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Old 12-04-2019, 02:36 PM
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Default Why Do Ag Prices Keep Going Down, Analyst Asks

Ag Commodities have done almost nothing else but go down, down, down in the past five weeks.
The leaks lower have been slow, almost imperceivable day by day, but when you look at the weekly changes we almost exclusively went down, down, down.
This, in spite of a poor production year in 2019 for the U.S., as we first didn't plant 15-20 million acres, and then slowly lost yield and production potential from late planting and weather that was too wet and cool much of the year.
Harvest weather is also turning adverse, with a major snow storm over NE and CO, today, and moving slowly northward and westward that will likely end the harvest for many states where heavy snow falls. And many states are not very advanced in their harvest of corn, especially ND (30% vs. 91% normally), MN (86% vs. 97% ave), SD (68% vs. 98% ave), WI (57% vs. 85% ave), and MI (56% vs. 83%).

These are the far northern states where snow is likely to last until spring, and also where late planted crops never reached maturity. So, they are still way too wet to harvest (25-35% moisture) and no propane is available anyway. It's likely that with 16% of corn nationally left to harvest (12% behind normal progress), probably 5-10% won't be harvested until spring.
Even soybeans are only 94% harvested, 3% behind the normal pace but northern farmers had to focus on soybeans to get them off before major snow fell. However, WI is still only 82% harvested soybeans vs. 97% normally, so we could lose some soybeans there. ND is only 89% harvested with soybeans vs. 99% normally, so its likely 10% or so won't get harvested as they are under water/mud/snow already. Also MI is only 80% harvested vs. 94% normally, so they will likely lose some soybean production as well.

The closer one looks at the corn/soy harvest, the worse it looks for northern areas that are at risk of losing crop to this very wet fall and relatively late planting year (with immaturity a problem - more so in corn than soybeans).
We note that cotton harvest (4% ahead of normal at 78% harvested) and sorghum harvest (5% ahead at 97% harvested) in the south are ahead of normal progress, with winter wheat on schedule too with 87% emerged (only 3% behind normal) and conditions at 52% rated G/E (same as last week).
But sunflower harvest in the north is 33% behind normal at 56% complete, similar to the soy/corn harvest up north. It is a potential disaster in northern areas - especially with a large snowstorm bearing down on these states over Thanksgiving.

We note that soils that didn't seem possible to get any wetter - got wetter this week, with subsoil (82% adequate/surplus) and topsoil (83% adequate/surplus) both rising 1%. Actually, we are even wetter now than most springs - and it's not likely to get any drier over winter. In fact, the risk of prevent plant in 2020 is probably the highest it's ever been because (1) soils are as wet at freeze up as ever, and 2) Very little fall fieldwork was completed due to soggy soils this fall.
That leads to a high likelihood of prevent plant next spring - especially on corn ground still not harvested, or even standing corn stubble. Even soybeans
in 2019 that didn't get worked this fall will be difficult to get planted in some areas. A great risk of prevent plant falls on many areas next spring.

Given the horrible 2019 season, you'd think prices would be high, or at least higher. But the market is saying that without a Chinese-U.S. trade agreement, U.S. commodities may always be relatively worthless - regardless of our production year?
What about with a trade agreement?
It is probably no coincidence that while originally we had a Nov. 17 date to sign a China-U.S. trade agreement - it didn't happen as Chile has some communist revolutionaries/protestors that cancelled the meetings. Since it was apparent this date was cancelled, ag prices have done nothing but go down daily/weekly without any trade agreement. Unfortunately, there still isn't any visible progress that either China or the U.S. has made.

Ironically, the stock market has rallied to new highs even though the trade agreement has not happened. So stock rally with no Chinese trade agreement, but commodities drop like a rock!
It is becoming more and more apparent who wins and who loses with no trade agreement with China.
Ray can be reached at raygrabanski@progressiveag.com.
++++++++++++++++++++++++++++++++++++++++++++++++++ +
Ray is President of Progressive Ag Marketing, Inc., a top Ranked marketing firm in the country.
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Old 12-05-2019, 09:06 AM
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Default Re: Why Do Ag Prices Keep Going Down, Analyst Asks

Maybe the purchasing agents have found that they can source out the commodities they need cheaper overseas. There is no national loyalty in this country. Price drives everything and as the source gets proven they're likely to move the manufacturing to the general area also.
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Old 12-11-2019, 01:10 PM
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Default Re: Why Do Ag Prices Keep Going Down, Analyst Asks

As Prices Skyrocket, China Claims It Doesn't Need US Pork To Ensure Domestic Supply

The Global Times is out with a new opinion piece on Tuesday morning, stating how China will expand its pork imports with Brazil rather than the US.

We've been covering this trend for the last several months, while the Trump administration continued to promote headlines indicating China was buying massive amounts of agriculture products from the US, including pork and soybeans. But as we noted, this wasn't the case, and China abandoned US markets for Brazil.

In early Nov., China signed the first-ever trade deal with Brazil to start receiving shipments of swine offal, or organ meats (hearts, tongues, stomachs, and entrails).

BS SA and BRF SA are the Brazilian meat companies that will start sending pig byproducts to China.

As we've noted in the past, the US has likely lost its label as the top producer in supplying China with agriculture products because of the trade war, which has led to a decoupling of both economies and forced China to head to South America for new sourcing channels.

China's "pig Ebola" wiped out about half of the country's breeding pig population so far this year, forcing pork spot prices to hyperinflate, which resulted in the consumer price index jumping 4.5% Y/Y in Nov., well above the 4.2% consensus expectation, and the highest annual increase since 2001.


The pig shortage sent the country's food inflation rate to a record +19.1% in November from +15.5% in October, primarily on higher inflation in fresh vegetable and pork prices.

To prevent further socio-economic unraveling spurred by soaring food inflation, China had to act quick, and that's why they've started sourcing pigs from Brazil to fill the gap in the pork deficit.

In other reports, we noted that China typically sources most of its soybeans from the US between October and January, though that wasn't the case this year.

Earlier this week, we produced a map showing all dry bulk, general cargo, and other dry vessels carrying agriculture products (fertilizers, grains, oil/oilseeds, meals/feeds/pulses, softs, and other agriculture products) across the world.



Several significant trends were spotted on the map. The first is how a massive flow of vessels are moving back and forth from Brazilian and Argentinean ports to Europe and China. The second observation is the muted activity on either coast of the US.

And maybe there's some validity to the Global Times opinion piece since it appears China has gone elsewhere for its agriculture needs.

Still, if there were crop failures or any livestock disease outbreaks in South America, China would have to renter US markets for pigs and soybean.

0Hedge
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Old 12-11-2019, 09:31 PM
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Default Re: Why Do Ag Prices Keep Going Down, Analyst Asks

I see your point here, but want to add a couple of things...

We in fact are selling China both beans and pork. Beans since mid summer, enough to in fact meet the USDA projected export business for 2018. Problem is/was no one but a true insider knew of that.
Pork is much the same, as no one source can supply what China has lost. So in fact they are buying pork here as well...

The jist of the Op was more about why even with this Chinese business, with no trade deal, traders just pretend we are not selling China anything, even though the know damn well we are. Speculators love a big move, as they make lots more money on big moves if they are on the right side of the fence. I can believe that with the huge $$$ they can keep the market in the tank, selling paper, waiting for the day it turns around with an actual trade deal. On that day they buy back there shorts, and buy into the long side of the market in the same trade. Then they capture the delta or change in price, as prices rise due to speculators going long form being short in the market. This is very powerful as in June speculators took 70 cents off the corn market in just 3 days.

As far as your article above, they leave out one very important fact. No country in South America has a huge trade deficit with China. We do. In fact this is what the trade war is trying to address. So if they want access to our markets, and believe me they do, then they will have little choice but to buy AG products from the U.S. We were 88% of ALL Chinese exports, and no way they can sell any were near these exports to the poor Latin American countries who will not in decades be able to match what we were importing. South America will be the secondary supplier...

Regards, Kirk
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