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Afternoon Market Recap for Feb. 21, 2019

New China trade details boost grain prices.

Corn, soybeans and wheat all move moderately higher in Thursday’s session

High-level trade negotiations between the U.S. and China continue today and tomorrow, with outlines, memorandums and other details finally beginning to congeal. That has infused some fresh optimism into grain markets, where corn, soybeans and wheat all trended moderately higher today.

According to the latest data from the U.S. Drought Monitor, released this morning, only 29.8% of the country is now affected by drought, down from 32.2% the week prior. Drought’s foothold in the Midwest and Plains is mostly nonexistent, but some problematic areas still exist in parts of the Southwest and West.

Further drought removal could be possible this coming week, according to the latest seven-day cumulative precipitation map from NOAA, which shows most of the country could expect some additional rain and snow through February 28.

On Wall St., some disappointing economic data pushed stocks moderately lower, with the Dow down 83 points this afternoon to 25,871. Energy futures were mixed, with crude oil retreating back below $57 per barrel, while gas and diesel took moderate gains. The U.S. Dollar also firmed moderately.

Corn prices made gains exceeding 1% Thursday, as technical buying overpowered any concerns for now about a moderate uptick in expected U.S. acres for 2019. March and May futures each climbed 4.75 cents to close at $3.7550 and $3.8425, respectively.

Corn basis bids were mostly steady to firm Thursday, moving 2 to 3 cents higher across several Midwestern locations today. An Illinois river terminal bucked the trend after dropping 3 cents lower.

USDA chief economist Robert Johansson reported this morning at the agency’s annual Agricultural Outlook Forum that U.S. corn acres could top 92 million acres this year, up 3.3% from 2018. Farm Futures’ second survey of farmers, released in January, showed then ready to increase corn seedings to only 90.3 million acres, while the average guess from the trade was 91.7 million. USDA also expects the average price this year to increase 1.4% to $3.65/bu.

Globally, the International Grains Council (IGC) has revised its 2018/19 corn production estimates 33 million metric tons higher (1.299 billion bushels) to a total of 1.109 billion MT. This revision was largely attributed to massive increases expected in China, which were partially offset by lower estimated production in the U.S.

The next USDA next weekly export report, out Friday morning, will actually cover six weeks of data (Jan. 4 through Feb. 14) to make up for delays caused by last month’s partial government shutdown. Analysts expect the agency to report corn exports between 159.4 million and 285.4 million bushels during this period.

U.S. ethanol production for the week ending February 15 dipped below 1 million barrels per day for the second time in the past five weeks, landing at a daily average of 996,000 barrels. The news helped ethanol futures move more than 1% higher in Thursday’s session.

Brazil’s state agricultural statistics agency Deral slightly raised its 2018/19 second corn crop production estimates for Paraná to 502.3 million bushels.

South Korea purchased 2.6 million bushels of corn from optional origins in a private deal earlier this week. The grain is for arrival in early July. In a separate international tender, the country purchased an additional 2.7 million bushels of corn, also from optional origins.

There could be tough choices ahead when it comes to spring fertilizer purchases, according to Farm Futures senior grain market analyst Bryce Knorr. Keep abreast of the latest price trends in Knorr’s latest Fertilizer Outlook column.

Preliminary volume estimates were for 492,838 contracts, down from Wednesday’s final count of 620,458.

Soybean prices trended nearly 1% higher Thursday on expectations that current U.S.-China negotiations are gaining some momentum, and with farmers likely to plant fewer U.S. acres this year. March futures gained 8.5 cents to $9.11, with May futures up 8.25 cents to $9.2425.

Soybean basis bids were largely steady Thursday, ticking 2 to 3 cents higher across several Midwestern locations but tumbling 10 cents lower at an Iowa processor today.

USDA anticipates 2019 U.S. soybean acres will trend 4.7% lower this year, reaching around 85 million acres. A recent Farm Futures survey found acreage of 84.6 million, below the average guess from the trade of 86.1 million.

Average prices could improve 2.3% to $8.80/bu, which still would leave 2019 average prices near a five-year low. Prices will likely need at least through 2020 to recover further, according to USDA chief economist Robert Johansson, who said today that current large ending stocks “will take years to unwind.”

Globally, the IGC has lowered its 2018/19 world soybean production estimates by 5 MMT (184 million bushels) to 363 MMT, largely on expected lower production by Brazil this crop season.

Ahead of USDA’s next export report, out Friday morning, analysts expect the agency to report soybean sales totaling between 224.1 million and 352.7 million bushels for the six weeks between January 4 and February 14.

And ahead of USDA’s report Friday afternoon that will announce domestic soybean crush data for last December, a group of analysts expects the agency to report a total crush of between 181.8 million and 183.6 million bushels – coming in around 3.4% higher year-over-year, if realized.

Brazil’s state agricultural statistics agency Deral slightly lowered its 2018/19 soybean production for Paraná to 600.8 million bushels for the country’s second-largest soybean state.

Preliminary volume estimates were for 315,666 contracts, up from Wednesday’s final count of 259,724.

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