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WEEKLY COMMODITY REPORT

08/01/2019

Price of corn and soybeans sharply down Thursday, 1st August following announcement by the White House of new tariffs on imports from China.

The market responded with a downward turn for corn and soybeans in the mid afternoon when the President announced imposition of a 10 percent tariff on the remaining $300 billion in imports from China not subject to previous tariffs.

The absence of any substantial news regarding the latest round of talks in Shanghai and a resumption scheduled only for September in Washington suggests intractability by China. The continuous stream of conflicting statements by White House spokespersons over the months since the dispute began is disconcerting to the commodities market and has contributed to price fluctuation. On Friday 26th White House Economic Advisor Larry Kudlow interviewed on CNBC commented "we expect China to make large-scale purchases but there has been no commitment but we are playing from the optimistic side". The market reacted negatively to the lack of progress in talks this week between U.S Trade Representative Amb. Lighthizer and Treasury Secretary Mnuchin with their counterparts in Shanghai. Promised purchases of agricultural commodities arising from the presidential meeting in June at the G-20 meeting have not materialized.

The following quotations were posted by the CME at close of trading on Thursday 1st August compared with values for Friday July 26 th (in parentheses).

COMMODITY

 

Corn (cents per bushel)

Sept. 393 (414)

Dec. 404 (424)

Soybeans (cents per bushel)

Aug. 848 (881)

Sept. 854 (887)

Soybean meal ($ per ton)

Aug. 294 (303)

Sept. 296 (304)

Changes in the price of corn, soybeans and soybean meal this past week were:-

COMMODITY CHANGE FROM PAST WEEK

Corn: Sept. quotation down 21 cents per Bu        (-5.1 percent)

Soybeans: Aug. quotation down 33 cent per Bu   (-3.7 percent)

Soybean Meal: Aug. quotation down $9 per ton.   (-3.1 percent)

  • For each 10 cent per bushel change in corn:-

The cost of egg production would change by 0.45 cent per dozen

The cost of broiler production would change by 0.25 cent per pound live weight

  • For each $10 per ton change in the price of soybean meal:-

COMMENTS

Subscribers are invited to the review of the weekly USDA Crop Progress Report posted in this edition for the rate of crop emergence and condition.

Some concessions have been promised by China on reducing coercive trade practices and clarifying dispute resolution although U.S. negotiators claim that China has backtracked on structural issues hence the threat of more stringent tariffs and embargos on trade with tech companies in China. From an agricultural perspective the question of delays by China in approving new GM cultivars has yet to be settled.

Prices will be influenced by the trend in stock levels, area planted in 2019 and crop progress through the remainder of the season.

For comparison commodity prices posted by the Dalian Mercantile Exchange in $US per short ton* during mid- July 2019 with comparable CME values in parentheses were:

Corn $255 ($157)

Soybeans $453 ($300)

Soybean meal $377 ($311)

*(conversion Rmb6.8=$US1)

The July 11th 2018 WASDE Report #590, projected that 91.7 million acres of corn would be planted in 2019 to produce 13.88 Billion bushels. The WASDE projected 80.0 million acres to be planted to soybeans. The 2019 soybean crop is projected to attain 3.85 Billion bushels according to the July WASDE. The levels of production and ending stocks for the two commodities are based on completion of planting, projections of harvest area and yield. The WASDE to be published in mid-August will confirm the projected yields and ending stocks of corn and soybeans respectively.

See the WASDE posting summarizing the July 11th USDA-WASDE Report #590 under the Statistics Tab documenting price projections and quantities of commodities to be harvested, processed and exported from the 2019 harvest. The Quarterly USDA Grain Stocks Report was posted on the July 5th edition of EGG-NEWS.

Unless shipments of corn and especially soybeans to China resume in volume, which is highly unlikely, the financial future for row-crop farmers appears bleak despite the release of two tranches of support funding in 2018 amounting to $8 billion as "short-term" compensation for disruption in trade. On July 25th the USDA announced a $16 million package to support agriculture with Market Facilitation funds to be distributed in three tranches. The first will take place in August through the Farm Services Agency under authority of the Commodity Credit Corporation. Payments will be based on the higher of 50 percent of the Producer's calculated payment or $15 per acre provided a cover crop is planted.

The magnitude of the second (November 2019) and third (January 2020) payments will be decided on according to prevailing conditions. Regulations framed in terms of the Additional Supplementation Appropriations for Disaster Relief Act of 2019 enacted in June will determine eligibility.

Promises by China to import soybeans, cotton and corn among other agricultural products can't buy implements, seed, fertilizer and fuel or keep the lights on and food on the table.