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U.S. soybean demand window open until March

U.S. soybean demand window open until March

CORN--------

Corn closed the week 2 ¾ cents higher. Private exporters did not announce any export sales. 

In the weekly crop progress and conditions report, corn harvested advanced to 84% done versus 96% on average. Producers in North Dakota are only 30% harvested while Wisconsin is 57% done, Michigan 56% complete and South Dakota is 68% done. 

Corn export inspections totaled 23.8 million bushels (mb), below the 40.3 mb needed each week to reach USDA's export estimate of 1.850 billion bushels (bb). Inspections for 2019-20 now total 220 mb, down 57% from the previous year. 

In the weekly Energy Information Administration report, weekly ethanol production saw its ninth week of increased production. Production was reported at 1,059,000 barrels per day, up 26 thousand barrels per day. The stocks declined to 20.28 million barrels (down 237k barrels). 

The USDA supply/demand report on Dec. 10 looks to lend little direction to prices, with no production adjustment and the USDA likely to lower demand forecasts by 15 to 25 mb. The most bullish driving force for prices would be if the funds decide to become buyers with very little farmer hedge pressure until after the first of the year.

Strategy and outlook: Stocks look to remain large with the poor demand pace. Commercial buying has lifted the index to a bullish position. The buy signal is likely premature as it is not a timing indicator.

SOYBEANS------

Soybeans closed the week 19 ¼ cents lower. Private exporters did not announce any private sales.

In the weekly crop progress report, Soybean harvest moved to 94% complete with North Dakota 89% done, Wisconsin 82% complete, Michigan 80% complete and Missouri 91% finished.  

Soybean export inspections totaled 71.4 mb, a marketing year high, which was also above the 32.1 mb needed weekly to reach USDA's export estimate of 1.775 bb. 

Inspections for 2019-20 now total 528 mb, up 18% from the previous year. Brazil and Argentina currently are planting their crops at a record pace. With profit margins the highest in five years, farmers are expected to seed record large corn and soybean crops. Brazil and Argentina store little to no excess grain, as storage elevators are absent from the countryside, not like here in the U.S.. Grain goes from field to port, which means they need to forward contract, or pre-sell their crop before it’s harvested to ensure it doesn’t pile up on the farm. 

From the start of the U.S. harvest in October until South American soybean harvest in March, the big demand window for U.S. soybeans as South American supplies are unavailable and the U.S. is the only port of origin for the world’s needs.

Strategy and outlook: The forecasted bearish COT report has proved prophetic with values failing at resistance and falling on fund selling.  

WHEAT----

For the week, Chicago wheat closed 24 ¼ cents higher, Kansas City wheat closed 13 ½ cents higher and Minneapolis wheat 8 ¼ cents higher. Private exporters did not announce any sales.

In the weekly crop progress and conditions report, winter wheat emergence is 87% with conditions unchanged at 52% good or excellent versus 55% last year. Wheat inspections totaled 15.5 mb, below the 18.3 mb needed weekly to reach USDA's export estimate of 950 mb. Inspections for 2019-20 now total 454 mb, up 22% from the previous year. 

December is when new crop winter wheat enters dormancy and wheat will not exit dormancy until March and until then, the market focus will be primarily on demand. This month, wheat harvest begins in Australia and will compete with U.S. wheat for demand. In addition, traders will be closely monitoring moisture conditions of the winter wheat crop during the winter months. This year’s winter wheat crop is entering dormancy with a slightly lower crop rating compared to the last five years.

Strategy and outlook: The huge world supplies of wheat mandates producers to sell out inventory and use options to manage risks on sharp rally attempts.

LIVE CATTLE--------

Last week, live cattle closed $2.40 higher while feeder cattle closed $3.32 higher. Fed cattle trade occurred in the North at $118 to $120 live and $187 per hundredweight dressed - mostly $2 to $3 higher than last week. Trade in the South was mostly $118 to $119 - $2 to $3 stronger. 

The Fed Cattle Exchange Auction sold 1,229 head out of 1,398 listed for sale in six of eight lots. Kansas lots sold 336 head at $115.75 to $116, Nebraska sold 893 head at $115 to $115.50 while one lot from Texas sold at $114.50 but was PO'd. There will not be a FCE auction this week.  

The latest USDA steer carcass weights were up four pounds compared to the prior week at 912, making them 12 pounds above last year. 

Net beef sales of 17,600 metric tons (MT) reported for 2019. For 2020, net sales of 9,100 MT.

Strategy and outlook: The weekly reversal for feeder cattle is bearish and seasonal weakness into Christmas time is expected.

HOGS-------

Lean hogs closed the week 67 cents higher. 

Iowa/Minnesota weekly hog weights came in at 287.1 pounds versus 287.1 pounds the week prior and 283.9 pounds last year. 

Net pork sales of 25,600 MT reported for 2019. For 2020, net sales of 24,900 MT. 

Strategy and outlook: Producers should hedge summer month premiums.

Brian Hoops is president and senior market analyst of Midwest Market Solutions Inc. The home office is in Springfield, Mo., with branch offices in Thief River Falls, Minn.; Verona, N.D.; Yankton, S.D.; Storm Lake, Iowa; and Springfield, Neb.

The Tri-State Neighbor Weekly Update

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