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A November to Remember
Usually the month of November is uneventful as far as dramatic market action goes. Five years of large American crop harvests, conducted in a mostly timely fashion, have normally led to steady to lower price action for corn, soybeans, and wheat in the weeks ahead of Thanksgiving. This November will likely prove to be quite different as there are five major events to monitor.
MFP Payments
Round two of the 2019 MFP payments are potentially in the works. The Market Facilitation Program (MFP) is for farmers or ranchers who have been impacted by the trade war. According to the Farm Service Agency September 2019 Fact Sheet, “MFP payments will be made in up to three tranches (or portions), with the second and third tranches evaluated as market conditions and trade opportunities dictate. If conditions warrant, the second tranche will be made in November, and the third in January.” The first payments were issued starting in late August. The question will be – do conditions warrant?
USDA Report
Friday, November 8 is the next regular monthly supply/demand report from the USDA. What we are closely watching on this report is yield. We are all assuming the yield numbers for corn and soybeans need to inch lower due to the horrific growing season for many Midwest producers. The question will be whether the USDA agrees, and if so, how much will they lower yield? The American farmer is enduring a grueling slow harvest, slow due to immature crops, and even slower due to wet rainy and snowy conditions! Some feel the final U.S. soybean yield will be closer to 45 bushels per acre, vs. the current USDA number of 46.9 bushels per acre. Current USDA corn yield is pegged at 168.4 bushels per acre, with many feeling that number should ultimately be lower as well.
Trade Deal
Head fake after head fake. Deal or no deal. U.S. President Donald Trump and Chinese President Xi Jinping were expected to sign “phase one” of the agreement at the November 17 Asia-Pacific Economic Cooperation summit in Chile. The Summit has since been canceled due to protests within Chile. When and where this deal will get done is still in the works. All eyes will be on Twitter to try to determine if President Trump and President Xi Jinping will announce their own meeting location this month or not.
Soybean Exports
Export demand for soybeans has actually picked up in recent weeks. Primary U.S. exports have been headed to Southeast Asia. In addition, China imported 1.73 million tonnes of soybeans from the United States in September alone. This amount was up from a mere 132,248 tonnes last year in September. In August of this year, China imported 1.68 million tonnes American soybeans. However, by comparison, China imported 4.79 million tonnes of soybeans from its top supplier Brazil in September, which was down from 7.59 million last year. What catches my eye overall is that China is buying American soybeans again.
Argentina!
Now, there is a new wrinkle in the global soybean story, this time stemming from Argentina. Argentina has a new President-elect, Alberto Fernandez. In Argentina, agriculture is highly important as it is the primary export and income generator for the nation. Years ago under a different president, Argentine farmers’ endured high taxes on overseas sales and export caps. Some feel this new president-elect may go back to those aggressive taxes as a means to generate income to meet various financial commitments. The reason this is significant is because, according to a recent article from Reuters, “Any tax increase would be paid to the government by export companies. But it would be farmers who in effect pay the tax because the companies discount export taxes from the prices they pay to growers. So higher taxes would lower local crop prices, hitting farmers’ incentives to plant and produce grains.”
Think about it. Potentially less grain production coming out of Argentina? If true, that shifts more demand to the United States. That would also mean less global soybean production overall, which would continue to bring the global carryout/ending stocks number down as well. This would continue to provide support to soybean prices.
Of course, all of these important and potentially market moving events will occur as farmers are desperately trying to harvest this nation’s crop before 2019 comes to a close! Do your best to keep an eye on marketing opportunities that might arise due to these important, and somewhat unconventional, events occur. Follow me on Twitter (@naomiblohm), and I’ll keep you updated along the way.
If you have questions, you can reach Naomi at naomi@totalfarmmarketing.com
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