What We Learn From USDA’s Export Sales Report

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The USDA’s weekly sales report was one of the many pieces of data affected by the government shutdown. This past week the USDA condensed six weeks of export sales and shipment data into its Feb. 22 report in order to catch up. There was a lot of information to unpack, but markets took it in stride with minimal volatility on the day of the release.

Soybean export sales to China were the most anticipated piece of information as a flurry of sales were completed, but the exact numbers were unclear. China booked 3.9 million tonnes of soybeans over the six-week period, along with 1.8 million tonnes in the latest report that came out today, bringing year-to-date commitments to 9.2 million tonnes. For comparison, last year’s commitments were 26.4 million tonnes at this point of the season. Trade negotiations with China will ultimately determine final US exports, but it was positive to see some movement. A total of 6.5 million tonnes of sales to all destinations during the six-week period was a record, but year-to-date commitments are still the lowest since the drought-plagued 2012/13 season.

South American soybeans are cheaper to import for China, even if Beijing were to eliminate the tariff on the US, so competition will be fierce as we enter the peak shipping period. Argentina production is set to bounce back to near record, and Brazil, despite recent reductions to production forecasts, is harvesting early and exporting at a rapid pace. US sales to Argentina were virtually zero for the six weeks, which may signal the end of Argentina’s need for imports to bolster supplies following a drought-devastated crop.

US corn export sales of 6.06 million tonnes for the six-week period were about average historically and in the broad range of market expectations. Last year saw record strong sales of 10.4 million tonnes during that period, so year-to-date commitments lost ground, as expected. Total commitments are still slightly ahead of last year, but competition is increasing. The US Gulf was the cheapest free-on-board (FOB) export price of the major origins, but has now rallied past Argentina and the Black Sea. Good early harvesting in Argentina and expectations of a bumper crop pressured local premiums making that the cheapest origin. If the US cannot regain competitiveness in export pricing, the USDA will likely have to lower its forecast for exports.

US Wheat sales over the six-week period were the highest in seven years. Total commitments gained a lead over last year for the first time this season. US hard red winter wheat was cheaper than milling wheat from the Black Sea on a FOB basis for most of the period, which likely led to some incremental gain in business. Forecast for full-season exports, modeled on the current pace, rose close to the current USDA estimate. Further, it has been anticipated for many months that Russia would run short of exportable supply and the US would be able to pick up market share late in the season. However, traders in the US and EU have generally been disappointed with the global demand for wheat. Good prospects for 2019/20 production globally, based on solid acreage gains, is weighing on prices. End users may choose to wait for new crop supplies, so it remains to be seen how the final three months of the US marketing year will finish up.

In the left chart above, the long lines represent US soybean export sales volumes to China from January to August for 2011 through 2018. The shorter line at bottom shows sales so far in 2019. On the right are US corn exports to various world regions. The jump in the last bar reflects the USDA’s release of six weeks of combined data following the government shutdown.

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