China Provides Agriculture Outlook
- China’s ag ministry forecast soybean crush at 86 million tonnes, which is in line with the USDA’s 2019/20 estimate of 86 million.
- Soybean production in 2020 was seen rising 3.9% to 18.8 million tonnes.
- Soybean imports in 2020 were estimated at 92.5 million tonnes vs the USDA 2019/20 marketing year estimate of 89.0 million, and are seen rising to 96.6 million by 2025 and to 99.5 million by 2029.
- Corn production is forecast at just over 260 million tonnes vs the USDA projection of 260.8 for last year.
- Pork production in 2020 is forecast to be down 8% at 39.3 million tonnes and projected to recover to 54 million by 2022.
- Pork imports are projected to increase nearly 33% to 2.8 million tonnes this year.
FBN’s Take On What It Means: Chinese demand will continue to be one of the main drivers of ag prices moving forward. Meat demand in the near term could be supportive. The market waits to see whether the Phase 1 trade agreement with China will be honored, or if fallout from the global pandemic leads to some modification of the terms. Over the long term, projected growth of Chinese imports should be supportive.
Soy Complex Bounces from Contract Lows
- Beans and meal made new contract lows Tuesday, but were able to rebound and close higher for the day.
- Bean oil closed lower but was not able to make a new low.
- The USDA raised the crush forecast in April to 2.125 billion bushels, up 20 million bushels over the March forecast.
- Meal export total commitments are down 6.4% from last year to date, while outstanding sales are over 12% lower than last year.
- Soybean crush projections for Argentina (the world’s largest exporter of meal) fell to 1.53 billion bushels and continued issues associated with soybean crushing in the region may lower this figure.
FBN’s Take On What It Means: Soybean oil continues to be a weakness due to reduced vegetable oil and biofuel demand. US domestic consumption of meal appears uncertain due to the impact of the pandemic on livestock production. Meal exports through the remainder of the year may provide support for potential for crush levels. However, an economic recovery, reduced competition from South America, and increased demand from China are likely needed to make a meaningful difference.
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