AgriVisor Market Recap

Friday, October 16, 2020
Trade was mixed for much of today’s session with futures on both sides of unchanged. Grains were the leaders of the market and took support from renewed global production worries and prospects for elevated demand, mainly to China. All contracts found support from a report that Brazil may be removing its import tax on commodities to help satisfy domestic needs. Soybeans fell under pressure from improved weather outlooks in Brazil and the concern over building Chinese political tensions and what they may mean for imports. We did see flash sales this morning totaling 128,000 metric tons of corn to Mexico and 391,150 metric tons of soybeans to an unknown. Wheat proved to be the strongest into the weekend on renewed doubts over Russian production estimates. 

The delayed export sales report for the week ending October 8th was released today with mixed numbers. Corn sales for the week totaled 25.8 million bu which was at the bottom of trade estimates and below the volume needed to reach yearly USDA projected totals. Soybean sales were above both estimates and needs at 96.7 million bu. Wheat sales were at the top of the estimate range at 19.4 million which was above the weekly needs. Cumulative sales are now ahead of last year by 635 million bu on corn, 928 million bu on soybeans, and 91 million bu on wheat. 

As corn harvest progresses, we are starting to collect more production data. Yields are starting to have a significant range with reports from upwards of 50 bushels per acre less than average to the best ever. The greatest losses in yield are in fields that have been corn for multiple years. Where a more normal rotation is seen yields are considerably better. This is making it very difficult to try and predict final corn production this year. 

This development in yields could be a factor in what acres are planted next spring. Given the big drag in corn on corn acres more farmers may opt for a more normal rotation.  This may only add to soybean acres as the current spread in futures already favors soybean production over corn. If anything, this development in yield may actually prevent the amount soybeans need to push for elevated new crop acres to help rebuild US reserves. 

Brazil has several soybean export sales on the books for February and March shipment. Exporters in the country are now showing concern over the earlier sales as the delays to plantings may make it difficult to fulfill obligations. Farmers in Brazil are already reportedly asking to have their deliveries deferred as they are not going to have soybeans ready. If this remains an ongoing issue, we could start to see some of Brazil’s export sales switched to US origination. 

A factor that is starting to be discussed when it comes to the slow planting on Brazil soybeans and potentially later harvest is what it means for the planting of the Safrinha crop. It is not uncommon to see delays continue from one crop to the next in years such as this. Sources claim that as long as soybeans are planted by the end of October any acreage loss on the Safrinha crop will be limited which is likely to happen. There are also several farmers in Brazil who are simply going ahead on their soybean planting to try and capture the premiums for early ship bushels. 

Soybean harvest is getting into its later stages in the United States, and as it does, the moisture content on bushels is dropping considerably. There are now several reports of soybeans at 8% moisture out of the field. One issue with this is that it can lower yields by upwards of two bushels per acre when this dry. Another is that soybeans are easy to shatter when this dry. The combination of these two factors could easily give the US a smaller soybean crop that currently projected. 

When first announced it was thought the discovery of African Swine Fever in Germany would elevate demand for US pork into China. While China has bought US pork since, we are not seeing the increase that was hoped for. This is because China is now buying pork from other European Union countries and satisfying much of their demand with that supply. These countries are now importing German pork as they do not have the restrictions that China does. This has done little to significantly alter the world pork balance sheets. 

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