Updated: November 8th, 2019
  
Closing Prices:
DEC. 2019 CORN $ 3.77
NOV. 2020 SOYBEANS $ 9.67
JULY 2020 KC WHEAT $ 4.45
 
Weekly Change: Corn down 11 for the week, Soybeans finished down 5, and Wheat finished 10 lower for the week.  
 

 

 

 

We need help!

Do you know of someone looking for a career working with ag producers and a passion for the markets? If so, we’d like to hear from them.  AgWest is currently looking for a few good folks that can help service the growing demands from our farming partners.  Currently we have the below openings:

  • Broker & Broker Assistant at our Yuma, CO location

For more details and to submit an application, please click HERE.


Crop Progress – Week Ending November 3rd 

 

CORN HARVESTED: As of last Monday’s report, 52% of the nation’s corn had been harvested which compared to the five-year average of 75% completed.

 

SOYBEANS HARVESTED: 75% of the soybeans had been harvested against the five-year average of 87%.

  

WINTER WHEAT PLANTED: 89% of the winter wheat crop had been seeded, which closely matched the five-year average for that date. 

 

November WASDE Report Highlights

 

Full report data and graphs can be found at the end of this week’s commentary.

 

This month’s report is another report with limited surprise impact.

 

CORN:     

Yield dropped 1.4 bushels per acre to 167.

Harvested acreage remained the same as last month at 81.815 million acres. 

Production came in 118 million bushels below last month, but the projected ending stocks declined by only 19 million bushels. 

U.S. ending stocks were anticipated to be 1.91 billion bushels.

World ending stocks came in at 296 MMT, down just over 6 MMT – likely the most price-friendly piece of information.

 

BEANS:   

Both yield and harvested area remained the same as last month.

Production held steady with last month.

U.S. ending stocks increased by 15 million bushels and stand at 475 million bushels.

World ending stocks had a fractional/insignificant change from last month.

 

WHEAT:

U.S. ending stocks were down 29 million bushels from last month, standing at 1.014 billion bushels.

World ending stocks had a fractional/insignificant change from last month.            

 

Down to the January “Final” Reports

 

The farmer has been completely convinced the USDA has been high on their yield/production numbers since early summer. The farmer has anticipated the USDA coming to grips with reality in recent months. The USDA has not moved the needle very far on yield/production and it is now down to one last chance for market-changing bullish surprises, and that last chance will be in the January WASDE reports. That is two months away… two more months without reason for a supply-driven rally. The January reports have a history of shaking up markets… maybe, just maybe, that will be the case this year. For now, the market will trade what it knows, and we need to make decisions accordingly. 

 

World Pork Production and African Swine Fever – What’s the Deal?

 

The following piece was authored by Dale Jergensen from our Gretna office. 

You can contact Dale with questions or further discussion on hog markets at djergensen@goagwest.com.

 

ASF is a highly contagious and deadly viral disease affecting both domestic and wild pigs of all ages. Markets are concerned about the carry-on effect of ASF in China, as well as what may happen in the US. The largest pork producer in the world is China. Their 2020 production is estimated to be around 64% of 2018, which shows how devastating ASF can be on hog herds. This report will look at the world pork production, exportable supplies, and imports for the major pork producing countries. While government report numbers can be changed as they get new data, they are better figures to get a clear picture of the status of world pork numbers than from someone who ‘has contacts’ in China and declares that the sky is falling. The demand for pork in China, or anywhere else, is not inelastic. This means that no one country will procure pork at any price to keep their consumption at some predetermined level. One reason is that substitute protein sources like beef, chicken, and fish are available. Also, simple economics tells us that one will eat less at higher prices. All of this makes it difficult to determine what the future holds for Chinese pork consumption and the amount of pork and other proteins they will import. Sources say that the US will get ASF. What happens then to the US pork market, along with the corn and bean markets which are dependent on the demand from hog production? The following tables and charts will give some perspective to the world pork production. The numbers in the tables and charts in this report come from the Foreign Agricultural Service division of the USDA Office of Global Analysis.

 

The World Pork Production balance table below shows that estimated world pork production for 2020 has dropped 17,715 MT from 2018 with 19,290 of the drop coming from China. Brazil, the EU and the US have the largest increases from 2018.

 

In the table above it is estimated that China will import 3,500 MT of pork in 2020. Notice that The EU is estimated to export 3,900 MT and the US is estimated to export 3,311 MT for 2020. Also, note that world imports are expected to be 9,962 MT and exports are expected to be 10,383 MT. I am going to assume that the countries not included in the table take up a lot of the difference. Chinese imports of pork are estimated to more than double from 2018 to 2020. Notice, also, that the domestic consumption in China is estimated to drop from 2018 to 2020 by 17,248 MT. This represents approximately 24 lbs. of pork per person, or about one lb. per month over two years. Thus, I would find the numbers in the above table to be reasonable. Let’s say the Chinese import numbers are too low. For China to make up the 17,248 MT drop in consumption from 2018 to 2020 in the above table it would take an additional 13,748 MT above the 3,500 MT estimated imports. It would seem difficult for exporting countries to meet this kind of demand without dramatically affecting local hog prices.

 

In the US, a market hog wean-to-finish production uses approximately 10 bushels of corn and 100 pounds of soybean meal. Let’s assume roughly the same use in other countries. The kind of feed may vary, but hogs consume feed to reach market weight no matter where they are being raised. The FAS/USDA Office of Global Analysis provides data and forecasts for pork production and hog numbers around the world. To get an idea of the drop in corn and meal consumption I will use the US numbers of consumption of corn and meal.

In China the estimated drop in the number of pigs is 275 million head from 2018 to 2020. This means a drop in demand for 2.75 billion bushels of corn and 27.5 billion pounds of meal. 27.5 billion pounds of soybean meal represents about 578.6 million bushels of beans. The Chinese drop from 2018 to 2019 is 195,000,000 pounds of meal. This represents about 410.28 million bushels of beans. Trade war aside ASF in China explains a lot of the drop in US bean exports to China.

The data that pops out on the above table is that the European Union has ASF in some of their member countries. FAS estimates their pig crop will rise to 270,000,000 head in 2020 from 265,287,000 head in 2015. The EU looks to be having success keeping ASF mostly contained to Eastern Europe. They aren’t having the same drop in production as China due to ASF. Russia also has ASF and their production is estimated to rise to 52,600,000 head in 2020 from 39,380,000 head in 2015. South Korea is also expected to increase their pig crop. However, the estimate for South Korea may have come out before the outbreak in South Korea. In Europe most of the ASF is in the wild population and mostly in Eastern Europe. The outbreak of ASF in the domestic hog population is small, and no doubt due to good bio-security, among other policies. I believe the ASF in China started in their wild hog population. The difference is the way the domestic hogs are raised.

 

What could happen in the US? The table above on the pig crop for the US has similar numbers to the quarterly Hogs & Pigs report, and estimates 143,255,000 pigs for 2020. When/if ASF hits the US, how many hogs will be lost from the total herd? With just the market hogs, a 10% loss would be 14,325,500 head in 2020. This means a loss of 143,255,000 bu. of corn and 30,158,947 bu. of beans. If corn and bean supplies were tight, this would be a very important demand factor to watch carefully. With corn stocks of 1.910 billion bu. and beans stocks of 475 million bu. the effect on demand is a little less concerning in and of itself. One can do the math from larger losses in the pig crop. A 10% loss would be significant, but nowhere near the issue that China is facing. The US has had time to develop procedures to limit ASF from spreading. The bio-security among US producers is very strong and officials in the US have been working on immediately containing and evaluating at risk areas. Will the US have the same issues as China? Probably not, but it is worth knowing what could happen if an outbreak gets out of hand.

 

 

 

Thought of the Week

 

“Success is not how high you have climbed, but how you make a positive difference in the world.”

                                                                                                      --Roy T Bennett 

Have a great week!

 

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. THERE IS SUBSTANTIAL RISK OF LOSS INVOLVED IN TRADING FUTURES AND OPTIONS WHICH MAY NOT BE SUITABLE FOR EVERYONE. HOWEVER, THE RISK INVOLVED WITH PURCHASING OPTIONS IS LIMITED TO THE PREMIUM PAID PLUS TRANSACTION COSTS. THIS MATERIAL HAS BEEN PREPARED BY A SALES OR TRADING EMPLOYEE OR AGENT OF AGWEST AND IS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION. THIS MATERIAL IS NOT A RESEARCH REPORT PREPARED BY AGWEST. IF YOU ARE NOT AN EXPERIENCED USER OF THE DERIVATIVES MARKETS, CAPABLE OF MAKING INDEPENDENT TRADING DECISIONS, THEN YOU SHOULD NOT RELY SOLELY ON THIS COMMUNICATION IN MAKING TRADING DECISIONS
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