The report didn’t give funds a reason to buy crops, a market analyst said
By Diego Flammini
The USDA’s first World Agricultural Supply Demand and Estimates (WASDE) report of the new year came in with a thud despite what market analysts thought might happen.
“The initial knee-jerk reaction was a disappointment at best,” said Moe Agostino, chief commodity strategist with Farms.com Risk Management. “There are not enough reasons for funds to buy crops to send (prices) higher, or for them to sell the crops to send prices lower.”
Some market movement could hinge on China and the U.S. signing their phase one trade deal next week.
As part of the agreement, China will purchase between US$40 and US$50 billion of American ag goods this year.
Once there’s concrete evidence of the trade pact, there’s “no question” markets will have the confidence to buy more grain, Agostino said.
“I know there’s still a lot of skepticism on whether or not China can make those purchases. I believe they can,” he added.
U.S. soybean growers could see prices climb because of the deal.
The USDA projected soybean ending stocks at 475 million bushels and the USDA’s Quarterly Grain Stocks report projected even higher ending stocks at 527 million bushels.
But if China can make good on its end of the trade agreement, soybean farmers could be rewarded.
“If the confidence grows that China will be buying soybeans, and ending stocks are in the 300s (million bushels), that’s 10-dollar beans,” Agostino said.
Meanwhile, the wildfire situation in Australia could benefit wheat producers.
While the country’s wheat crop is already harvested, the wildfires are burning as growers there are preparing for the next planting season.
“Production going into 2020 could be lower,” Agostino said. “But with (Australian wheat) exports estimated at 8.2 million metric tons, that number could go to zero. If that happens, the beneficiaries are going to be American and Canadian wheat farmers, and wheat prices could move higher.”
Overall, Agostino recommends farmers practice a little bit of patience.
Between the details of the U.S. and China trade agreement, South American weather and U.S. planting intentions, there may be opportunities for higher prices later in the year, he said.
“I think we’ll get the higher prices; it’s just going to take a little while,” he said.
The USDA will release the next WASDE on Feb. 11.
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