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COMMODITY REPORT August 30th.

08/30/2019

Price of corn down 1.3 percent at close of CME trading on August 30th following a 2.4 percent decline last week. Soybeans relatively unchanged, soybean meal down 1.7 percent.

 

Corn continues a downward trend in price. Previously corn responded to the mid-session release of the August WASDE on Monday 12th with a decline by close of trading on that day.  The WASDE documented an unexpected higher yield and an 8.6 percent increase in ending stocks. Currently field evaluation of the status of the 2019 crop is in progress amid conflicts. Soybeans were relatively unchanged this past week but a re-evaluation of yield will be highlighted in the September WASD. This may alter the estimate of ending stock forecast to be 15.8 percent of supply.

 

The absence of any substantial news regarding negotiations with China and now the new issue of possible intervention by China in Hong Kong has created pessimism over a resolution of the trade conflict. Resumption is scheduled for some undisclosed time during September in Washington suggesting intractability by both the U.S. and China. Current consensus is that there will be no resolution of the trade dispute before the end of 2019. In the interim China has retaliated by banning all imports of agricultural products from the U.S. The threat of increased tariffs is still on the table.

 

The continuous stream of conflicting statements by White House and Government of China spokespersons over the months since the dispute began is disconcerting to the commodities market and has contributed to price fluctuation.

 

The following quotations were posted by the CME at close of trading on Friday 30th August compared with values for  22nd August (in parentheses).

COMMODITY

 

Corn (cents per bushel)

Sept.  357  (362)        

Dec.    369 (370) 

Soybeans (cents per bushel)

Sept.   857  (858)

Nov.   868 (870)         

Soybean meal ($ per ton)

Sept.   289  (294)

Dec.   295 (300)

 

 

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

COMMODITY Change from past week %
Corn: Sept. quotation down 5 cents per Bu (-1.3 percent)
Soybeans: Sept. quotation down 1 cents per Bu (-0.1 percent)
Soybean Meal: Sept. quotation down $5 per ton (-1.7 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:-

The cost of egg production would change by 0.44 cent per dozen

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

 

COMMENTS

Subscribers are referred to the weekly USDA Crop Progress Report and the August 12th WASDE posted under the STATISTICS tab.

 

In June some concessions were promised by China to reduce coercive trade practices and clarify dispute resolution. Subsequently 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.

 

Prices will be determined by estimates of ending stocks as influenced by the 2019 harvest, exports and domestic use.

 

For comparison the values below are commodity prices posted by the Dalian Commodity Exchange in $US per short ton* at market open on August 13th 2019 (local time) with comparable August 30th closing CME values in parentheses:-

  Corn $236 ($130)

  Soybeans $448 ($256)

  Soybean meal $372 ($289)

*(conversion  Rmb7.14=$US1 effective August 30th)

 

The August 12th 2019 WASDE Report #591, projected that 82.0 million acres of corn will be harvested in 2019 to produce 13.90 Billion bushels. The WASDE projected a harvest of  3.68 Billion bushels of soybeans from  75.9  million acres. The levels of production and ending stocks for the two commodities are based on completion of planting in June and current data on harvest area and projected yield. The WASDE to be published in mid-September will confirm the projected yields and ending stocks of corn and soybeans respectively.

 

The corn price was adversely affected by the August 9th decision by the EPA to grant 31 and to deny six waivers to refineries. This action according to the Renewable Fuel Association decreased demand by 1 billion gallons of biofuel. This was reflected in a sharp decline in the value of a RIN from 20 to 11 cents. Ethanol spot price was $1.34 per gallon 0n August 30th  ($1.27 per gallon on August 9th).

 

Unless shipments of corn and especially soybeans to China resume in volume, which is highly unlikely, the financial future for row-crop farmers in 2019 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 payment has commenced through the Farm Services Agency under authority of the Commodity Credit Corporation.  Payments will be based on a value corresponding to 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.