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AgriVisor Market Review

 
Tuesday, September 15, 2020
Futures were mixed to start today’s trade but were on the negative side shortly after the day session got underway. Fundamentally nothing has changed in the market, and losses were more technical in nature. Corn and soybeans both worked into over-bought territory and instigated the correction. A flushing of weak longs added to the negativity, especially in soybeans. Losses were limited by reports of frost damage in the Upper Plains with most loss in North Dakota. We again had flash sales today with China buying 132,000 metric tons of soybeans and an unknown taking 132,000 metric tons of soybeans and 120,000 metric tons of corn. 

Brazilian soybean exports are staring to slow but remain higher than initially thought. The USDA is currently predicting Brazilian soybean exports this year at 81 million metric tons, but indications are this is between 1 and 3 million metric tons too low. The country’s soybean exports are forecast to remain high into 2021, with the firm Safras already indicating sales of 82.5 million metric tons. These forecasts remain heavily based on Chinese demand, which shows no signs of slowing. 

Brazil’s corn exports are starting to ramp up but remain below last year. Last week Brazil exported an estimated 55 million bu of corn which is up from recent weeks as soybean loadings do slow. For the year, Brazil has exported 20.3 million metric tons of corn, well below last year’s 26.6 million metric tons at this time. While heavy soybean exports are one reason for this decline, so is the elevated use of corn domestically for feed and ethanol. 

Trade is starting to question this year’s energy product demand and what it could possibly mean for ethanol usage as well. Gasoline demand in the month of August was down 18% from a year ago. This is not that surprising given the lack of travel that continues following the Covid 19 outbreak. The Energy Information Administration predicts world crude oil demand will average 93.1 million barrels per day for 2020, down 8.3 million barrels from 2019. This is expected to rebound 6.5 million barrels per day in 2021, but still be depressed overall. 

This same loss of demand is being noted in the ethanol industry. Data indicates global ethanol production is down 20% this year from last. This is from a lack of travel and has led to the closing of 250 ethanol plants world-wide. In the United States there is a 10% decrease in ethanol demand at the present time as many of the closed plants have started to resume manufacturing. Industry officials believe we will see ethanol production rebound to normal levels in the 2022 calendar year. 

The National Oilseed Processors Association soybean crush report for August was released today with less than expected demand being shown. For the month NOPA members crushed 165.05 million bu of soybeans, the lowest monthly amount since last November. The August crush total was 4.5 million bu under expectations and well below the 172.8 million bu seen in July. Soy oil reserves at the end of August totaled 1.519 billion pounds, the least amount in nine months. 

China’s hog numbers continue to grow as the country rebounds from its African Swine Fever outbreak. According to data from Mid-Co Commodities, China had a reported 31.3% more hogs in production at the end of August than it did at the end of August 2019. Sow numbers in China were up 37% from last August. This increase in numbers has generated elevated feed demand in China and is a leading reason for the high corn and soybean imports we are seeing. 

Even with these elevated hog numbers the United States may see higher pork export demand to China. This comes on the heels of the ASF outbreak in Germany that has led to China shutting off imports from that source. Germany has been China’s 3rd largest pork supplier, and this now leaves a void that will need to be filled. US exporters are hoping to see a significant portion of this demand. 

RISK DISCLAIMER: The risk of loss in trading commodity futures and options is substantial. Before trading, you should carefully consider your financial position to determine if futures trading is appropriate. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results. The information contained in this report is believed to be reliable but is not guaranteed to accuracy or completeness by AgriVisor, LLC. This report is provided for informational purposes only and is not furnished for the purpose of, nor intended to be relied upon for specific trading in commodities herein named.  This is not independent research and is provided as a service.  As such, this is considered a solicitation. 
 

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