April 23, 2019 | Grain Hedge Insights | Kevin McNew | Views: 76

Russian Wheat Prices Decline

Spring wheat crop conditions improve in Russia

Russian Wheat Prices Decline

Russian Wheat Prices Decline As 2019 Crop Forecasts Improve  

Both internal and export FOB prices of Russian wheat declined over the last week as the condition of the 2019 winter and spring wheat crops has steadily improved, causing analysts to raise their production estimates.  

FOB 12.5% protein prices fell across key export locations by $3 to $224 MMT.

Domestic prices for third-class wheat fell 50 roubles to 12,150 roubles ($190.5) a tonne at the end of last week in the European part of Russia on an ex-works basis.

Russia exported 38.2 MMT of grain between the start of the season on July 1 and April 18, -9% YoY.  This figure includes 32 MMT of wheat, -3% YoY.

Russia's agriculture ministry continued to sell grain from its stockpile last week, off-loading 7,500 tonnes of wheat. It has sold 1.76 MMT of grain, including 1.48 MMT of wheat since the start of this marketing year.

Current wheat production estimates are 80-83 MMT just shy of the 85 MMT in  2017/18.

What It Means for the U.S. Farmer: With a favorable weather outlook for most of Russia’s wheat growing regions, an 80-83 MMT crop is at the upper end of the historical production range.  Russian spring wheat planting is running ahead of schedule. At FBN we believe that while there is a long time until the Russian wheat harvest is finalized and in the bin, a large Russian wheat crop has the ability to pressure the U.S. listed futures.           

 

 

 

 

 

 

 

Citing Reduced Hog Demand; Brazil Soy Exports to China Set to Decline  

Brazilian Agriculture Minister Tereza Cristina Dias said that Brazilian soy exports to China will definitely decline this year as African swine fever in China cuts demand for the animal feed.  

Brazil is the world's largest soybean exporter, while China is the largest importer. The U.S. is the second largest exporter of soybeans.  

Brazil's soy exports are widely expected to soften this year, due to lower foreign demand, tougher competition with U.S. producers and lower domestic production.

Brazil and Chinese officials are scheduled to meet twice over the next month, once in Brazil and the other in China, to discuss a broad Chinese investment strategy that also is agricultural centric.  

Given the decline in Chinese hog supplies due to African swine fever, the Chinese government is working with the Brazilians to certify additional poultry and hog processing plants for exports.   

What It Means for the U.S. Farmer:  We believe that these comments from the Brazilian Ag Minister are honest and can be a negative for the U.S. soy producer.  The lack of Chinese demand for Brazilian soybeans can cause prices to decline, making them more competitive with U.S. prices in the global export grid.  We also believe that a reduced global demand structure inside of the USDA’s current 895 MBU estimated carry-out is not encouraging for prices.


 

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April 22, 2019 | Grain Hedge Insights | Kevin McNew | Views: 278

Ruling on Chinese Grain Import Quotas

Marks the second U.S. victory in as many months

Ruling on Chinese Grain Import Quotas

U.S. Wins WTO Ruling Against Chinese Grain Import Quotas

The United States won a World Trade Organization (WTO) ruling on Thursday against China's use of tariff-rate quotas for rice, wheat and corn, which it successfully argued limited market access for U.S. grain exports.

The case was filed by the U.S. in late 2016, and marked the second U.S. victory in as many months. It came amid U.S./China trade talks and on the heels of Washington clinching a WTO ruling on China's price support for grains in March.

A WTO dispute panel ruled on Thursday that under the terms of its 2001 WTO accession, China's administration of the tariff rate quotas (TRQs) as a whole violated its obligation to administer them on a "transparent, predictable and fair basis."

If China's TRQs had been fully used, the USDA estimates that $3.5 billion worth of corn, wheat and rice could have been imported in 2015 alone.

Either side can appeal the ruling within 60 days.

What It Means for the U.S. Farmer:  We believe that the WTO ruling against China is another favorable win for the U.S. farmer. This ruling helps articulate how the U.S. grains producer has been unfairly discriminated against by the Chinese. While it’s uncertain what the ramifications will be, we believe that the WTO’s decision should provide the U.S. negotiators with more leverage in the ongoing U.S./Chinese trade talks.      

 

 

 

 

 

 

 

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April 18, 2019 | Grain Hedge Insights | Kevin McNew | Views: 708

Weekly Sales on Par with Expectations

Well-supplied world competitors, strong U.S. dollar continue to be significant impediments for U.S. grain export program

Weekly Sales on Par with Expectations

Weekly Sales on Par With Expectations

USDA’s weekly export sales tally sheet this morning showed volumes inline to slightly higher than expectations.  

CIF corn values from the U.S. into key Asian markets are still tracking above CIF delivered values from South America, making it challenging for the U.S. to see sizable export business.

For beans, Argentina has normalized their bean crop after last year’s drought loss which has led to more competition. At this stage, buyers of U.S. beans are limited to Japan, South Korea and Mexico which doesn’t move the needle much for U.S. sales volumes.

What It Means for the U.S. Farmer: Well-supplied world competitors and a strong U.S. dollar continue to be significant impediments for the U.S. grain export program. In turn, that makes price rallies few and far between as U.S. values can’t disconnect from world values.                                            

 

Summer Weather Outlook Mixed

U.S. weather forecaster CPC put out their May-July weather outlook this morning. Temperatures are pegged to be higher than normal in the ECB but the Plains amd WCB are likely on par with normal. Meanwhile precipitation should continue to be above normal.

What It Means for the U.S. Farmer: Hints of a drought are hard to find this season, so it will be a challenge for the market to get excited about too wet conditions this growing season.

 

The risk of trading futures, hedging, and speculating can be substantial. FBN BR LLC (NFA ID: 0508695)

April 17, 2019 | Grain Hedge Insights | Kevin McNew | Views: 1190

U.S. Pork and Poultry on the Negotiating Table

China will likely lift ban on U.S. poultry, may buy more pork

U.S. Pork and Poultry on the Negotiating Table

U.S. Pork and Poultry on U.S./Chinese Negotiating Table

While the details are thin, it is likely that China would likely lift a ban on U.S. poultry and may buy more pork to meet a growing supply deficit resulting from African swine fever (ASF).  

A key hurdle will be if the U.S. and China can negotiate to lift the current ban on pork that has traces of ractopamine.  While the U.S., Japan and South Korea have scientifically proven that animals treated with ractopamine to be safe for human consumption, China has banned meat with ractopamine since 2015.  

Chinese authorities blocked the use of ractopamine since 2002.

Beijing has banned all U.S. poultry and eggs since January 2015 due to an avian influenza outbreak.

As part of the negotiations, it seems highly probable that China will want to export poultry to the U.S.   

What It Means for the U.S. Farmer: At FBN, we believe that any negotiations to increase the volume of U.S. protein can be positive for the farm economy.  Simply put, greater export demand = increased animal supplies = greater demand for feed inputs like corn, soybean meal and DDGs.                                                               

Russian and German Wheat Crops Showing Strong YoY Growth

This week both estimates for the 2019/20 German and Russian wheat crops have been increased.  

According to DRV, an association of German co-ops, Germany's 2019 wheat harvest is estimated to increase by 20.6% YoY to 24.44 MMT as the crop recovers from a drought in 2018.  

Germany's 2019 winter rapeseed crop will fall 11.6% YoY to 3.24 MMT on reduced sowings.

SovEcon has raised its forecast for the country's 2019 wheat crop in 2019 to 83.4 MMT from 80 MMT as a majority of the crops are in good condition.  The estimated production increase would add 12 MMT of wheat production but is just shy of the record 85.1 MMT production in 2017.

SovEcon also raises its overall grain forecast to 129.1 million tonnes from 126.1 million tonnes.

What It Means for the U.S. Farmer: We believe that increases in global wheat production can be a negative for the U.S farmer.  While larger yields normally signal lower protein wheat, the global wheat export regime continues to make U.S. wheat the supplier of last resort.  Add to this a strong US dollar; at FBN we believe there is no rush to own future U.S. wheat demand. Cash market protein spreads could become more important so please contact your FBN representative with any questions.                                          

 

The risk of trading futures, hedging, and speculating can be substantial. FBN BR LLC (NFA ID: 0508695)

April 16, 2019 | Coach’s Corner | Greg Martinelli | Views: 1259

Top Five Sales Strategies from Coach’s Corner

The most popular Coach’s Corner posts from the first year

Top Five Sales Strategies from Coach’s Corner

 

Coach’s Corner is dedicated to making you the best salesperson you can possibly be.  Today, we review the best of the best from this year’s articles.  Enjoy them and I look forward to another great year of learning and sharing, Greg

#5 — “No” is just the Beginning

This is not another “We don’t take “No” for an answer article.”  This article helps you understand the real selling process begins when you get that first “No” from a prospect.  We uncover the two most common mistakes salespeople make when calling on busy farmers and how to avoid them so we don’t end up with objection. 

#4 — 20 Questions for the Ag Salesperson

Effective selling strategies begin with pre-call planning, followed by high-value questions.  Answer these 20 questions to gain a new perspective of your territory, your customers and yourself.  Determine if you know your customers, your market and are headed in the right direction.

#3 — 7 Strategies for Selling to Busy Farmers

We work and sell in a very seasonal business.  Planting season is upon us now and harvest is only 100 days away.  At these times, our customers are so busy, we think there is nothing we can do with them on the sales side.  Read this article to discover seven strategies you can employ to work with customers at their busiest times.

#2 — Quit these 7 Behaviors to Sell More

Yes, winners quit!  Read this article to uncover those things you need to stop doing in order to be more successful in your sales.

And the #1 Top Coach’s Corner article — Sell More by Telling Better Stories

Stop the data dumping charts and graphs that every other salesperson out there is using.  Start telling better stories.  Learn how the Hollywood-storytelling method can make you a successful salesperson.   

For more information on Ag sales training, coaching or business development, contact Greg Martinelli at Greg@GregMartinelli.net  

April 16, 2019 | Grain Hedge Insights | Kevin McNew | Views: 542

China Starts Reviewing U.S. DDGS Anti-Dumping Measures

Due to ASF, China’s pork import demand during 2019 and 2020 will accelerate

China Starts Reviewing U.S. DDGS Anti-Dumping Measures

China Starts Reviewing U.S. DDGS Anti-Dumping Measures

China could agree to allow more Brazilian meat (pork, beef and poultry)  imports following high-level talks set between the two countries for early May.

It is believed that up to 78 Brazilian meat processing plants could be added to the list of those certified to export to China.

Trade talks between China and Brazil have been on-going and are set to accelerate over the next two months.  In addition to the Chinese delegation visiting Brazil, the Brazilian delegation will travel to China at the end of May to continue discussions.  

Chinese investment hit a seven-year high in 2017; the figures for 2018 have not been released.

Agriculture goods are not the only items on the agenda.  Telecommunications and construction items including further development of Brazil’s rail infrastructure are also part of the conversation.    

What It Means for the U.S. Farmer: We believe that China’s continued investment and engagement with Brazil’s senior political leadership will create further competition for the U.S. agricultural producer.  We also believe that China certifying more slaughter plants, presumably a focus on pork, is neutral for the U.S. farmer. China’s pork import demand during 2019 and 2020 will accelerate, and the U.S. does not have enough hogs to supply all of China’s demand lost to ASF.        

                                                  

 

AT 170 MBU, NOPA March Soybean Crush Tops Estimates  

March NOPA soybean crush at 170 MBU topped estimates by 2 MBU as positive margins helped maintain a near record-setting crush pace.    

Crush forecasts for March ranged from 155 MBU to 171.4 MBU.  

The 170 MBU was up from 154 MBU in February but down from the record of 171.8 MBU in March 2018.  

Soybean oil stocks rose to 1.761 billion pounds, compared with 1.752 billion pounds at the end of February and 1.946 billion pounds at the end of March 2018.  

What It Means for the U.S. Farmer: Positive margins helped maintain healthy soybean demand by crushers.  We continue to believe that U.S. crusher demand for soybeans can not solve a 895 MBU carryout but the continued pace can be supportive of local basis. 

                              

The risk of trading futures, hedging, and speculating can be substantial. FBN BR LLC (NFA ID: 0508695)

April 15, 2019 | Grain Hedge Insights | Kevin McNew | Views: 769

NOPA March Soybean Estimated Crush

March crush would be the second heaviest on record

NOPA March Soybean Estimated Crush

NOPA March Soybean Estimated Crush: 168 MBU -3 MBU YoY     

A Thompson-Reuters poll estimates that NOPA members likely crushed 168.028 MBU of soybeans during March.  

Crush forecasts for March ranged from 155 MBU to 171.4 MBU.  

NOPA releases their March crush and oil stocks data today, 4/15.

If realized, March crush would be the second heaviest on record, behind last year's 171.858 MBU. In February, the NOPA crush totaled 154.498 MBU.

If a YoY decline in March is realized this would be the first decline during the 2018 marketing year.

Soyoil supplies among NOPA members at the end of March are estimated at 1.783 billion pounds, up 1.8% from 1.752 billion pounds at the end of February but -8.4% from 1.946 billion pounds during March 2018.

What It Means For The U.S. Farmer:  At FBN we believe that a slowing NOPA crush pace during March would not be a surprise.  U.S. weather during March created logistical issues for many plants.   

Export Sales Announcement

Private exporters reported to the U.S. Department of Agriculture export sales of 140,000 metric tons of soybeans for delivery to unknown destinations during the 2018/2019 marketing year.

                      

China Starts Reviewing U.S. DDGS Anti-Dumping Measures

China's Ministry of Commerce confirmed it is starting a review of its anti-dumping tariffs on U.S. DDG imports.  

China's tariffs on U.S. DDGS were first implemented in 2016 at a rate of 33.8%.  Starting in January 2017, the anti-dumping duties were raised to between 42.2% and 53.7%, while anti-subsidy tariffs have ranged from 11.2% to 12%.

The investigation should be completed in a year.

What It Means For The U.S. Farmer: We believe that the review of U.S. DDG exports by the Chinese is a positive step that can be supportive of prices.  The estimated timing of year to completion seems like it could be reduced during the U.S./Chinese trade negotiations.                                    

The risk of trading futures, hedging, and speculating can be substantial. FBN BR LLC (NFA ID: 0508695)

April 12, 2019 | Grain Hedge Insights | Kevin McNew | Views: 931

EPA Could Grant Fewer Biofuel Waivers

Production cuts could provide USDA with support to reduce corn for ethanol use

EPA Could Grant Fewer Biofuel Waivers

EPA May Grant Few Biofuel Waivers       

The Environmental Protection Agency (EPA) could grant fewer waivers exempting small refineries from the country's biofuel policy as lower prices for blending credits known as RINS have helped reduced the cost of compliance.

Under the U.S. Renewable Fuel Standard (RFS) program, refiners must blend certain volumes of biofuels like ethanol into their fuel each year or purchase RIN credits to offset production.  Small refineries with a capacity of less than 75,000 barrels per day can get waivers if they prove that compliance with RFS would cause material financial strain.

RINs, also known as renewable identification numbers, are methods to track production and are traded in the secondary market.  

Biofuel producing companies have complained that speculation in the RIN market has inflated prices and damaged profits.  

The Department of Energy should rule on allowed production cuts for 39 refineries that filed small refinery waivers.

What It Means for the U.S. Farmer: The ethanol business for the 2018/19 marketing year has been complicated as margins are low and production has only recently declined.  We believe that if production waivers are granted, local corn basis could weaken as demand would fall. We’re unsure how corn futures could react to the DOE granting production waivers. Depending on the details, production cuts could provide the USDA with support to reduce corn for ethanol use on the WASDE.

Argentina Soybean Production Estimates Rise To 56MMT

Timely precipitation has helped raise soybean yields and production estimates in Argentina.  

This week both the Buenos Aires Grains Exchange and the Rosario exchange also increased its estimate for the crop.

On Wednesday the Rosario Exchange raised its soy output estimate by 2MMT to 56MMT.  

The Buenos Aires exchange also raised production estimates by 2MMT to 55MMT.  

The two exchanges are predicting the corn crop to fall between 46-48MMT.

The Buenos Aires exchange has meanwhile forecast a record wheat crop of 20.6MMT.  

What It Means for the U.S. Farmer: We believe that production increases in corn, soy and wheat are not positive for the U.S. farmer as increased supply creates greater competition in the global export markets.                                      

 

The risk of trading futures, hedging, and speculating can be substantial. FBN BR LLC (NFA ID: 0508695)

April 11, 2019 | Grain Hedge Insights | Kevin McNew | Views: 1245

African Swine Fever in China Reduces Pork Supplies

Global pork market could be in for a supply shock

African Swine Fever in China Reduces Pork Supplies

African Swine Fever In China Reduces Pork Supplies        

The global pork market may still be in for a supply shock as African swine fever could reduce China's pig production by 134 million pigs on the year, roughly the size of the entire U.S. crop.    

The USDA estimates, China's 2019 pig crop will fall to its lowest levels in 17 years, and hog inventory will decline by 18% YoY to the lowest levels in 30 years.

China produces and consumes nearly half of the world’s pork. Last year, the Asian country produced 54MMT of pork and consumed just over 55 million MMT about 4.5 and 5.5 times more than the United States.

A 10% decline in China’s pork production, representing 5.5MMT is significant considering that the volume is more than half of annual global pork trade.

China's pork imports are set to rise 41% in 2019 to 2.2MMT and USDA predicts that Europe, Brazil, and Canada will assume most of this volume.

U.S. pork is less competitive as China imposed 62% tariff on U.S. pork.   

CME listed lean hog futures have surged this year and were the third best performing commodity future during Q1.  

What It Means for the U.S. Farmer: The USDA’s estimates are solid and present a more numerical support for what the world already knows.  The contraction of China’s hog herd can be a positive for the U.S. farmer in many ways: supportive hog prices and supportive domestic feed inputs.                                   

U.S./China Make Progress In Trade Negotiations

The United States and China have largely agreed on a mechanism to police any trade agreement they reach, including establishing new "enforcement offices."

No word on when or if U.S. tariffs on $250 billion worth of Chinese goods would be removed.

The two sides are working on broad agreements covering six areas: forced technology transfer and cyber theft, intellectual property rights, services, currency, agriculture and non-tariff barriers to trade.

President Donald Trump said that a deal could be ready around the end of April.

What It Means for the U.S. Farmer: Establishing a trade enforcement mechanism was a key and important point for the U.S. negotiators and should represent a big step forward.  The two countries are still negotiating on other terms. Still no date for a summit between President Trump and President Xi.                   

 

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April 10, 2019 | Market Intel | Veronica Nigh, Economist, American Farm Bureau Federation | Views: 1073

Southern Border Showdown, 2020

A shutdown, or even slowdown, at the southern border would be disastrous for U.S. ag trade

Southern Border Showdown, 2020

Last week, President Trump walked back the threat to close the southern U.S. border, a potential development that had caused a significant amount of concern among the agricultural community. Hindsight is 20/20, but we don’t need hindsight to tell us that a shutdown (or slowdown) at the southern border would be disastrous for U.S. ag trade.

In 2018, the United States exported more than $19 billion in agricultural products to Mexico. In this Market Intel, we dig into why a border shutdown or even a limited port closure would have affected producers differently based on commodity, season and location.

The Department of Transportation (DOT) maintains detailed statistics on U.S.- North American freight by port, commodity group and mode. That data shows 69% of all two-way, U.S.-Mexico trade occurs by truck, 13% by rail, 11% by vessel, 3% by air and 4% by other means, including pipeline and mail.

Agricultural trade follows a somewhat similar pattern; 69% of two-way, U.S.-Mexico agricultural trade occurs by truck, 20% by rail, 9% by vessel and 2% by other means, including air.

On a commodity basis, corn, dried distillers grains and soybeans are the most reliant on rail transportation, while wheat and sorghum are more likely to travel by vessel.

In total, 54% of coarse grains and oilseeds travel by rail, 34% by vessel, 11% by truck and 1% by other means. As a quick reminder, Mexico is the largest export market for U.S. corn, distillers grains and rice.

Mexico is the second-largest export market for wheat and soybean meal.

Beyond coarse grains and oilseeds, the other 87% of agricultural trade between the U.S. and Mexico is significantly more dependent on truck transit, with 78% of shipments occurring by truck, 15% by rail, 5% by vessel and 2% by other means.

The products that ship by truck tend to be value-added, perishable and in some cases, seasonal. Mexico is the largest export market for U.S. dairy, poultry and eggs.

It is the second-largest market for U.S. pork and fresh fruit and the third-largest export market for beef.

Beyond the mode of transportation, DOT data is also illuminating when it comes to commodity trading patterns through specific ports. Four states make up the southern border. In order of the number of border ports they are: Texas, 13; California, six; Arizona, six; and New Mexico, three.

Among these states, Texas is responsible for the largest share of ag trade by far (73% of total bilateral ag trade), followed by California, which handles 13%; Arizona which handles 12%; and New Mexico which is responsible for 1%.

However, when each southern border state is viewed from the lens of agricultural trade as a share of total trade, Arizona rockets to the top of the list. In 2018, 19% of two-way merchandise that crossed through Arizona ports was agricultural, followed by California (9%), Texas (8%) and New Mexico (2%).

Diving into trade flows on a commodity-by-commodity basis things get even more interesting, and we learn how important individual ports are to the flow of different commodities.

For example, 48% of dairy trade between the U.S. and Mexico occurred through Laredo, TX. An additional 39% of dairy trade passed through El Paso, TX.

Combined, that means that 87% of all U.S.-Mexico dairy trade happens through just two of the 28 southern border ports. Meanwhile, a full 72% of trade in meat products passes through one port: Laredo, TX.

Fresh fruits and nuts are largely transported through other ports than dairy and meat. In 2018, 36% of fruits and nuts went through Hidalgo, TX; 18% through Laredo, TX; 17% through Nogales, AZ, and 13% through Otay Mesa, CA.

Unless you have an intimate knowledge of agricultural production and trade in vegetables, you would expect that fresh vegetables and roots would go through the same ports  as fresh fruits and nuts, but that’s not necessarily the case.

In fact, 30% of vegetables and nuts entered Mexico through Nogales, 22% through Laredo, 20% through Hidalgo, 11% through Calexico-East, CA; and 10% through Otay Mesa, CA.

Knowing more about the flow of agricultural products through different ports is important as we consider warnings of potential "traffic and commercial delays" along the southern border as a result of the administration's decision last week to ramp up the number of immigration officers processing Central American migrants attempting to enter the U.S. through Mexico.

The ports along the southern border are not necessarily close to one another, so if a port is closed, trucks will not necessarily divert to another port. Further, port facilities are equipped differently; it’s not as easy as simply driving a truck through a set of gates.

A port like El Paso, which handles a large number of live animals has different equipment and personnel than does Laredo, with its refrigeration for boxed meats.

Instead those trucks will sit and wait, adding to transit times and cost, while subtracting from fresh days on market and supplier reliability. These impacts will be felt by exporters and customers on both sides of the border.

Contact: Veronica Nigh, Economist
Phone: (202) 406-3622
Email: veronican@fb.org

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