Futures were steady to start the month but turned weaker as the day progressed. Ongoing trade issues were the main reason for this set back, along with renewed concerns on the impact they could have on the entire US economy. Sharp losses in the outside markets weighed on commodities as well. Losses were limited by concerns over Argentina grain production and thoughts the US corn harvest will progress long into the winter months and possibly until spring.
US trade developments were a main focal point of today’s session. Developments with China were limited, and indications are the US is likely going to go forward with its next round of tariffs on December 15th. Over the weekend President Trump tweeted that the US will reinstate tariffs on Brazil and Argentine steel and aluminum. These were suspended when other countries had tariffs placed on them, but now President Trump claims the South American countries are manipulating their currencies which is in turn hurting US farmers. The concern with these tariffs is what it will mean for the US economy as manufactured good prices will likely rise.
Argentine weather was a market factor today as conditions are turning hot and dry in the country’s main corn production region. Argentina does have rains in the forecast for late next week, but ahead of that crops will be stressed. These rains are also not expected to be heavy enough to fully replenish dry soils. Brazil’s forecast is more benign with moderate temperatures and widespread rains.
US weather is also a market factor, mainly for corn. Winter weather conditions over the past week have slowed fieldwork in many regions, especially those of the Upper Plains. This is where a large amount of corn was already left to harvest. Farmers in the regions, along with other areas, are now claiming they may leave corn in the field until spring rather than fight muddy fields to complete harvest now. The concern with this is what impact it will have on yields and quality both.
Trade is closely monitoring wheat tour results in Argentina. Reports from southern Argentine fields indicate yields may be down 37% this year from drought. That region of Argentina has been suffering from abnormally dry conditions since July. Now farmers in the region are finding plant disease, mainly wheat scab. There is little doubt the combination of these factors could start to lower the country’s crop.
Australian officials have already lowered their wheat crop estimate and are now cutting it even further. Australia has been suffering from a drought all year and thoughts are the crop will be nearly 20% less than a year ago from it. This will make the country’s wheat production the least since 2008 and put it 35% under the 10-year average. Australia has seen its wheat production slip for three consecutive years and now worries are emerging that it could impact the country’s economy.
Export loadings for the week ending November 28th favored soybeans over the grains. Soybean loadings for the week were twice the needed amount to reach yearly projections at 56.9 million bu. Of this, 40 million bu was destined for China. Grains inspections were only half of the needed amount, with 16.9 million bu on corn and 9 million bu for wheat.
Mixed economic data has been released from the USDA. Net farm income for the United States is projected to rise by 10% over 2018 for the 2019 calendar year. This will put net farm income at $92.5 billion. While this seems positive, data shows that roughly one-third of farm income this year will come from either government aid or insurance payments. Economists are worried over what this could mean for 2020 income if payments halt and commodity values do not rebound.
This commentary is the sole opinion of Karl Setzer, Senior Commodity Risk Analyst for AgriVisor, LLC. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to send an e-mail to firstname.lastname@example.org.