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AgriVisor Market Recap

 
Monday, November 02, 2020
Trade was mixed for much of today’s session with futures seeing both sides of unchanged. A primary reason for this was new moth positioning, but also last minute squaring ahead of tomorrow’s Presidential election in the US. Trade is not just preparing for the election itself, but the possibility we may not know the outcome for several days or weeks. Soybeans felt additional pressure from more favorable long-range weather outlooks for South America as some are calling for upwards of five inches of rainfall for Brazil. We did see a flash sale on corn of 204,000 metric tons to an unknown, but again nothing to China. Wheat futures were able to separate themselves and rally today as funds favored that commodity over the others. 

We have seen a sizable advancement in Brazilian soybean planting in the past week. While the overall planting pace is still behind normal it is not as great as it once was. Sources in Brazil now claim this year’s harvest will not be delayed a significant amount either. In fact most claim the Brazilian harvest will be less than a week later than usual. This means Brazilian soybeans could be ready for export by early February which is how long many buyers claim to have coverage already on the books with the US. 

So far this marketing year the United States has sold 1.73 billion bu of soybeans for export. A year ago this total was only 704 million bu at this time. One concern with this volume is the number of unshipped bushels to China and unknown buyers that total 956 million bu. The worry with these is that we may see cancellations as the year progresses, especially if the South American crop is as large as some predict. 

The real question is how these sales may be accounted for in next week’s WASDE data. The current carryout estimate on soybeans is 290 million bu and thoughts are the number will shrink even more. The question is how quick the USDA may be to adjust their ending stocks. Even in years with demand such as we are seeing the USDA is slow to make big reductions to ending stocks as they believe rationing will take place as the year progresses. 

Not only are soybean sales up on the year, but so are corn bookings. The US currently has 1.2 billion bu of corn sales on the books, up from last year’s 450 million bu. Thoughts are we may see corn exports raised 50 million bu in the November supply and demand report, but that is unlikely to change the outlook of the market very much as carryout would still hold above 2 billion bu. More support is likely to come from the global side of balance sheets if production is cut as much as the International Grains Council has indicated. 

The current market remains void of nearly any risk premium which is starting to be noticed, especially in the soy complex. Risk premium is the act of taking a position in a market in case of an adverse event and is typically associated with weather. There are other cases too, with one being the potential of depleting a commodity reserve. Some economists believe this should currently be happening in the US soy complex as ending stocks could reach historically low levels this year. The reason we are not seeing much risk premium is the forecast for a large soybean crop in Brazil. If that crop starts to see trouble, we will likely see the market react accordingly. 

Export inspections for the week ending October 29th were mixed. Corn inspections for the week came in at 28.4 million bu and wheat was at 10.5 million bu, both of which were under the needed amount per week to reach yearly projected totals. Soybean inspections were much higher totaling 76.5 million bu. This was twice the needed amount on a weekly basis. This high soybean number was welcomed by trade as it lessens the chance of cancellations once the South American crop becomes available. 

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. 
 

  SYMBOL IN EVEN SQUARE