Markets appeared to be reacting to trade issues with China
By Diego Flammini
Staff Writer
Farms.com
International trade relationships contributed to a bearish report for soybeans in July’s World Agricultural Supply and Demand Estimates (WASDE) report.
2018-19 soybean ending stocks will be around 580 million bushels, the USDA projected, which is up from 385 million bushels in June. The USDA lowered projected soybean exports by about 250 million bushels.
The federal ag department dropped its average price range from US$8.75 to US$11.25/bu in the June report to between US$8.00 to $10.50/bu in July.
Those figures could reflect the trade issues between the U.S. and China, said Moe Agostino, chief commodity strategist with Farms.com Risk Management.
“The USDA is giving us the worst-case scenario for if (the U.S. doesn’t) get a trade deal with China,” he told Farms.com today. “That being said, if (the governments) get a deal done, the headlines are going to read that China is buying twice as many beans and the markets could turn around.”
Soybean prices have fallen about 22 percent since May, when producers could earn about US$10.60/bu, Agostino estimates. But he doesn’t expect that downward trend to continue indefinitely.
“If the market drops another 22 percent, you’re looking at about US$6.48/bu,” he said. “That performance is unsustainable and, at some point, you find the bottom.”
The WASDE proved to be a little kinder to corn producers.
Estimates for corn ending stocks for 2018-19 were down by 25 million bushels and exports increased by about 125 million bushels, the report said.
If growers with storage can be patience, they may be able to earn US$4.00/bu next spring or summer, Agostino said. Farmers without storage may have to look at other alternatives.
“If you don’t have storage, you might want to look for basis opportunities,” he said. “But if the elevator you’re storing (the crop) at wants the crop delivered in February, but you harvest in September, you still need to store it for a few months.”
Wheat yields in other parts of the world may benefit North American growers.
Global wheat production is down 8.43 million metric tons from the June WADSE, the July report said. Yields in Russia and the European Union are down by a combined total of 5.9 million metric tonnes.
“When numbers from the EU and Russia are lower, that’s a supportive feature for the wheat market,” Agostino said. “U.S. wheat also has better protein. Countries will be looking for that and willing to pay a premium for that protein.”
The next WASDE will be released Aug. 13.
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