AgriVisor Market Recap

Thursday, March 26, 2020
Even with an abundance of fresh fundamental news, commodities favored the negative side in today’s session. This was from profit taking following the recent recovery in the market, mainly on soybeans and wheat. We did see large export totals this morning, but for corn, these were just enough to compensate for the decline that is expected in domestic usage. The lack of disruptions to global trade also negated some of the friendly export news, although traders do expect disruptions to eventually take place. 

Export sales for the week ending March 19th were all at the top end or above trade expectations. Corn sales for the week were a marketing year high at 71.4 million bu. Soybean bookings were solidly higher on the week at 33.23 mbu, as were wheat sales at 27.19 mbu. China was listed as a primary buyer of all three commodities which is not that surprising given last week’s flash sales. China is trying to rebuild reserves following its initial outbreak of Coronavirus which is a leading catalyst for the elevated buying. 

Even with this renewed export demand on corn, trade is concerned with domestic usage, primarily ethanol manufacturing. It has been well publicized how US ethanol manufactures are struggling with poor margins and a lack of demand which is causing many to halt operations. As a result, we have already seen increases to corn carryout estimates with some analysts raising it from the current 1.89 billion bu estimate to 2.2 bbu. Given the ripple effect of this demand uncertainty and prospects for a large crop of corn this year, a 3 bbu new crop carryout is not out of the question. 

Data shows that for the months of January and February China imported 6.1 million metric tons of soybeans from the US. This compares to just 1 mmt for the same months in 2019 when the two countries were at the height of the trade war. For the same period Brazil only sold China 5 mmt. These numbers shifted in March though when the combination of Brazil’s harvest and the Coronavirus limited Chinese demand. 

Trade is looking at long range export potential on soybeans with some questions being asked. China, the world’s leading soybean importer, is estimating its soybean imports for this coming year at 86 mmt. Brazil is predicting soybean exports for the year at 73.5 mmt. While not all of these will go to China, a large portion likely will. This could leave very little Chinese business for the US, and futures will need to remain very competitive for our share of China’s market not to shrink even further. These numbers also make it more important than ever for the US to maintain sales to buyers other than China as well. 

Soybean sales out of Argentina have been light in recent weeks, and the immediate response is this is from the Coronavirus. While that may be some of the reason, farmer holding of inventory is more of a factor. Farmers in Argentina believe soybean values will rally later in the year and are holding as much inventory as possible for better values. The only sales taking place right now are for cash generation, which is much the same as what is happening around the world. 

The International Grains Council released its world balance sheets estimates today for the 2019/20 and 2020/21 crop years. The IGC raised its grain production forecast for this year to 2.175 billion metric tons, a 3 million metric ton increase. The firm cut its grain demand prediction by 1 mmt, but it will still be greater than production at 2.192 bmt. This scenario will be repeated in the 2020/21 marketing year with world grain production forecast at 2.223 bmt and demand at 2.226 bmt. 

The United States has seen demand increase for several commodities recently, but one that is getting the least amount of attention is poultry. Poultry demand stated to increase in late winter when pork and beef values started rising. The elevated consumer buying we had when the Coronavirus hit elevated poultry demand that much more. Consumer tend to buy larger volume of poultry for frozen reserves. Poultry also tends to be cheaper than beef and pork and demand rises when economic market concerns arise.