What We're Watching This Week - March 13, 2017

COMMODITIES-TRADE

Japan Faces a Faltering Australian Sorghum Crop:

The outlook for Australia’s sorghum crop in Queensland and New South Wales has turned dire over the past month. The USDA reduced production potential to a 23-year low on Thursday. Granted, Australia accounts for less than 2% of the world’s production of sorghum, but the country supplies the lion’s share of Japan’s sorghum imports (nearly 1mn metric tons a year). The US has seen its exports to Japan dwindle to less than 100k tons last year. With Australia likely out of export markets, the US and other top producers could be in a position to capture a greater share of Japan’s sorghum imports in 2017.

ANIMAL FEED

China’s Hogs Are in Need of a Census:

Despite China’s soybean imports running nearly 30% higher year-to-date, the latest forecast of China’s hog herd from the US Attaché could temper the country’s demand for soybean meal. The sharp contrast in the USDA’s official view (roughly 5 million increase in 2017) and the attaché’s report (roughly 44 million decline) illustrates just how difficult it is to peg the size of China’s herd. What’s more, the mixture of small farms and industrial production makes forecasting feed demand a greater challenge than in developed markets. Even so, a standard farrow-to-finish feed model suggests a meaningful drop could be afoot.

Note: Consumption or import volume forecasts aren't available yet.

AG CHEMICALS

US Urea Imports Bounce Back:

Following a lull last fall, China’s urea exports to the US have snapped back. In fact, US urea imports from China reached a January level not seen since 2013. Although Chinese producers curtailed output in late 2016 as domestic coal prices rose, a rebound in wholesale urea prices returned many producers to break-even by early 2017. At the same time, Chinese exporters are benefiting from a weaker Chinese yuan. Since US retail nitrogen prices have been gradually increasing in 2017, we will be keeping an eye on urea imports from China in the coming months.