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AgriVisor Market Recap

 
Wednesday, September 23, 2020
Trade was weaker to start today as fresh buying interest by the funds is becoming sparse. That said, the same funds are hesitant to sell in today’s environment, which is giving us support. Soybeans took additional support today from flash sales of 132,000 metric tons to China and 126,000 metric tons to an unknown. Less than expected rainfall in Brazil and a slower planting pace also supported soybean futures. The grains struggled today as our recent rally has made us over-priced in the global market. 

China’s grain imports for the month of August increased considerably from a year ago. For the month China imported 1.02 million metric tons of corn, a 340% increase on the year. Yearly Chinese corn imports now stand at 5.59 million metric tons, a 50% yearly increase. Wheat imports in August totaled 700,000 metric tons, an incredible 740% more than in August of 2019. For the year China has imported 5 million metric tons of wheat, a 137% yearly gain. 

China is also showing considerable increases in its pork imports. The country took in 350,000 metric tons of pork in August 2020, twice the volume of August 2019. This was a slight reduction from the 430,000 metric tons that were imported in July, however. Calendar year Chinese pork imports now stand at 2.91 million metric tons, a 133% increase from a year ago. Even with these imports, China’s domestic pork values have risen 53% from last year. 

Although we have recently seen elevated demand, trade has been slow to react in the corn complex, and some are questioning why. The main reason is that even with elevated demand we have yet to surpass the corn usage estimate being used in balance sheets. It is quite likely that until we see ending stocks on corn dip below 2 billion bu the futures market will be slow to react. 

The same question is being asked in the soy complex, but an ending stock reduction in that commodity is more likely. To become bullish corn balance sheets need to shrink by 500 million bu which is quite a change. Soybean balance sheets only have to contract another 150 million bu and trade will start to become more nervous on inventory. This could easily be done with a 2 bushel per acre lower yield than currently being expected. 

Sources in Argentina have released crush data for the country, indicating a reduction in processing is taking place. For the month of August, Argentine soybean crushing was down 20% from the same month a year ago. This is from 50% of the Argentine crush industry being idled at the present time. Soybean movement in the country is down 12% on the year which is causing this reduction. This is a result of the government’s higher taxes on soybeans and an unwillingness to make farm gate sales. For the year, it is believed Argentine crush will be down 9.5%. 

Ethanol manufacturing for the week ending September 18th was down 2.2% from the previous week. For the week US processors manufactured 6.34 million barrels of ethanol, a 140,000-barrel decrease from the week before. Even with this decline ethanol stocks increased by 199,000 barrels to a 20 million bu total. This compares to the 22.5 million that were in storage this week a year ago. 

The spread between US and Brazilian ethanol in the global market is widening back out. After narrowing to just 2 cents, the spread is again back at 20 cents per gallon. This has been a great benefit for US ethanol exports in recent weeks. Industry hopes are this spread will hold and exports will start to negate the losses being seen in domestic usage. Energy demand on a whole continues to struggle with a lack of travel following the Covid outbreak. 

The August cold storage report contained mixed numbers for the livestock complex. Beef in cold storage on August 31st totaled 460.2 million pounds, up 20 million from July, but 10 million fewer pounds than a year ago. Total pork in storage came in at 467.8 million pounds, 7 million more than in July, but a large 139.1 million decrease on the year. Pork bellies saw the greatest decline with an inventory of 30.53 million pounds. This was 12 million less than July and a large 15.2 million pound decrease on the year. 

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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