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AgriVisor Market Recap

 
Tuesday, November 17, 2020
Soybeans were once again the leader of the market with sizable advances being posted in the complex today. Demand is one reason for this as both exports and domestic use continues to run at elevated levels. This shows the market that rationing has yet to affect buyer interest and more needs to be done. Data that shows funds have plenty of buying room left in their position added to today’s soybean strength, as did concerns over long-range weather outlooks in South America. Less interest was shown in the grains today, even though we did finally see a flash sale on corn as Mexico bought 195,000 metric tons. 

The most interest in global balance sheets right now is on US soybeans. Even though just tightened, the US carryout figure on soybeans could easily contract even more. US soybean sales for export are already at 80% of marketing year expectations. This leaves less than 400 million bu of sales over the next ten months to reach the yearly projected 2.2 billion bu mark. Even if sales slow, this number is likely to be surpassed. It is not hard to justify a true ending stocks figure of less than 100 million bu in this scenario. 

Not only has demand for US soybeans been high in recent months, but so has demand for soy oil. Other oil seed products around the world are in short supply, mainly palm oil. The United States is also seeing less competition from canola oil as Canada is shipping more whole canola than product. The greatest benefit for soy oil is the concern over the Argentine soybean crop as loss predictions build in that country. 

The bottom line in today’s market environment is that is favors sellers over buyers. This starts with the US farmer and how they are in no need of making additional commodity sales to generate cash flow. Large sales took place right at harvest and this generated enough cash flow for many to last until later in the year. In addition to these sales, many have received enough government payments to further restrict cash selling. 

South American weather forecasts indicate dry conditions will likely persist into the end of the month. Current models indicate 62% of Brazil will remain dry over the next two weeks. The same outlooks expect 76% of Argentina to be dry into month end. A good portion of these two countries are expected to see less than half of their normal rainfall over this period, intensifying drought conditions. 

Most of the attention on South American production loss has been on soybeans and corn, but more is starting to develop on wheat. Argentine wheat production has been hit hard with drought this year and analysts now believe the crop will only total 16.7 million metric tons. If correct, this would be the smallest Argentine wheat crop in five years. This loss is being overshadowed by the record large Australian wheat crop that is supplying a large share of the global needs. Trade is also expecting a large wheat crop out of the United States next year and EU officials believe their wheat plantings will increase 9% which may keep the global supply steady. 

More estimates are being released for what next year’s plantings in the United States may total. Estimates indicate US farmers will plant 92 million acres of corn next spring, 1 million more than this year. Soybean acres are predicted to reach 89 million, a 6 million increase. Wheat plantings are expected to total 46 million acres, a 1.7-million-acre increase. The question is if even with these elevated plantings if production will satisfy demand. 

China continues to rebuild its hog herd following the outbreak of African Swine Fever. Data shows that during the month of October China had an increase in its hog inventory of 27% from October 2019. China’s sow herd showed an increase of 31.5% which indicates we will see numbers start to rise even faster in future months. A result of this build in inventory is declining pork values in China. This decrease is lowering the level at which Chinese importers are willing to make purchases, pressuring the global hog market. 

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.
 

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