Milling & Baking News - April 9, 2019 - 26

Ingredient Market Insight

in 2019-20 with most of the increase taking place in exporting countries.
"There will continue to be strong competition in export markets particularly
from the E.U. and Russia, where production is expected to rebound from last
year," he said, adding that the prospect
for a U.S. 2020 wheat carryover above 1
billion bus will pressure prices in the next
three months or so.
Mr. Meyers did not rule out the possibility of a rally, just stating it didn't appear
likely based on what is known now and
should weather be normal in the United States and abroad. He noted further
that the March 29 reports also suggested
farmers will plant more corn than earlier
thought and that March 1 corn stocks were
significantly higher than expected.
"The possible lows for corn, now, are
lower than we earlier thought, which will

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Milling & Baking News

underlying support to futures as we get
back to a more normal trading relationship with China."
Mr. Freed said some have suggested
a trade accord with China may include
that country fulfilling its tariff rate quota
obligations to which it agreed when it
joined the World Trade Organization in
December 2001. This would entail granting greater access for wheat.
"We've been waiting for a China deal
since November," Mr. Freed said. "The
question is, if a deal is reached, will funds
get out of a 70,000-contract short position in wheat, a 250,000-contract short
position in corn and 60,000-contract short
position in soybeans? We're dealing with
a lot of unknowns. But if a trade deal is
reached, and it includes, wheat, wheat
futures will rise." MBN
- Jay Sjerven

Corn turns bearish after
U.S.D.A. reports

earish data from the U.S. Department of Agriculture on March 29
turned what had been an arguably
bullish corn market into a bear, with fear
of delayed or reduced plantings due to
wet and cold spring weather and floods
not expected to be enough to bring a bullish tone back to the market.
"The corn numbers were pretty bearish," said Paul Meyers, chief agricultural
economist, Foresight Commodity Services, Inc., Naperville, Ill. "The market was
surprised by both the (U.S.D.A.) stocks
and the acreage numbers."
The U.S.D.A., in its annual Prospective Plantings report, said farmers intend to plant 92.8 million acres of corn
in 2019, up 4% from 89.1 million acres
planted last year and above the 92 million acres projected by the U.S.D.A. at its
Agricultural Outlook Forum in late February. Acreage is expected to be up or
unchanged from 2018 in 34 of the 48 estimating states. Except for South Dakota
(up 13%), acreage in most major states
was forecast up 1% to 5%, with increases
26 / April 9, 2019

provide a chance for wheat to move lower
than it might have had corn acreage and
stocks been closer to trade expectations,"
Mr. Meyers said.
Mr. Freed acknowledged some see a
potential new low in Kansas City futures
below $4.20, but if futures do drop that
far, "they probably won't stay there very
long." He suggested new lows in the
Kansas City September may be possible
if there are good crops in both the United
States and the rest of the world.
Mr. Meyers said perhaps the greatest
demand-side uncertainty going forward
was China demand.
"I think there will be some sort of an
agreement, and that would be supportive for soybeans, corn and somewhat for
wheat," Mr. Meyers said. "If we reach an
agreement, that doesn't mean we'll see
a significant rally, but it would provide

of 10% or more mainly across the South.
In its quarterly Grain Stocks report, also
issued March 29, the U.S.D.A. estimated
March 1 stocks of corn in all positions at
8,605 million bus, down 3% from March
1, 2018. The on-farm share of stocks was
5,131 million bus, equal to 60% of total
stocks compared with 56% of the total the
prior year. Disappearance of corn during
the December 2018-February 2019 period
was estimated at 3.33 billion bus, down
9% from the same period a year earlier.
"Corn just had its shock for this year,"
said Steve Freed, vice-president of research, ADM Investor Services, Inc., Chicago, concerning the U.S.D.A.'s planting
intentions and stocks numbers.
Still, several factors, including crop insurance and the record net short position
held by funds in CME Group corn futures
are at play in the market, he said.
"But the No. 1 thing is whether we
have a deal (with China) or not," Mr.
Freed contended.
Last week there were indications that a
new trade deal with China was progressing,

and Mr. Freed was hopeful there would
be a deal in April.
The U.S.D.A.'s 2019 planting intentions
forecast was well above the full range of
trade expectations that averaged 91.3 million acres. The U.S.D.A.'s March 1 stocks
estimate was within the range of pre-report trade expectations but was above the
average of 8,335 million bus.
The combination of the two bearish reports sent nearby May corn futures down
17½c a bu, or 4.7%, to $3.56½ per bu on
March 29, with the new-crop December
falling 13½c, or 3.4%, to $3.84¾ a bu.
The U.S.D.A. plantings survey was
conducted during the first two weeks of
March, prior to the worst of the flooding
in the western Corn Belt and other areas
that was especially severe in parts of Nebraska and Iowa, the largest corn growing state.
But the analysts don't think the muchpublicized floods, which some estimate
may take more than 1 million crop acres
out of production this year, will be a major market factor "in the big scheme of
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Milling & Baking News - April 9, 2019

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