Trade and Export News and 2 Week Weather Outlook
Updated: Oct 2, 2018
Update for September 26th, 2018
It’s widely believed that President Trump will soon announce his plan to lift summer limits on E15, high-ethanol gasoline. In essence this change in policy would allow the sale of E15 year-round vs the current policy which restricts the sale from June 1 through September 15th in regions where smog is a problem. This change is expected to add between +100 to +200 million bushels of demand to the corn market. The exact timing of the Presidents anticipated announcement is not yet known but this policy change would certainly be a positive move for the corn market. Recent figures show ethanol exports have set a new global record this season reaching nearly 1.4 billion gallons, valued at $2.37 billion. The previous record of 1.1 billion gallons was exported during the 2011/2012 marketing year which was prior to USGC development of an ethanol program. The U.S. market share rose sharply as well increasing from 50% in 2016 to 65% in 2017. In addition to the positive news in the ethanol industry the USDA recently announced another large sale of corn (239,630 MT’s) to Mexico. They also have announced sales to some “unknown” destinations as well which has puzzled many traders.
This week’s USDA Crop Conditions report indicates that the soybean harvest in the U.S. is off to a very quick start. Big production states of Iowa, Illinois, Minnesota and Nebraska all are running ahead of normal harvest pace. Producers in Brazil are also off to a fast start with soybean planting with many areas running well ahead of normal which means soybeans in these early planted areas will be ready for harvest in late-December to early-January. This gives U.S. exporters a very narrow window of opportunity to make sales. The drastic fall in soy prices has now made the price of soybeans out of the Pacific Northwest cheaper to buy than soybeans out of Brazil, even with the 25% tariff added on! The USDA announced a sale of 162,000 MT’s of U.S. soybeans for 2018-19 delivery season to an “unknown” destination. Some traders feel that this purchase will likely be destined for China and that the country has no choice but to import larger quantities of U.S. soybeans. There is reliable evidence now that Brazil’s soybean supply is fading quickly and because of that Chinese buyers are turning to Argentina to source soybeans. In response to this Argentina is replacing their soybean supply with imports from the U.S. and rumors are that some buyers in Brazil are also looking to source soybeans from the U.S. all of which is helping boost our demand.
A renegotiated free-trade agreement between the U.S. and South Korea was signed Monday at the United Nation’s General Assembly. South Korea is the 6th largest export market for U.S. agriculture importing $6.9 billion in farm goods last year and now the possibility of an even larger market open to U.S agriculture goods in the future.
The USDA Quarterly Grain Stocks report will be released on Friday morning. There are no adjustments made to domestic or global balance sheets in this report, those will occur in the October 11th WASDE report. This report does tell us how many bushels are still on hand from last year as of September 1st. It’s expected that corn supplies will be smaller than last year (but it will likely be determined by the Feed and Residual number) while soybeans and wheat stocks are forecast to increase.
U.S. Quarterly Grain Stocks (billion bu.)
USDA Average Range of USDA
Sep 2018 Trade Est. Trade Est. Sep 2017
Corn 2.010 1.953-2.099 2.293
Soybeans 0.398 0.378-0.430 0.302
Wheat 2.344 2.155-2.440 2.266
2018-19 Wheat Production (billion bu.)
USDA Average Range of USDA
Sep 2018 Trade Est. Trade Est. Aug 2018
All Winter 1.188 1.170-1.200 1.189
HRW 0.661 0.655-0.666 0.661
SRW 0.291 0.285-0.294 0.292
White 0.237 0.230-0.247 0.236
Other Spring 0.610 0.591-0.635 0.614
Durum 0.073 0.070-0.080 0.073
All Wheat 1.873 1.848-1.907 1.877
Several areas of the country are starting to experience some weather related harvest delays which is creating some grain quality and yield issues. This situation could intensify if the forecast from WeatherTrends 360 hold true. The maps show “a general north-south orientation with much below normal high temps across the northern tier and still summer across the South, especially the Southeast. Its harvest season and we certainly don’t need a conveyor belt of moisture going right through the heart of the Corn Belt this time of year.”