AgriVisor Market Recap

Friday, November 13, 2020
Grains managed to stabilize today as selling came to an end. Funds have trimmed their weak long contracts which was a primary reason for yesterday’s declines. Soybeans posted a recovery today after yesterday’s sell-off which also lent support to the grains. Trade is starting to search for fresh news which limited all advances while ongoing weather concerns in South America provided support. Buyers did surface late in the session in all contracts in an effort to put some risk premium into futures. 

A benefit for the commodity market is coming from the energy sector and a leveling out of product demand. Energy analysts claim gasoline demand in the United States is holding at 85% to 90% of what it was prior to the Covid-19 shut-downs in the US. While a decline, this is better than what was seen just a few months ago. In turn this has elevated demand for renewable fuel usage as well. 

We are now starting to see foreign countries push back on US tariffs. The main one of these is the EU who strongly opposes the tariffs that were just placed on their US exports. Another is China who is expected to try and renegotiate its current plan that kept the trade war with the US from escalating. These changes come from the expected change in the US administration following the first of the year. 

Even with less than ideal weather, Brazilian firms are holding to their large crop estimates. More interest in this is being placed on soybeans, but we are now seeing more interest on corn, mainly the Safrinha crop. A slight reduction is expected to Brazil’s first corn crop from drought but sources in Brazil expect weather conditions to improve enough to see limited impact on the Safrinha production. Brazil can also expand its third corn crop which is mostly grown in northern areas if need be, as that is where drought has been less stressful. 

The greatest unknown when it comes to the global corn balance sheets is in Ukraine. The USDA lowered the Ukraine corn crop by 25% in this week’s balance sheets and indicated it may go lower. The uncertainty with Ukraine corn is that farmers in the country are going to let some fields sit until next spring to be harvested due to wet conditions. This means the country’s corn output will not be truly known until then. This also opens the door for elevated US demand through the winter months. 

It is no surprise that since the bullish data was released by the USDA this week, we have seen even less interest in cash sales. We did see an immediate bump in selling interest, but this ended quickly. We are also seeing carry build back in the grains, giving farmers even less incentive to market inventory into the spot market. This could easily open a window of opportunity for quick delivery sales in the near future. 

We are starting to see more of a disconnect in the market between cash and futures. In areas where country movement of inventory has been greater, we are seeing basis values fade as buyers are comfortable with reserves. This is especially the case in regions where processing margins in local markets are being pressured. In others we are seeing basis values rally to encourage movement, even with elevated futures values. This makes it more important for a seller to monitor local cash bids rather than futures movement. 

Export sales for the week ending November 5th were mixed. Corn sales were under trade estimates and the volume that is needed per week to reach the yearly projected total with 38.5 million bu. Wheat sales came in at the low end of estimates with 11 million bu. Soybean sales were above estimates with 54 million bu. 

Weekly beef sales for the 2020 year were down 30% from last week at 14,300 metric tons. Beef sales for 2021 were also light at 3,300 mt. Weekly pork sales were down a slight 1% and totaled 42,500 mt for 2020. Pork sales for 2021 were a strong 16,100 mt. China was again listed as a primary buyer for both pork and beef. 

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.