Traders continue to operate in the dark on the Chicago Board of Trade. The information light is turned off, and prices vary in a narrow range based on the optimistic or pessimistic information flavor of the day.
News and speculation is the life-blood of grain traders. Recently there has been limited news because we are still catching up reports from the time of the government shutdown of most USDA offices.
There has been a steady stream of speculation, mostly about the progress of trade talks with China, which had been scheduled to last through the end of February.
Talk this week is that the deadline for an agreement between the two largest economies of the world would not happen on time. It was reported that the heads of the two governments of the two nations would not meet until after the first of March. The speculated delay was met with reactions that varied from “Oh, no, we are not progressing well!” to “This is a difficult thing to do in just three months.”
The reality is that the delay is probably a good thing, and it likely indicates that progress on a big deal takes a long time. I never expected an announcement until the last day, so, I guess it takes a few days longer.
The meeting of President Xi and President Trump will just be a formality to do the diplomatic niceties and sign the darn thing. For the moment, we just wait and “Xi” what is coming. (I could have resisted, but what fun would that have been?)
Complicating trading has been the fact that our normal fundamental news link, the USDA reports, has not been flowing. The government got back to work, and we finally got three critical reports delayed since January. Friday, Feb. 8, USDA posted the Final Crop Production Report, the Winter Wheat Seeding Report, and the U.S. Grain Stocks Report.
What we are not getting is a catch up of normal weekly reporting, especially export and sales reports. These are the numbers that get traded in the day-to day change of futures prices. USDA made the decision to report these slowly, catching up over a period of time.
Traders view this as intentionally obstructive. They feel the numbers are available electronically and don’t take that much work to catch up. The idea is expressed that USDA workers are creating a penalty for the shutdown and a threat for what will happen if we have another.
The delayed Crop Production Report (link opens report as .pdf) confirmed what many traders had anticipated, that the soybean and corn crops were not, in the end, as big as had been reported. This feeling has been anticipated by observers who said the end of the harvest was delayed, with resulting heavy losses in areas such as Southern Minnesota.
USDA did cut the crop size of soybeans a little, dropping the soybean yield a half-bushel to 51.6 bushels per acre. The trade was anticipating 51.8, so there was little surprise. The yield made the final crop come out at 4.544 billion bushels.
There was more surprise in the corn, where USDA dropped the yield two and a half bushels from the December report, for a final 176.4 bpa and a crop of 14.42 billion bushels. Traders had been anticipating a yield drop of one bpa on the average, with some guessing more than two bpa.
With a few more analytical gymnastics, the significant numbers for traders were a carryout of soybeans of “only” 910 million bushels and a carryout for corn of 1.735 billion bushels. That is a reduction since the December report of 45 million bean bushels and 41 million corn bushels. They are still huge carryovers, and limit the upside of any trade-changed market.
They are still a lot better the round numbers of 1 billion and 2 billion that were bandied about in this recent negative market.
Export rumors continue to provide some fodder for traders to chew on. We keep talking about possible government restrictions on the export of Russian wheat.
We also do our usual data dive into South American soybean weather. Current reporting has the Brazilian bean crop significantly decreased, but the Argentine crop improved. Then, we talk about the Argentine improvement being after a poor crop last year.
The reality is that it is just talk, and we expect an average of a trend-line yield for South America as a whole.
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