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AgriVisor Market Recap

 
Tuesday, November 03, 2020
All eyes in today’s trade were focused on election updates and developments. This caused the equity markets to firm as selling has been taking place up to this point, causing speculative bottom-picking to develop. The US dollar collapsed at the same time, enticing even more buying interest in commodities. The US harvest is winding down and will likely be complete in another week which is giving the cash market strength as buyers now need to push for deliveries. Elevated domestic usage numbers added to the market strength. 

The Census soybean crush data for September has been released with a record volume of soybeans being used. For the month US crushers consumed 171.03 million bu of soybeans, the most ever for the month. This total was in line with most pre-report estimates but was still enough to give the soy complex support. 

One factor that was noted in the monthly crush data was lower yields on meal and oil. Monthly yields averaged 11.5 pounds of oil and 43.9 pounds of meal per bushel. These are just slightly under what we have been seeing but brings into question the overall quality of this year’s soybean crop. They also generate ideas that crush could be higher this year to produce enough products, further reducing ending stocks. 

According to Census data, the United States produced 28.42 million barrels of ethanol in the month of August. This was a 12-million-barrel reduction from July and 11% less than a year ago. Ethanol exports during the month totaled 2.4 million barrels which was a 4-month high. Ethanol stocks at the end of August totaled 20.14 million barrels. For biodiesel, the United States produced 163 million gallons for the month. 

Ukraine corn sales have started to increase in recent weeks as the global market appreciates in value. Sources in Ukraine now claim corn sales are at 816,000 metric tons. While this is much less than a year ago it is double what the country had sold just a few weeks ago. The reason for the surge in demand has been from buyers wanting to spread out their purchases rather than having all needs booked from two sources, mainly the US and South America. The main one of these is China, who is taking this step on all imports. 

This change in China’s buying is being confirmed by the state group Sinograin who books imports for Chinese storage. Sinograin is now booking soybeans from Argentina for import for next year. Typically Argentina sells more soy products for export than raw soybeans, so this move verifies China’s intent to limit its risk in the global import market. 

We are starting to see private forecasters alter their crop estimates for Brazil. Surprisingly, some are raising crop sizes, even with the delayed start to soybean planting and mixed weather conditions. There are now thoughts we could see a Brazilian corn crop of 116 million metric tons, 15 million more than what was produced this year. The country’s soybean crop is pegged at 133.5 million metric tons, up 12 million on the year. These are also larger than earlier estimates from private forecasters. 

One reason for the higher crop estimates in Brazil is yield, but elevated plantings are also a factor. Record corn and soybean values in Brazil have encouraged farmers to expand plantings. The question is if these crops, if achieved, will lead to elevated exports. It is quite possible that Brazil may be hesitant to export as much as they did this year given the fact they keep overextending their sales. 

The October Fall Harvest Option crop insurance values have been released. For soybeans this value is $10.55 per bushel, the highest fall value since 2013. On corn the fall option value is $3.99 per bushel. This is also the highest since 2013, and for the first time since 2012 the fall value is above the spring value. 

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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