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Spring Severe Weather Outlook and ASF and Crop Price Movement

Update for March 4th, 2021

Sales of U.S. corn to China have helped to ignite corn prices. Last week exports reached nearly 60 million bushels which is the highest so far for the marketing year which will end on August 31st. Now that we have reached the halfway point of the marketing year, we would hope to see more than a total of 44% of current sales shipped by this point. In addition, the Chinese government has not raised the quota needed to cover all of the bushels purchased for shipment out of the U.S. This has many traders concerned that we may begin to see cancellations on these unshipped orders similar to what happened during the 2013/14 marketing year when China canceled a large portion of their U.S. corn orders. The other big unknown right now is new crop acres. These are significant forces that will likely cause a lot of uncertainty in the corn market over the coming weeks.

As the harvest season progresses in Brazil production estimates are increasing. StoneX (formally FC Stone) has now pegged the Brazilian soybean harvest at a new all time record high of 133.5 MMT. The overall yield per acre may be lower than normal but the overall acres planted to soybeans is up and is expected to offset any drag in yield. Production totals in Argentina are projected to fall below that of the last couple seasons which could lead to less farmer selling causing shortages of soybean meal that could ultimately affect global supplies. Some traders are concerned that U.S. soybean orders may also face possible cancellations due to the higher cost of our product. Currently Brazilian soybeans are around $30/ton less than U.S. beans and when shipping costs are figured in that discount increases to $52/ton or about $1.50 per bushel. U.S. 2021 total soybean acreage, weather outlooks along with domestic and global demand will all be important components to watch in the coming weeks.

Soybean exports out of Brazil are beginning to accelerate but shipping vessels lined up in port waiting to be loaded are now at record levels. The slower than normal harvest pace initiated the backlog but progress is being made. The USDA estimates Brazilian exports for this season will reach 85 MMT, slightly less than the high last season of 92.1 MMT. Compare this to U.S. soybean exports that have never before exceeded 59 MMT – projections this season for U.S. exports to reach a new high of 61.2 MMT.

Recent reports out of China indicate the presence of new strains of ASF have been detected within the country. The newly discovered strains appear to be milder than the previous strain but are highly transmissible which is complicating the containment efforts. A team of scientist from the Harbin Research Institute has been monitoring 7 Chinese provinces and stated, “The emergence of lower virulent natural mutants brings greater difficulty to early detection and poses new challenges for the control of ASF.” The team isolated 22 viruses through 3,660 samples collected within the 7 provinces during a period from June through December, 2020. The only specific information the Chinese government has released regarding the outbreak says that the outbreak was found in piglets that had been illegally transported in southwestern China. Some analysts warn that this latest outbreak could affect up to 20% of China’s breeding herd which would be a considerable hit to grain and oilseed demand.

Spring weather outlooks are on farmers minds and with all of the wild weather already this winter tensions are rising. The La Niña weather system that has been in place for several months now continues to remain in effect and according to the National Oceanic and Atmospheric Administration’s Climate Prediction Center it has a 60% chance of lasting throughout the early spring. Looking further down the road – April-June there is a 60% chance that neutral conditions will return and last until fall. By fall there are 50/50 odds La Niña will return once again.

Typically, with a La Niña system in control during the early spring months we see an increase in tornadoes and other severe weather activity particularly during March, April and May. While some portions of the country have already experienced some early, severe weather outbreaks, forecasters say that this season’s weather conditions closely resemble those of the La Niña spring of 2011 which was one of the most active springs in recorded history. That season got off to a late start in February and March but April was extremely active with over 700 tornadoes reported.

The current long-range outlook from AccuWeather predicts 275 to 350 tornadoes during April 2021. AccuWeather Lead Long-Range Meteorologist Paul Pastelok says though that there are some very important differences that could keep this spring from being as active as 2011. One of those key factors being the drought that is present over the western half of the U.S. These dry conditions will help to suppress thunderstorm development and move much of the most severe weather further east than normal.

The precipitation outlook through next Wednesday is shown in the map below.

The outlooks for next week show the Midwest warm up will continue along with increased chances for some much-needed precipitation.

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