O’Brian: Grain outlook more positive than what market would suggest

Manhattan, Kan. – “February tends to be an interesting time in the grain markets as March contracts go out for delivery and production concerns linger around the corner,” says Dan O’Brian, Kansas State University Grain market economist. 

Absence of news 

“In the absence of any strong export news, worldwide crop issues and March contracts off the board, the pressure tends to drive markets down,” says O’Brian. 

He explains the weakness in the market is a technical one as opposed to weakness associated with supply and demand issues. 

“Around the corner, we will begin to look at crop production as a major factor in the market,” he says. “We will also look at winter wheat and hard red wheat to determine potential winter damage.” 

He explains much of the Midwest begins planting corn in early April, and there are still snowdrifts around much of the region. 

“When we look at parts of Iowa, Illinois and Kansas, we’re seeing a lot of moisture, which could be a determinant in the market soon,” O’Brian notes. 

“Soon enough, production concerns will enter the focus of the market lens to shape the market,” O’Brian says. 

Exports 

“Because exports are typically down this time of year, we tend to view the market in a negative way,” O’Brian explains. “The one exception at this time is soybeans.” 

He comments soybean prospects are picking up from the previous months. As of the week ending Feb. 21, there were over 83 million bushels set to export. 

“This is very welcome and much better than what we’ve been seeing,” he says. “When trade tariffs were applied to China, the outlook of the soybean market was very grim.” 

According to O’Brian the USDA is set to release backlogged trade data of both shipments and purchases up to Feb. 28. 

“We are 25 weeks into the corn market, about 48 percent through, and looking purchases of 1.6 billion bushels,” he says. “This would account for 64 percent of the USDA’s projection of 2.45 billion bushels.” 

“The market is arguably in good shape as far as what’s on the books,” O’Brian comments. “We are a little behind in terms of actual shipments but can catch up depending on crop options around the world, particularly in South America.”

Purchases

“Grain sorghum purchases are sitting at about 29 million bushels, with about 25 million already shipped,” says O’Brian. “USDA projected around 100 million bushels for the year.” 

He explains buyers in the sorghum market have gone hand-to-mouth, as there is a major lack in forward purchasing. 

“I think we see this lack of forward purchasing behavior with sorghum buyers because the supplies are they when they need or want them,” O’Brian says. “They aren’t having to fight hand-over-fist to get their hands on any supply. 

Wheat

“Wheat is 73 percent through the market year, as we are in week 38 of 52,” he says. “We’ve seen purchases of 800 million bushels, which is about 80 percent of the billion-bushel USDA projection.” 

He says, although exports have seemed low, they are actually pretty well on target. Last week, the U.S. shipped out around 25 million bushels. 

He adds, “We only need to export 14 million to keep up the pace.

“We have weeks where actual shipments aren’t bad, even though the futures don’t reflect that,” says O’Brian. 

“Soybeans are 76 percent through their projection and only halfway through the market year,” O’Brian notes. 

He explains the largest issue with soybeans will be when South American crops become available on the market. At that point, the U.S. will have to compete dollar-for-dollar with the South Americans, which may slow down exports. 

“Overall, it’s not as if there haven’t been crop purchases made,” O’Brian explains. “It’s more a fact of there hasn’t been any surprise in the markets to drive gangbuster shipments. If there had been flooding in Argentina, droughts in Brazil or hard freezes in the Black Sea region, the purchases would be more robust.” 

Dan O’Brian is featured weekly in Kansas State University’s “Agriculture Today with Erik Atkinson” program. The program covers current affairs across the agriculture sector. 

Callie Hanson is the assistant editor of the Wyoming Livestock Roundup. Send comments on this article to roundup@wylr.net.