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In most situations, when global stocks of corn have declined 13.3 percent from the previous year, the bulls have taken the ball and run. However, traders have been slow to respond in this instance because stocks are deemed adequate to meet current demand. Meanwhile, that will likely change as the planting season gets closer, and a hiccup in production can be ill afforded. Until then, the market will focus on trade negotiations with China, planting estimates, and long-term weather forecasts. Looking at exports, sales are on track to meet USDA’s target of 2.450 BB, but shipments are lagging. Inspections last week were 29.2 MB and below the average of 52.9 MB that need to be shipped on a weekly basis to reach their projection. In the meantime, rumors are circulating that China may be interested in 5-8 million tons.
Traders may not get much more out of the deck playing the China card in soybeans. A new trade deal will eventually be struck but getting back to pre-tariff sales levels is wishful thinking. In the meantime, world stocks are at a record, Brazil’s crop is the second highest ever, and China’s imports are peaking. Furthermore, we still do not know the extent that African Swine Fever will affect demand. Currently, USDA projects their usage being down 3.2 percent from December. Looking at shipments, they are running 38 percent behind a year ago. Inspections last week were decent at 39.0 MB and above the average of 35.9 MB that must be shipped on a weekly basis to reach USDA’s projection of 1.875 BB. China took 17.9 MB and have averaged shipments of 11.1 MB each week since early January. However, that is well below the average of 15-30 MB they received prior to the tariffs.
Global stocks of wheat have declined from the record set a year ago but remain at an elevated level. While sales of U.S. wheat were reported to Egypt and Nigeria early this week, we have a lot of catching up to make up for lost sales to the Black Sea Region. Inspections last week were 20.6 MB and below the average of 27.1 MB that must be shipped each week to reach USDA’s projection of 1.0 BB. Currently, we are on track for shipments of 840 MB.
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