Crop Harvest Remains Below Market Expectations

Good Morning from Allendale, Inc. with the early morning commentary for November 13, 2019.

Grain markets rebounded on extremely cold temperatures in crop areas yet to finish harvest. Traders and funds supported the markets as well on some profit-taking, short selling on renewed optimism we could see a U.S.China trade deal soon after Trumps speech in New York City.

USDA weekly crop progress report showed corn harvest rating at 66% complete (68% estimated, 52% complete last week, 86% last year, 87% 5-year average). Soybean harvest rating at 85% (87% estimated, 75% last week, 97% last year, 93% 5-year average). Winter wheat rating at 54% GTE (57% GTE estimated, 57% last week, 54% last year, 56% 5-year average). Winter wheat plantings at 92% complete (93% complete estimated, 89% last week, 88% last year and 93% 5-year average).

President Trump mentioned the prospect of completing an initial trade deal with China "soon," but offered no new details on negotiations in a campaign-style speech touting his administration's economic record. President Trump said he would raise tariffs on Chinese goods "very substantially" if China does not make a deal with the U.S. "And that's going to be true for other countries that mistreat us too," he added.

Chinese authorities approved new Brazilian meat exporting plants, according to the Brazilian agriculture ministry, a highly anticipated move to continue to strengthen trade ties between the two nations. The current list of Brazilian units approved by China is 13 in total (five pork, five beef and three poultry plants), according to the ministry's statement.

Through October, Brazil has exported 34.7 million tonnes of corn in 2019 (60% higher than the previous record for this time), according to official Brazilian data, (this includes an all-time monthly record of 7.3 million tonnes in August). In contrast, the U.S. exported 36.2 million tonnes of corn during the same period (40% lower from a year earlier).

Brazilian soybean exports to China could fall from 60 million tonnes in 2018-19 to 53 million tonnes in 2019-20 in the case of a trade deal between China and the U.S., said Agroconsult. U.S. soy exports to China are expected to rise in 2019-20 even if a trade deal is not reached, said the analyst, projecting 20 million tonnes (14 million tonnes were exported in 2018-19).

President Trump renewed his criticism of E.U.'s trade policies, saying it has "terrible" barriers that are unfair to U.S. producers. "European Union: very, very difficult," he told the New York Economic Club. "The barriers they have up are terrible, terrible. In many ways, worse than China," he added.

China's pork prices fell sharply last week for the first time in 10 months, as reports of fresh ASF outbreaks in the northeast led to more hogs being sent for slaughter just as consumers cut back on pricey meat, analysts said. China says its herd has shrunk by 41% since a year ago (almost 200 million pigs), and analysts say pork output will plunge by about a quarter (13 million tonnes) this year.

Last week's cash cattle traded between $114/$115. Last year's December futures traded at $119 for three weeks then $123 in the last week of December due to winter storms. These price ranges could be realistic this year as well with a seasonal decline in supply and strong demand remaining.

Dressed beef values were higher with choice up 1.91 and select up 2.54. The CME feeder index is 147.24. Pork cut-out values were up 2.19.