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-USDA statement on aid package leads to volatile overnight session
-Widespread U.S. rains remain in forecast
-Attache sees lower Canadian canola crop
-USDA reports soybean sale to unknown

 

Grain markets saw volatile price action overnight on changing ideas of the USDA ag package and the ongoing weather/planting issues. Exact timing on when the USDA will announce specifics of the aid package is unknown so with so many variables at play, increased volatility may very well be seen in the near term.
 
 USDA released a statement overnight appearing to attempt to allay concerns of the additional farmer aid package impacting acreage/production decisions. USDA said, “Details on the new farming support program will be forthcoming shortly, but we want to be clear that the program is being designed to avoid skewing planting decisions one way or another. Farmers should continue to make their planting and production decisions with the current market signals in mind, rather than some expectation of what a farming support program might or might not look like based on inaccurate media stories.” During the session yesterday, a Bloomberg article cited ideas the new aid package may include $2/bushel payouts for soybeans, 63 cents/bushel for wheat and 4 cents/bushel for corn, with ideas that it would/could be tied to 2019 acreage levels and historic yields, prompting views farmers would maximize soybean acreage this year, at the expense of other crops as possible, creating an even greater supply glut of soybeans for the coming year. Obviously the last thing the soybean balance sheet/market needs…
 
 USDA reported the sale of 131k tonnes of soybeans to unknown this morning, with 110k tonnes being old crop and 21k new crop.
 The USDA ag attaché in Canada expects canola acreage to decline this year to 8.9 million hectares (22.0 mil acres) from 9.232 mil hectares (22.8 mil acres) last year due to the ongoing trade issues with China as farmers shift their intentions to other crops amid the trade outlook uncertainty. However, the attaché’s, as well as USDA’s which is the same, canola area estimate is above Statistics Canada’s most-recent estimate of 21.3 mil acres. The attaché sees the 2019/20 Canadian canola crop declining to 19.75 MMT (USDA 21.1 MMT) from last year’s 20.3 MMT (USDA 21.1 MMT). The attaché sees Canada’s old crop canola exports at 9.75 MMT, well below USDA ideas of 10.6 MMT, with ending stocks at 3.5 MMT, up sharply from the previous year’s 2.506 MMT. Despite the trade issues with China, the attaché expects continued low oilseed prices to allow for a modest increase in canola exports in 2019/20 to 10.3 MMT as non-Chinese buyers take advantage. The USDA sees new crop canola exports at 10.1 MMT. The bottom line sees the attaché’s 2019/20 canola ending stocks estimate at 3.4 MMT (USDA 4.4 MMT) vs 3.5 MMT in 2018/19.
 Chinese soybean crush margins have improved solidly of late on the sharp rise in soybean meal values given the renewed/accelerated trade conflict with the U.S. Chinese soybean meal values have risen sharply of late as expectations for a prolonged trade war with the U.S. and, subsequently, continued lack of availability of U.S. soybeans into China. Crush margins in Shandong are said to be back near breakeven (22 yuan/tonne-$3.20/tonne) vs 215 yuan/tonne ($31) losses last week and 450 yuan/tonne ($65) losses at the end of 2018. Crushers have cited a notable increase in poultry feed demand largely offsetting hog feed demand declines in some areas.
 There has been talk of late of reduced Chinese corn production potential due to armyworm infestations in some areas. Xinhua news agency reported armyworms have been found in 14 provinces/regions so far, including major corn producers Henan and Anhui, with total area impacted so far being around 92k hectares (227k acres). While this situation has been cited recently as an influence on higher Chinese corn values at times, it must be kept in context of expected total corn area this year of around 41.0 million hectares (101 million acres).
Weather
No major changes. An exceptionally wet pattern looks to continue across much of the Midwest in the next 10 days. The current system will finish up in the east in the next 24 hours, with additional totals of .25-.75”+ in MN, MO and most areas east of the MS River. The next system will begin to develop some hit and miss showers and thunderstorms by later Thursday and then those hit and miss showers and thunderstorms will continue into Friday and Saturday. That activity still looks to favor MN, IA, WI, WI and the northern 2/3rd of IL, IN and OH. Estimates on amounts look to be in the .50-1” range with that activity, with some 1”+ amounts also possible. The forecast for Sunday and into much of week indicates a stalled front to produce waves of showers and thunderstorms across most of the region. Estimates on amounts with that activity from Sunday through Friday are are running in the 1-2” range, with areas of 2”+ likely in IA, southern MN and northern IL. 

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