Morning Commentary

May corn up 2 ½ at $3.50

May beans down 1 ½ at $8.5775

The DOW is down

USD is weaker

Crude oil down $1.18 at $64.01

Good morning,

Corn bulls were happy to see slightly stronger weekly export sales, but still nothing overly exciting or worrisome enough to shake the bears. Weather forecasts are mostly mixed. Bulls argue there’s still way too much moisture in the soil and rain in the forecast for many important U.S. production areas. Bulls are also pointing to the game-clock, which has been ticking away. Next Wednesday is May 1st, perhaps the bears will start to take more notice once we flip the calendar. It will be interesting to see how much we have planted by mid-May. Remember, back in 2013 we only had about 5% of the crop planted in the week ending April 28th. And only 28% of the corn crop planted by the week ending May 12th. That was about -37% behind our historical pace for that week. I suspect we will be ahead of that pace this year.

Soybean bulls are pointing to China buying a couple more cargoes of U.S. soybeans. Unfortunately, bears were quick to point out, China’s customs data showed March soybean imports totaling 4.92 MMTs, of which only 1.51 MMT’s came from the U.S. (down roughly -50% from last year) while 2.79 MMT’s came from Brazil. Many sources suspect U.S. exports will continue to lag even if a Chinese trade agreement is announced. That’s the biggest problem for the bulls moving forward, it’s not just the trade agreement. There’s continued fallout from African Swine Fever spreading across China, a strong U.S. dollar, a good harvest in South America and near record supply here in the U.S.

Brazil will ship an estimated 290,000 metric tons of soybeans to Mexico in the first three months of its marketing year, which opened on Feb. 1. That would more than double the 120,000 metric tons sold in the same period in 2018 and would be nine times more than usual for the first quarter.

CHS barges still need to travel 500 more miles home to get crucial nutrients to corn farmers for the spring planting season. But it could be a while as river locks on the main U.S. artery for grain and fertilizer have been shuttered for weeks. High water is still presenting a hazard for boats, barges and lock equipment, and railroad travel is also delayed by the winter weather in the western Midwest. According to company officials, the poor weather was a key reason for a $8.9 million drop in agricultural profits during its fiscal second quarter. (Source: Reuters)

In the middle of the unique mix of trade relations that involve the U.S., China and Taiwan, lies a strong and growing agricultural export market, with opportunity for massive expansion. In 2018, agricultural exports to Taiwan amounted to more than $3.9 billion, of which 43% was consumer-oriented products. I should mention that beef, poultry, and fresh fruit were the top products among the $1.7 billion in that category. We need to keep in mind that high-value consumer-oriented products were major contributors to the growth of U.S. agricultural exports to Taiwan, increasing +23% from 2014 to 2018, and that our reputation among Taiwan’s consumers for high-quality food, agricultural products, and competitive prices bode well for our future growth. With Taiwan’s aging society, which includes changing demographics (more than 20% of its population expected to be older than 65 by 2026) and increased incomes, the country is seeing its residents demand healthier products as well as eating out more frequently. And the good news is the U.S. is positioned to supply the needed demand. Below, I share deeper insights from recent research provided by the USDA’s Foreign Agriculture Service. They offer insight into both the consumer-oriented exports as well as bulk exports going to Taiwan. (Source: USDA, FAS)

Beef & Beef Products: According to Euromonitor International, Taiwan’s households spent more money on meat products than any other type of food, on average about $1,500, in 2017. Beef is Taiwan’s most-imported meat product, with imports valued at more than $1 billion in 2018. Currently we hold a 55% market share in this space and with our reputation for quality and safety, exports should continue to increase. Keep in mind, we only send beef derived from cattle that is less than 30 months of age.

Poultry & Poultry Products: The United States holds a 91% market share of poultry imports, as it is one of the few countries certified to export poultry meat to Taiwan. However, Taiwan does have domestic production that is significant and able to meet most demand, making them the main competitor for U.S. exporters. From what I understand, Taiwan consumers prefer dark meat over breast meat, with broiler thighs, legs, and wings representing a majority of the United States’ $189.4 million in poultry exports to Taiwan in 2018.

Soybeans: While total demand for soybeans has remained flat, the United States increased its market share from 56% in 2017 to 84% in 2018. Increased volume and price competitiveness in 2018 resulted in a 42%increase in U.S. soybean exports, by value. Taiwan is a mature market for soybeans, and thus total consumption is not expected to grow significantly. Substitution of alternative feed and oil products, such as fishmeal and palm oil, also affects total consumption, especially when soybean prices increase. However, there are some opportunities for growth in soybean exports as a source of plant-based protein for Taiwan’s significant vegetarian population.

Corn: The United States holds a large share of Taiwan’s corn import market and this share grew to 76% in 2018. Overall imports of corn from the world increased only slightly, but imports from the United States increased by 33%. Corn imports from Brazil and South Africa, the second- and third-highest-value trading partners behind the United States, fell significantly in 2018.


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