AgriVisor Market Recap

Tuesday, November 10, 2020
The early portion of today’s session was spent getting final positions in place ahead of the monthly WASDE report. Typically the November release receives little interest but prospects for a sharp drop in soybean ending stocks heightened it this month. This was especially the case on soybeans and has given that complex the majority of its recent support. Corn did benefit from a flash sale this morning of 130,000 metric tons to South Korea. The USDA data proved to be more friendly than expected today and caused futures to rally considerably. 

A sizable 2.6 bushel per acre reduction to the US corn yield took place in the November supply and demand report which was enough to decrease production to 14.5 billion bu. The USDA increased corn exports by 325 million bu but made a 75 mbu reduction to feed and residual use. If correct, this puts US exports at a record 2.65 bbu this year. This is forecast to leave the US with a tight 1.7 bbu corn carryout and an average cash values of $4.00. 

The US soybean yield was also reduced 1.2 bushels per acre for a 50.7 bushel average for the US. This is now forecast to give the US a 4.17 bbu soybean crop. The only change to soybean demand was a 3 mbu increase to seed and residual, but the decline in production was enough to give the US a projected carryout of 190 mbu, a 100 mbu decrease from last month, and what is approaching a minimal pipeline supply. The USDA is now forecasting an average soybean cash value of $10.40 per bushel. 

The question with the soybean balance sheets is why exports did not increase. The answer is that the USDA is projecting soybean values will rally to a point where exports are rationed. Given this scenario, the USDA may not alter exports even if we do see weekly sales remain strong. 

Only minimal changes were made to the domestic wheat balance sheets. Production was left unchanged at 1.826 bbu and the only change to demand was a 6 mbu increase to food and seed uses. This will leave the US with an adequate 877 mbu in ending stocks. The average cash wheat value was left unchanged at $4.70 per bushel. 

On the global side there were significant changes to balance sheets as well. Corn ending stocks were reduced from 300.5 million metric tons to a current 291.4 mmt. Soybean ending stocks were also lowered from 88.7 mmt last month to 86.5 mmt this month. A minimal 1 mmt decrease was made to wheat ending stocks putting it at 320.5 mmt. 

While the numbers did not receive as much intertest as the WASDE release, we did receive the monthly Brazilian crop updates from CONAB this morning. CONAB is predicting a Brazilian soybean crop of 135 mmt this year, up rom its previous estimate for 133.7 mmt and last year’s crop of 124.8 mmt. The firm pegged Brazil’s corn crop at 104.9 mmt, down from its last prediction for 105.2 mmt, but larger than last year’s 102.5 mmt crop. The main reason for the changes in estimates was acreage rather than weather, as CONAB believes Brazil will seed 3.5% more soybean acres this year while cutting corn plantings. 

One area of corn demand that is being monitored is Mexico’s import projection. Mexico is currently predicting this year’s corn imports at 17.2 million metric tons. This is 1 million tons under the current USDA projection. The difference is being credited to Mexico using a calendar year while the USDA uses a marketing year. Regardless, Mexico is starting to cut back on its demand forecast as officials in the country claim a resurgence in Covid cases is again limiting commodity demand. 

A topic that is starting to be more closely monitored by trade is export demand versus domestic usage, mainly on corn. The United States already has 1.3 million bu of corn commitments booked, three-times the volume of a year ago. This has already driven corn values higher and to a point where domestic processing margins are being pressured, with most interest on ethanol. There are some thoughts that corn loadings are front loaded and will back off in the next few months. If this does not happen and economics do not improve, we could see domestic demand suffer. 

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