AgriVisor Market Recap

Monday, April 06, 2020
Futures trade was mixed today as we started to see an increase in positioning ahead of the monthly WASDE report that will be released on Thursday. Few changes are expected from the March data, although most interest was placed on the global numbers rather than the domestic updates. Corn was again pressured today by renewed selling in the energy complex, which pressured corn for the 7th straight session. Soybeans rebounded today after three days of weakness as concerns over South American production are starting to rise. Wheat was the leader during the session, with thoughts demand will increase as more countries restrict their exports. 

Export inspections for the week ending April 2nd favored corn over soybeans and wheat. A reported 50 million bu of corn was inspected for export, nearly the same as last week. This was more than enough to reach the yearly projected total from the USDA. Soybean inspections were on the light side at 11 million bu as were wheat loadings at 11.7 million bu. These both fell short of the volume needed to reach USDA expectations. 

The current vessel line-up in Brazil indicates a record volume of soybeans will be exported in April. There is an estimates 13.6 million metric tons of shipping capacity lined up to be loaded outside of Brazilian ports. There is also another 1.1 mmt of shipping capacity that is getting ready to be loaded for May. This volume of loadings is weighing on US exports, and likely will until late summer. 

These heavy loadings verify reports out of Brazil that logistics in the country are at near normal levels. We are also seeing limited congestion in Argentina, but unlike Brazil, Argentina is seeing less traffic to the ports. Data shows truck traffic in Argentina is down almost 75% from a year ago as concerns over the spread of Coronavirus limit movement. This is also impacting the Argentine crush industry and seen as a benefit for US export potential. 

Chinese officials have stated that despite Coronavirus issues, their soybean imports will hold steady this year. Prior to the virus outbreak China’s soybean imports were actually up 14% from a year ago. While this is positive news, Brazil will likely get the largest share of the business. This is a trend that has been taking place for several years now. Chinese officials believe the country will import 88.5 million metric tons of soybeans this year. Of these, 65% are expected to come from Brazil, 19% from the US, and 10% from Argentina. 

One commodity that has been impacted from the Coronavirus outbreak is Argentine beef. Argentine beef exports in 2019 increased 50% as both chin and the EU made sizable imports to try and make up for losses from the African Swine Fever outbreak. This generated $3 billion in trade for the Argentine beef industry. Since the outbreak of Coronavirus began, Argentina has seen its beef exports drop off considerably. There are hopes this will bring the US additional export demand on beef and hopefully pork as well. 

The decrease in US grain and soybean stocks in last week’s USDA reports has received minimal market reaction. The same as for all other commodities, the concern right now is not on supply as much as it is on demand. Traders believe that we will see commodity demand on a whole decrease enough that the reduction in stocks will be absorbed. Trade may also be waiting to see what is published in the next WASDE report before adjusting current positions.