Feed Grain Outlook December 21, 2018 Volume 27, Number 78

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1 Today s Newsletter Market Situation Crop Condition 1 Grain Use 2 Outside Markets 4 Marketing Strategies Seasonality Feed Grain Marketing Plan 9 Market Situation Crop Condition. Corn and soybean crop analysis for South America on the website Soybean and Crop Advisor ( notes dry weather conditions impacting both the full season corn crop and soybean production in Southern Brazil, notably major producing states of Parana and Mato Grosso do Sul. Specifically, rainfall in this part of the Brazil has been much below normal for the first 10 days of December (Dekad 1). Precipitation in Mato Grosso, further north and the largest soybean producing state in Brazil, has been mostly normal to above normal. Upcoming Reports/Events 9 1

2 Grain Use. Corn export sales commitments had the best week of the marketing year on December 13, 78 million bushels. This number is twice the 35 million bushel pace needed to reach USDA s target for the year of 2,450 million bushels. However, cumulative sales are only 48 percent of the overall target. Normally by the end of December, 55 percent of the total is accounted for. Grain sorghum exports were flat, with only 6,000 bushels reported sold. Mil bu 2,600 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1, U.S. Corn Export Sales Commitments, 2018/19 MY Weekly Net Sales Cumulative Net Sales Projected MY Total Top Importers, Current MY, mil bu. Mexico % Japan % Korea 87 7% Colombia 74 6% Peru 49 4% Taiwan 41 4% Guatemala 29 2% Costa Rica 23 2% Egypt 21 2% Dom. Rep. 21 2% Pace to reach target: 35 Export Sales Commitments for the week 12/13/2018: 78 million bushels Total Export Sales Commitments this marketing year: 1,166 million bushels 48% of the 2018/19 MY Export Sales Target of 2,450 million bushels (December WASDE) Normal rate of sales end of December: 55% USDA, Foreign Agricultural Service: December 20, 2018 U.S. Grain Sorghum Export Sales Commitments, 2018/19 MY Mil bu Projected MY Total Cumulative Net Sales Top Importers, Current MY, mil bu EU % Mexico % Japan % 0 Weekly Net Sales Pace to reach target: 2 Export Sales Commitments for the week 12/13/2018: 6,000 bushels Total Export Sales Commitments this marketing year: 17 million bushels 17% of the 2018/19 MY Export Sales Target of 100 million bushels (December WASDE) Normal rate of sales end of December: 60% USDA, Foreign Agricultural Service: December 20,

3 Livestock and poultry inventory numbers this week overall continue to support growth in the grain for feed category. Broiler chick placements continue to run on par with last year s levels while cattle on feed are up four percent this corn marketing year and hogs and pigs are up two percent. 2018/19 Broiler Chicks Placed United States, weekly Thousand 195, , , , , , , , ,000 December 15, % of last year 2018/19 MY Total to Date Year ago: 100% 2016/ / /19 Source: USDA/NASS, Broiler Hatchery, December 19, 2018 Cattle on Feed 1,000+ capacity feedlots MY to date Year ago: 104% Average: 109% 000 head 12,000 11,500 December 1, % of last year 108% of average 11,000 10,500 10,000 9,500 9,000 Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug 5-yr avg 2017/ /19 Source: USDA/NASS, December 20,

4 U.S. All Hogs and Pigs Inventory 2018/19 MY Total to Date Year ago: +2.1% Average: +7.6% 000 head 79,000 77,000 75,000 December 1, % compared to last year +7% compared to average 74,941 74,550 73,000 71,000 69,000 67,000 65,000 1-Sep 1-Dec 1-Mar 1-Jun 5-yr avg 17/18 18/19 Source: Quarterly Hogs and Pigs, USDA/NASS, December 20, 2018 Outside Markets. In its December meeting held this week, the Federal Open Market Committee of the Federal Reserve voted to raise the target range of the federal funds rate from percent to percent. The committee cited the strong labor market and rising economic conditions as reasoning for this move at this time. This is the fourth interest rate hike of Based on a survey of committee member s economic assessments, a longterm range of 3.00 percent interest is on the horizon, which signals two more rate hikes in

5 The Conference Board s Leading Economic Index was up 0.2 percent in November, following a 0.3 percent decline in October and a 0.6 percent gain in September ( The most recent three-month total is 0.5 percent, down from 0.8 percent in August/September/October, and 1.7 percent in July/August/September. Commentary from the report: The LEI increased slightly in November, but its overall pace of improvement has slowed in the last two months, said Ataman Ozyildirim, Director of Economic Research at The Conference Board. Despite the recent volatility in stock prices, the strengths among the leading indicators have been widespread. Solid GDP growth at about 2.8 percent should continue in early 2019, but the LEI suggests the economy is likely to moderate further in the second half of

6 LEI Index Conference Board Leading Economic Index (LEI) FMA MAM AMJ MJJ JJA JAS ASO SON 1.4% 0.8% 1.1% 1.3% 1.6% 1.7% 0.8% 0.5% % change 1.000% 0.500% % % 102 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec % LEI % change The Conference Board, December 20, 2018, A general interpretation of the LEI is that the probability of a recession increases when the index is down 0.3 percent for three consecutive months and is down more than 1 percent for the three-month period. Prices at 10:00 am CST Friday December 21: IV QTR Oct 21-Dec net change % change S&P 500 Index 2, , (459.88) % CRB Commodity Index (25.63) % MAR 19 Crude Oil (28.22) % MAR 19 Copper (0.13) -4.68% MAR 19 Dollar Index % MAR 19 Corn (0.01) -0.20% JUL 19 Corn % DEC 19 Corn (0.00) -0.06% 6

7 Charts 10/1-12/21/2018: 7

8 Marketing Strategies Seasonality. The seasonal price pattern for the December corn contract shows that prices tend to have some upward momentum early in the year. For the contract year, prices generally trade in the top third of the price range from January to mid-june then drop below the yearly average in July (index = 0.50) December Corn Futures and Seasonal Index Pattern Jan 11-Jan 20-Jan 29-Jan 7-Feb 16-Feb 25-Feb 5-Mar 14-Mar 23-Mar 1-Apr 10-Apr 19-Apr 28-Apr 7-May 16-May 25-May 3-Jun 12-Jun 21-Jun 30-Jun 10-Jul 19-Jul 28-Jul 6-Aug 15-Aug 24-Aug 2-Sep 11-Sep 20-Sep 29-Sep 8-Oct 17-Oct 26-Oct 4-Nov 13-Nov 22-Nov 1-Dec 10-Dec 0.00 Dec '19 futures Index '06-'18 8

9 2019 Feed Grain Marketing Plan. I am working on budgets for At this point, it looks like a cash price of about $4.00 with average yields will cover total costs. This will help in evaluating specific pricing opportunities but my overall marketing plan stays the same: spread out my sales with timing aligned around major reports/production indicators and seasonal tendencies. /bu December Corn Futures and 2019 Marketing Plan 20% 20% 20% 20% 20% South American crop conditions Battle for Acres Planting Intentions Planting Intentions Grain Stocks Early season crop conditions Weather outlook Acreage Report/ Grain Stocks Weather Tassel and August Crop Report Cash sales at harvest /4/2018 9/14/2018 9/26/ /8/ /18/ /30/ /9/ /21/ /4/ /14/ /27/2018 1/7/2019 1/15/2019 1/23/2019 1/31/2019 2/8/2019 2/16/2019 2/24/2019 3/4/2019 3/12/2019 3/20/2019 3/28/2019 4/5/2019 4/13/2019 4/21/2019 4/29/2019 5/7/2019 5/15/2019 5/23/2019 5/31/2019 6/8/2019 6/16/2019 6/24/2019 7/2/2019 7/10/2019 7/18/2019 7/26/2019 8/3/2019 8/11/2019 8/19/2019 8/27/2019 9/4/2019 9/12/2019 9/20/2019 9/28/ /6/ /14/ /22/ /30/ /7/ /15/ /23/ /1/ /9/2019 Upcoming Reports/Events January 11 Crop Production WASDE Wheat Seedings Grain Stocks January 6-12, 2019 Jan 22-Mar 7, 2019 TEPAP The Executive Program for Agricultural Producers, Austin, TX Master Marketer, Lubbock, TX Registration is open, a few seats still available 9

10 Mark Welch, Texas A&M AgriLife Extension Economist 600 John Kimbrough Blvd, Suite 335 College Station, Texas Tel. (979) Fax. (979) The opinions and recommendations expressed are solely those of the author and are intended for educational purposes only as part of the Texas A&M AgriLife Extension Service. The author and Texas A&M AgriLife Extension Service assume no liability for the use of this newsletter. The Texas A&M AgriLife Extension Service provides equal access in its programs, activities, education and employment, without regard to race, color, sex, religion, national origin, disability, age, genetic information, veteran status, sexual orientation or gender identity. The Texas A&M University System, U.S. Department of Agriculture, and the County Commissioners Courts of Texas Cooperating 10