With just over a month to go, the market evaluates the preliminary numbers of the 19/20 campaign, subject to an eventual agreement between China and the US. At the local level, the market rewards the transfer of deliveries from May to November with a rate of 13.4%.

After the 95th Annual Agricultural Perspectives Forum was held, the granary markets begin to internalize the first trends of the new agricultural campaign in the US. The Outlook Forum is an event organized by the US Department of Agriculture, which addresses issues related to agricultural activity, foreign trade, policies and financing, among other issues. On this occasion, it was held on Thursday 21st and Friday 22nd of this year in Arlington, Virginia. The forecasts for planting intention 2019/20 are the first elements to delineate the possible supply scenarios. After successive years of growth, the USDA consensus foresees an annual fall of 4.7% in the area that would be destined for soybeans, which would cover 34.40 mill.has. As counterpart, part of the hectares that the oilseed releases would turn to the corn crop that would add about 1.20 mill.has with respect to the previous cycle with an area of ​​37.20 mill.has.

Relative prices have a direct impact on planting decisions by North American farmers. The outcome of the trade dispute between Donald Trump and Xi Jinping altered the behavior of the Soya Nov19 – Maize Dec19 contracts, tilting the balance more in favor of the cereal. This is reflected in the ratio in Chicago that currently stands at 2.23 and is significantly below the 2.40 units that averaged the two previous campaigns at these instances of the year. It theoretically determines that soybeans are quoted more than twice as much as corn and the higher it is, the more hectares will be produced at the expense of the second.

The decline of this indicator responds to the substantial accumulation of stocks in the US. The offer of beans has grown more than proportionally to its demand, basically due to the impact of exports and resulted in larger surplus of soybeans. At the end of the current commercial year, stocks would reach to comfortably cover 81 days of consumption without resorting to the new harvest. This figure is about 43 days in the case of corn. The only factor that would generate a sudden change in the proportion of covered area would be the arrival to a final solution, or the closest thing to it, between China and the US. Almost a year after this conflict, the latest developments show that the US president would delay the application of the additional tariffs that were originally scheduled to begin this Friday, March 1, although the date of said extension was not specified.

Turning to the domestic sphere, harvest values ​​continue to oscillate in the range of 235-240 US$/tn according to the condition and delivery port. The commercialization of the new soybean thrives slowly and with hardly a third of the operations agreed on a firm price. This accounts for the poor predisposition of the producer to get rid of his merchandise and some uncertainty when it comes to compromising his harvest. The price structure provides clear incentives to defer deliveries with a premium that far exceeds the average for other years. The widening of the May-19 futures spread against the more distant positions promotes closing sales by postponing the unloading. Opting to sell a part of the production in the forward market with delivery to Nov-19 yields a more attractive return than the operation at a closer term.

For this strategy, additional expenses derived from storing the grain must be incorporated into the margin equation. In the second place, it is of exclusive nature to have the financial capacity to stretch the term of the unloading and therefore, of their collection. Since the May19 – Nov19 differential operates at slightly more than U$S 16/tn, the resulting implicit rate stands at 13.4% in dollars, well above other credit lines. If we draw a comparative line, exactly one year ago, the rate stood at 9.6% and the stimulus to postpone deliveries was more limited. In turn, this interest included an additional component that is not currently present in the quotes: The monthly reduction of export duties. Although it was not done subsequently, in February 2018 a reduction of 0.5 percentage points per month was discounted. Thus, between May and November a difference of 3 points was charged for withholdings, so that the rate effect was clearly lower. Meanwhile, if we go back to 2017, the pass between both positions offered a rate of 9.8%. Clearly the market rewards today those vendors who are willing to dose deliveries.