AgriVisor Market Recap

Friday, November 06, 2020
Trade started out today’s session firm but became mixed as the day progressed. Much of what took place was collective trade following an active week in the futures. Mush of the strength we have seen has come from less than ideal growing conditions in South America and prospects for decreased ending stocks in next weeks WASDE report, particularly on soybeans. Grain values corrected from recent highs as thoughts the US is becoming overpriced in the world market limited fresh buying interest. We did see several flash sales this morning, including 132,000 metric tons of soybeans to China, their first flash sale purchase since October 15th. We also had sales of 272,150 metric tons of soybeans and 206,900 metric tons of corn to an unknown, and 30,000 tons of soy oil to South Korea. 

South American weather remains a driving force in the commodity market, even with planting taking place. Conditions are mixed with Northern Brazil seeing adequate rainfall, but Southern Brazil and Argentina still suffering from drought. This is not uncommon in a La Nina event and is starting to have more of an impact on crops that are already seeded, mainly in Argentina. Dry conditions are also reportedly causing some farmers in Brazil to shift acres from soybeans to late seeded corn. 

Dry weather in the Southern US is also becoming more of a market factor. Not only is this being monitored on the winter wheat crop, but on US shipping channels as well. We are already starting to hear of reduced drafts due to low water levels which can cause grain supplies at the US Gulf to tighten. This also tends to add to shipping cost due to reduced barge capacity and availability, and can weigh on basis. 

We are starting to hear of some logistic issues with South American exports. These are not in the countries themselves, but at the Panama Canal, where ships are starting to become backlogged. A large volume of vessel movement is one reason for this but so are labor issues stemming from Covid 19 outbreaks. The issue with this development is that the vessels are already loaded and are unable to be shifted in any way to make deliveries quicker. 

Country movement of corn and soybeans has dropped off considerably since the beginning of the US harvest. One reason for this is the instability we have seen in futures and the market weakness it has brought. Another is that farmers simply do not need to generate cash flow and are content to sit on inventory. The question now is when we may see the next round of farm gate sales and the likelihood is not until next spring. If correct, we will likely see several windows of opportunity open for quick ship bushels in the cash markets. 

There is a development in the Ukraine corn crop that could end up benefiting US exports. Ukraine’s corn crop is a reportedly 66% harvested and has been stalled by persistent rainfall. As a result, farmers in the country may be forced to leave between 7 and 9 million metric tons of corn in the fields until next spring to finish harvest. It is not out of the question this could bring the US additional export demand. 

Several estimates have been released on possible yields in next week’s updated WASDE numbers. Private firms have the US corn yield between 175 and 179 bushels per acre. For soybeans the yield range is from 51 to 53 bushels per acre. These compare to the October USDA yields of 178.4 bushels per acre on corn and 51.9 bushels per acre on soybeans. 

Rising cases of Covid 19 around the world remain a factor for not just commodities, but for all markets. Rising cases have caused several countries to again limit services, including dining and non-essential travel. The likelihood of this taking place on a global scale are also rising, even in the United States. Some US cities are again restricting dining options and concerns over other closures are possible. Not only would this again disrupt commodity demand, but energy demand as well. 

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.