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March 2019 Market Overview

02 April 2019

March 2019 Market Overview and USDA Prospective Crop Planting Report

We are pleased to provide the following commodities update for March, 2019 and the USDA estimates on anticipated planted acreage in the US by crop as of March 29th, 2019.

Soybean/Canola Market Update

Early 2019 soybean board price rally has been capped and put into reverse as rains returned to Brazil after a dry January. Brazil’s harvest is over half complete and Argentina’s harvest is just beginning.  There is also still no trade talk resolution between US and China; However, soybean basis remain firm on heavy biodiesel production.  Canola basis prices continue their downward trend.
Premium over soybean has eroded:
  • Averaged $0.10-$0.13/kg in late 2018
  • Currently: $0.01-$0.03/kg

China has rejected an order of canola from a Canadian supplier citing pest/quality concerns.  This is most likely a political move as a result of the Huawei situation.

Initial planting estimates for 2019:

Soybean

Despite low soybean values, estimated soybean acreage likely to be 3rd highest on record.

Canola

We may see a decline in canola acres; a very recent wheat rally and low canola basis prices may persuade farmers to plant more wheat over canola. 

Watch outs:

  • South American crop harvest progress

Sugar Market Update

Sugar prices rose to start 2019, then retreated, then rose slightly.  Brazil’s recent rainfall has eased concerns over upcoming harvest yields and recent reports in Brazil noted slowed economic growth, which depreciates the Real vs. USD and makes sugar prices less expensive.  There has been a slight uptick in the last couple days with crude oil approaching $60/barrel.  We’re approaching sugar cane crushing season in Brazil.  Let’s hope for a smooth harvest/crush to help ease prices.

USDA Prospective Crop Planting Report

  • Corn acreage is increasing from 89.1 million acres in 2018 to 92.8 million acres in 2019 (4% increase)

  • Soybean acreage is decreasing from 89.2 million acres in 2018 to 84.6 million acres in 2019 (5% decrease)

  • Sunflower acreage is increasing from 1.3 million acres in 2018 to 1.35 million acres in 2019 (4% increase)

  • Oat acreage is decreasing from 2.75 million acres in 2018 to 2.56 million acres in 2019 (7% decrease)

Takeaways:

There was a notion that soybean acreage would decline in favor of corn and this was substantiated by this report.

Corn futures prices dropped ~5% as a result of today’s report. 

Soybean futures prices stayed somewhat flat despite the drop in acres. 

Why?

  • 2019 estimates came within analysts’ predicted range of 84-86 million acres
  • There is still a record carryout of beans from last year’s harvest as US/China have not reached a trade resolution

What’s Next:

We’re still a ways away from planting in most regions as flooding and excess moisture persist.

  • The prospective planting report provides a good estimate of upcoming supply but is not a guarantee; farmers may change their minds between now and when planting takes place.

The majority of oats and canola in North America are grown in Canada; we will get a prospective Canadian acres report on these on April 24 from Statistics Canada.

I would expect flat/slightly bearish pricing trends on canola and soybean at least for the next couple of weeks as South American harvest carries on.

  • We may see declines in pricing limited by rising crude oil costs (demand for alternative fuels will increase); crude oil has hit its highest level since November 2018.

Any resolution to Canada and the US’s respective issues with China will renew demand for canola and soybean and shoot prices upward.