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Jerry Gidel

At this same meeting of public and private sector officials from across US agriculture last week, the presenters had mixed outlook depending which one of the three major crops — corn soybeans or wheat — they were speaking about to the group.

As might be suspected, soybeans were the one major crop with the least amount of post-harvest upside potential.  This year’s combination of a record US yield per acre and this crop being in the center of the US/China trade tensions has reduced this crop’s overseas demand when it likely needs it the most. Seasonal price swings will exist, but any substantial upside price potential will only occur if South America and in particular Mato Grasso in Brazil would have a drought.  This loss of output would likely prompt an increase in US export sales and possibly even some Chinese purchase from the US because reduced global availability.  However, this approach isn’t a strong marketing plan if no dry trends have been establish in Brazil by early in 2019.   With soybeans building a substantial carryover supply, US producers will likely reduced their 2019 bean plantings. The western and northern regions of the US will likely to switch to corn and small grains while the strong 2018 yields of the eastern Midwest could curtail producer changes. A range of 2.0 to 4.5 million of reduced bean acres developed between the presenters.

Wheat has had spurts of upside price enthusiasm during its June to May crop season on reduced output from within the five major exporting regions (Black Sea, the EU, the US, Canada and Australia) during the first half of crop year. Despite substantial cuts in Russia, Germany, other northern European and Australia of over 30 mmt from last year, building stocks in non-exporting China and India have reduced the impact on the world’s total ending stocks. This has reduced the investment fund interest in this market to this point. However, any combination of winter weather freezing up Black Sea ports or a Kremlin decision to curtail their exports during the second  half of 2018/19 crop season could have immediate impact on US export demand and world wheat prices.  Price swings back to the top 2018’s price range ($5.90-$6.20) could still occur. Because of its low initial cost, larger (hard red and soft red) winter wheat seedings are likely as producer look to grow something for cash. They could follow with second crop beans ifthe current  US and Chinese tensions would subside in 2019.  Presenters all-wheat plantings ranges from 2-3 million acres.

Because of lower 2018 South American corn output in both Argentina and Brazil, the US corn price post-harvest potential remains the strongest of the three major crops. Wet weather delays in the WCB this harvest and now reports of higher field losses prompted last week’s presenter and many others to moderately reduced the US corn crop by the final January production report. These smaller supplies along with any weather scares for S. America this winter could swing values back toward last summer’s highs.  With animal numbers expected to remain strong thru the first 3 quarters or more of 2018/19 crop year, ethanol remaining competitively priced both domestically and overseas and foreign buyers already pushing US corn sales 32% ahead of last year, corn’s 2019 ending stock are still likely to decline 400 million bu or more. 2019 corn planting levels are expected to increase because of producers cutting their soybean price exposure in the 2-3 million acre range.  Only a jump above 4 million acres might be problematic for 2019 prices.

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