also saw reductions in corn ratings: South Dakota -6%, Nebraska -4%, Kansas and Illinois each -3%, Indiana -2%, North Dakota and Wisconsin -1%. A few states saw improvement in GD/EX ratings: Ohio +4%, Missouri, North Dakota, Arkansas and Kentucky +2% and Tennessee +1%.

Areas of the central and southern Plains are being closely watched for developing dry conditions and crop deterioration. IEG Vantage released a new U.S. corn acreage estimate on Monday of 94.1 million acres and total production of 15.4 billion bushels vs USDA’s current estimates of 97 million corn acres and total production just over 16.0 billion.


On June 30th the USDA will deliver the latest acreage report and quarterly grain stocks estimate. Some believe that the funds, which are short -297,000 corn contracts according to the newest CFTC report, will decide to balance up before the report as “there is little meat left on the bone” for profit-taking and most are expecting the USDA will reduce their estimated corn acres from the current 97 million. The biggest question is exactly how many acres will the USDA cut from their projection? There is a wide range of guesses at this point…:

  • Bears argue that the weather and early planting has been beneficial to crop development and there are no imminent weather concerns as there is more rain in the extended outlooks. Most in this mind-set think the USDA will deliver an acreage number of +94 million.

  • Bulls dispute these estimates. They believe planted acreage could fall below -90 million with many of these lost acres moving to the soybean side due to the high production costs associated with corn and stronger preventive plant insurance.

Ethanol production has increased for a 6th week in a row but remains down nearly -24% from this week a year ago. Ethanol use is now out pacing production with current demand up 56% from the low in early April. This has moved ethanol stocks to their lowest level since the end of 2019.

Most recent purchases of U.S. soybeans from China have been for scheduled for delivery beginning in August. Nearby Chinese needs have been imported from Brazil at a historical rate with over 83% of their expected soybean exports already booked. Arlan Suderman of INTL FCStone believes the unusual buying trends indicate that China is fearful of shortages in the near future and are they are hoarding products now in an attempt to protect themselves from any slowdown in the flow of goods. “They are driven right now primarily by fear; fear of shortages. They believe that they handled Coronavirus better than anyone else in the world and they had to shut down their supply lines, they even shut down their ports. If they handled it better than anyone else, it’s only a matter of time before Brazil and the United States have to shut down, and that could lead to some shortages. Right now, they’re more fearful of shortages resulting from the Coronavirus and the impact on commodities coming in.” “We’re seeing a massive influx of shipments {into China}, and now that they’ve got most of Brazil’s supply bought they’re turning to the United States. No surprise there, the only question is how much will it total up? And how close will it come to the objectives?” Suderman doubts China will be able to reach the $36.5 billion trade quota even with the recent increase in soybean purchases. “I do think we’ll see some significant shipments of U.S. commodities to China in the last half of this year, not because they’re trying to be gracious and kind to us, but because they see it as in their best interest to buy while they’re cheap and to hoard supplies, just in case our ports get shut down as well as Brazil’s.”


Brian Grete of Pro Farmer thinks China will begin more new crop soybean purchases over the next few months. “In terms of whether or not China meets its phase one commitments, in all likelihood, they’re probably going to ask for a one quarter extension from what we’re hearing. That won’t come until later, so that would push everything back a quarter, including the back half of the deal. The other thing to keep in mind is if President Trump feels like he isn’t going to win the election in November, he’s probably more likely to become stronger against China, and take a stronger stance there and be more adversary, if that’s possible for him. That’s something to keep in mind as we move forward: how do these relations develop because it is a developing situation. Neither side really know what’s going to happen day to day, week to week and those types of things. And there is definitely more tension now than what there was a couple of weeks ago here.”


The U.S. Climate Prediction Center has placed the odds of ENSO-neutral conditions at 60% for the summer. (Meaning neither El Niño nor La Niña) As we approach fall and winter the scale tips slightly in favor of a La Niña weather pattern developing. Kyle Tapley, senior ag meteorologist with Maxar says” “La Niña may develop a bit too late to significantly impact the U.S. corn and soybean crops, but it does lead to some hotter and drier risks to the forecast for the balance of the summer.” Weather Trends 360 explains that the warmer and drier trend we are seeing now is occurring due to the developing La Niña pattern along with some other shifting cycles. In the map below you can see the significant cooling trend that has developed in just the past couple of weeks across the Equatorial Pacific Ocean where significantly below-normal water temps are making their way to the surface.

In the Dry to Drought Conditions maps below you can see the progression of drier conditions during past 12 months. The map from May of 2019 shows that at that time only 9% of the U.S. was in any stage of drought, which is the lowest in decades. We now have jumped up to 39% of the U.S. in some stage of drought and Weather Trends 360 expects this trend will continue, growing to 50% by the end of 2020 and near 55% by next spring.

A look at the 6-10 day outlook shows temperature falling below normal and above normal precipitation for most of the Corn Belt.

The longer range 8-14 day outlook shows less of the country with below normal temps and precipitation near normal.



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