AgriVisor Market Recap

Thursday, September 24, 2020
Corn and soybeans were under pressure today while wheat posted a slight rebound. The most negativity came from an increase in harvest activity and the accompanying hedge pressure. Technical weakness was also a source of pressure, although it also provided support on the downside. A firming US dollar weighed on commodities as well. Losses were held in check by strong weekly export sales, even though we did not see any flash sales announced this morning. Wheat futures managed to close on the positive side today, taking support from freeze concerns in the Upper Plains. 

Even with recent rains, drought conditions are persisting in Argentina. This is mostly in the country’s wheat belt where 12% of the crop is reporting extreme drought conditions. Many portions of this region claim wheat production will be less than 50% of normal. Some regions are even stating they will see wheat abandonment due to dry soils. Dry conditions are also causing some farmers in Argentina to shift fields from soybeans to later maturing corn. 

As a result of these conditions, The Buenos Aries Grain Exchange lowered their Argentine crop estimates compared to a year ago. Total production in Argentina is expected to decline this year by 6.1%. The country’s corn crop is now estimated at 47 million metric tons compared to last years 50 mmt. Wheat production is pegged at 17.5 mmt, down from last year’s 18.8 mmt crop. Soybean production is also forecast to decrease from 49.6 mmt in 2019 to a current 46.5 mmt estimate. 

Even with these declines, The International Grains Council is not changing their South American production estimates. The IGC is now estimating a global corn crop of 1.16 million metric tons this year, 6 million metric tons less than in August. The IGC sites smaller crops in the US and China as the cause of the decline. Even with this decrease, world corn production is still expected to be a record. The council also believes world wheat production will be a record at 763 mmt. 

Weather is also becoming much more of a topic in Brazil. Soybean planting is underway in Brazil but is progressing slower than normal given the drought that impacted the country last year is still holding on in some regions. While this is not to a stage where any production is being jeopardized, a slow planting pace opens the window for a later harvest, and the possibility of elevated US soybean sales. We are just in front of the rainy season in Brazil, which normally gets underway in early October. 

These weather conditions are not uncommon in La Nina influenced years. While drought takes place in South America in such events, trade is starting to look at possible happenings in the United States in such years. It is not uncommon to see drought in the Southern Plains in La Nina events. The last time this happened was in 2017. 

Export sales for the week ending September 17th favored corn and soybeans over wheat. Corn sales totaled 84.2 million bu and soybeans came in at 117.4 million bu, both well above trade guesses. Wheat fell in the middle of the estimate range with 12.9 million bu. It is no surprise that China was again listed as the primary buyer. 

Meat sales for the week were also mixed. The US sold 18,010 metric tons of beef last week, a 26% increase from the week before. Pork sales on the week reached 37,788 metric tons, which was down 25% from the prior week. 

Livestock trade is now positioned for tomorrow’s monthly cattle on feed report. The September 1st on feed number is projected to come in 3.5% higher than the numbers from a year ago. Placements in the month of August are pegged at 106% of last year’s, continuing the trend of high numbers of cattle moving into lots. This is not necessarily from high cattle numbers but from poor pastures in the US Plains. August marketings are expected to be on the light side at just 96.7% of August 2019. 

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.