AgriVisor Market Recap

Monday, November 16, 2020
Trade was mixed to start the week with corn and soybeans on the positive side and wheat under pressure. Corn and soybeans took support from ongoing weather concerns in South America, although we did see weekend rains in several production areas. Much more is needed and trade remains skeptic over how much will be received in regions of South America that need it the most. All contracts retreated at mid-session as rumors of large Chinese purchases were not confirmed in the daily flash report. In fact, no sales were listed at all. The market is starting to run out of fresh fundamental news which also capped daily advances. We are seeing buyers surface on breaks though, which offered support into the close. 

Cash values of US soybeans and corn continue to run at historically high values. The current average US corn basis is 22 under December futures. This is the best cash basis we have seen on corn in the past seven years. The average soybean basis in the US is 43 cents under January futures, which is also the best basis in the past seven years. We have started to see more volatility in basis values though as even where coverage is needed, buyers are weighing their margins when posting bids. 

France was listed as a buyer of US corn in last week’s sales report which is highly unusual and caught the market by surprise. US corn into France is currently not economical given the 25% import duty. There are also GMO regulations in the EU that do not favor US imports. France only bought a small amount of corn though, and thoughts are this was done to test the process in case larger purchases are needed later on. 

While the recent rally in futures has been welcomed by many in the cash grain industry, it has caused economic issues for buyers and processors, mainly in feed. Many traditional corn buyers around the global market have now started to opt for cheaper feed grains. The main one of these is China who is now reportedly considering releasing government stored inventory into the domestic market to offset high import prices. This is starting to temper the global feed grain market rally, even with tightening supplies of corn. 

Trade is keeping a close eye on global wheat values. The Black Sea market has been driving global wheat values, especially when it has come to sales into Asia. Australia has started to export its excess supply though which is considerably larger than in recent years. Right now, Australia is selling wheat into Asia at a $10.00 per metric ton discount to Black Sea sources. In turn, this is driving down the entire world wheat market. 

Even with recent drought, not many analysts are backing off on their Brazilian corn crop estimates. The latest CONAB estimate was for 105 million metric tons of corn production, but private firms are putting the crop closer to 107 mmt, even with less than ideal weather. This is from an expansion to corn plantings which is expected to reach 48 million total acres. This would be a 5% increase from last year. 

Export inspections for the week ending November 12th were released today with favorable numbers. Corn inspections came out at 32.2 million bu and wheat was at 12 million bu, both of which were above last week’s totals. Soybean inspections were down on the week but still quite high at 82.3 million bu. The grains fell short of what is needed to reach yearly projections on a weekly basis though, while soybeans were well above the needed amount. 

The National Oilseed Processor Association, or NOPA, soybean crush report for October was released today with a record usage number. For the month, NOPA members processed 185.25 million bu, well above the previous record 181.37 million bu set last March. Crush usually increases in October as new crop soybeans become available. Soy oil stocks at the end of the month were about as expected with 1.45 billion pounds. Meal exports in October decreased from September though to total 945,835 tons. 

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.