In the two weeks since the last report there has been very little movement in the market from a cash price standpoint but a significant amount of news and information has been disseminated into the market which will have long lasting impacts.
In the weekly export sales report, the overall volume for the week is an abysmal 31,000 MT but considering the marketing year high volume seen recently, the overall export numbers look better than they did two weeks ago. The same can be said of the vessel tonnage although a very significant amount of inventory was moved in the past two weeks as well. On balance, this market indicator is not considered bearish at this point in the marketing year.
Competitive Asian pricing has gradually shed some value since the last report and while some of this is due to changing currency values, there is an element of trade factors moving the price as well. The next week or two will be telling in this sector depending on how global politics plays out, especially given the changing relationships between Southeast Asia and the West.
The USDA world market price estimate is up again after a drop in last week’s numbers. This is largely reflective of the sharp boost in export sales during the same time frame. Remember that the WMP estimate is largely backward looking and is not generally effective at incorporating real-time events.
Domestic cash markets have gotten quieter (if that is possible) as the old crop stocks dwindle to nothing and very little remains in the market yet to trade. This sector will remain stagnant until new crop materializes unless there is a MAJOR demand shock that provides some incentive for aggressive new crop bidding.
In the futures market, all of the new crop contracts have posted notable losses over the week. The old crop and nearby July ’19 saw some modest gains. The old/new crop spread is growing ever wider and lacks any semblance of convergence with the cash markets suggesting that other factors are at play in the market outside of fundamental forces. Typically, these types of movements are corrected by the market itself and it will be interesting to see when this adjustment will be reflected in pricing.
In other news, the USDA released its June World Agricultural Supply and Demand Estimate (WASDE) this week. For the month of June, the revisions remained minor. On the supply side, imports were increased by 1.0 million hundredweights while on the demand side, exports were decreased by 2.0 million hundredweights.
Both revisions were made to reflect the actual trade numbers to date. These adjustments led to a 3.0 million increase in ending stocks and a decrease in the season average farm price to $12.30-$12.70 per hundredweight.
The next (July) report should see some additional revisions as actual planted acreage and other “official” numbers become available to incorporate. Until then, the market will trade global politics and attempt to normalize as much as possible.