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AgriVisor Market Recap

 
Wednesday, October 28, 2020
A sharp correction took place in the markets today as traders exited many of their long positions. Light month end profit taking and positioning for the upcoming US election were the initial cause of this, but this snowballed into heavy selling as the session progressed. This was not just in commodities but in all markets, including energies and equities. Renewed concerns over the rising cases of Coronavirus on a global scale and news of shuts downs were a primary cause of this. These come as the passing of a Covid relief package in the immediate future were snuffed out. We did see flash sales this morning, but trade overlooked nearly all fundamental influences. These sales included 110,000 metric tons of soybeans to Egypt, 120,000 metric tons of soybeans to an unknown, and South Korea booking 207,000 metric tons of optional origin corn. 

Rising cases of Covid 19 around the world are becoming a driving force in the world markets. The most notable today was Germany shutting down several portions of its economy including non-essential travel in an effort to contain the virus. In the US we are hearing of some cities again shutting down indoor dining and this is likely to expand. The concern is this happening right before the Holiday Season. 

The lack of an economic stimulus package being passed is again weighing on not just commodities, but all markets. Investors had been hoping this package would be passed to revive consumer confidence. Without these funds we may see less consumer spending at a time when it usually increases. We are also seeing less travel given the economic uncertainty which has put pressure on the energy market. 

It was announced today that Brazil has in fact booked US soybeans for import. A newswire report indicates Brazilian buyers have booked 1 cargo of US soybeans which is less than what had been hoped for. Sources in Brazil claim sizable US soybean imports are unlikely given the logistic issues they bring. Not only do the soybeans need to be unloaded once they reach Brazil, but then trucked a considerable distance to a crush facility. This adds cost to the import value and makes them uneconomical. Same as with corn there are also worries over GMO contamination with US soybeans, further reducing the desire for imports. 

One buyer that has stepped up its US corn imports recently is Mexico. So far this marketing year Mexico has imported 12.23 million metric tons of US corn, a 3.6% increase from a year ago. Of this total 10.8 million metric tons has been sourced from the US which is a 5.3% increase from last year. This increase is from tight corn supplies in Brazil where Mexico’s imports are down 5.6%. 

We are starting to see mixed opinions when it comes to the Brazilian soybean crop. Several private analysts are projecting the crop at 133 million metric tons which is line with official projections. Others are not as optimistic though and believe delayed plantings and weather conditions for the area that is already seeded will trim crop size. These estimates range from 127 mmt to 130 mmt, and while this does not seem like much of a reduction, will alter the global soybean balance sheets. 

We are also seeing updated estimates on the Brazilian corn crop. Most analysts have the crop projected at 110 million metric tons which is in line with official estimates. Many are quick to claim the crop could be trimmed lower however, as delays to the soybean plantings are also likely to delay the planting of the Safrinha crop. This could push the crop into the dry season before it is fully mature and trim bushels. That said, record corn values in Brazil will entice farmers to plant as many acres as they can. 

The ethanol report for the week ending October 23rd was again mixed for trade. Ethanol manufacturing during the week totaled 6.587 million barrels, a 3.1% increase from the week before. Ethanol stocks decreased 120,000 barrels in the week though, and now stand at 19.6 million barrels versus 21.1 million a year ago. This is the least amount of ethanol in reserve since December 2016. 

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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