AgriVisor Market Recap

Thursday, November 05, 2020
 Corn, soybeans, and wheat continued to rally today with new highs being posted in several contracts. Building concerns over global weather and the potential for the loss of production were primary factors for the rally. Sizable losses in the US dollar further aided commodities as the dollar is now at its lowest value since May 2018. Thoughts are this will add to an already elevated export pace for US commodities. We did see flash sales today of 106,000 metric tons of sorghum to China and 33,000 tons of soy oil to India. 

Export sales for the week ending October 29th were favorable across the board. Corn sales for the week were above trade guesses with 102.78 million bu. This was mostly from the large sale to Mexico that took place last week. Soybean sales were at the top end of trade estimates at 56.24 million bu, as were wheat sales with 21.94 million bu. Trade is already questioning if these numbers will be as high next week given the lack of flash sales we have seen this week. 

Beef sales for 2020 last week totaled 20,400 metric tons, an 8% increase from the previous week. Pork sales for the 2020 calendar year totaled 42,000 metric tons, 46% more than the previous week. Export sales for 2021 totaled 4,500 metric tons on beef and 800 metric tons on pork. 

Census export data for the month of September has been released with high totals. Corn exports for the month totaled 149.7 million bu and soybean loadings hit 286 million bu. Of these, 25% of the corn and 68% of the soybeans were destined to China. Wheat exports in September reached 105.8 million bu, a 24% increase from 2019. 

Product exports for September were mixed. The US exported 77 million gallons of ethanol during September, the lowest total for the month since 2015. DDG exports totaled 1.16 million metric tons though which was the 2nd highest September total on record. Soy meal exports were a record at 960,000 metric tons and soy oil shipments were a five-year high at 2.84 million pounds. 

Trade continues to monitor weather around the world but is starting to up its interest in US conditions. Much of the Southern US remains dry which is not uncommon in a La Nina year. While it is early, trade is already starting to question how this will impact next year’s production if it continues. History shows us that it we will need to remain dry well past the spring planting season for futures to react, especially after the production we have seen in recent years with less than ideal growing conditions. 

A negative factor that is hanging over the market at the present time is continued sluggish energy product demand. Gasoline demand in the US has been down for three consecutive weeks ending hopes of a rebound in travel demand. Even though US ethanol stocks have declined to a four-year low, this decrease in demand is starting to generate ideas that stocks will again build. The sluggish demand is also weighing on renewable energy manufacturing margins, causing some US production facilities to again slow operations. 

Even with a spread of over $2.00 per bushel, global feeders are opting to feed wheat at this time instead of corn. The primary reason for this is that wheat is more readily available in the global market from a greater variety of sources. This allows buyers to find wheat in more places than corn, which is mostly available from only the United States at this time. While corn is cheaper per bushel, freight advantages are narrowing the price gap. As a result, several of the US’s normal corn destinations are upping wheat feeding, including China. 

Commodity values in China have settled down in recent days, but still remain record high. China’s domestic corn has an average value of $10.50, the highest since 2014. Soybeans in China are currently trading at $22.50 per bushel which is the highest level since 2008. The greatest reason for these elevated values is currency exchange rates. These high values are one of the main reasons China has been an active import buyer in recent months as global values are more affordable for processors. 

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.