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AgriVisor Market Recap

 
Wednesday, November 18, 2020
It was no surprise that soybeans were again the leader in today’s trade. In a redundant statement, this support came from South American weather and ongoing demand in the United States. That said, we are not seeing confirmation of fresh soybean buying in flash sales which is tempering fund buying. We did see another corn sale this morning though with 140,000 metric tons to an unknown buyer. We also received support from hopes of another Covid relief package that will hopefully ease worries on commodity demand. Fresh news was mostly limited however, keeping buying interest light. Given the lack of selling interest, even light buying can give sizable advances such as we have seen recently, however. 

An issue for the US livestock markets right now is the resurgence in Covid 19. We have seen several limitations again placed on US travel and gatherings, with one being the closure of in-door dining in several cities. We are also seeing schools close back down in an effort to control the virus. The immediate thought is this will reduce commodity demand, especially food products. While this is possible, the fact that many schools and restaurants were already at lower capacities is causing less impact than last spring when initial restrictions were put in place. 

Not all commodities are being impacted by these changes, however. For one, we are seeing much more at-home use of products that is offsetting the loss of restaurant and school demand. This is especially the case with the approaching holiday season. We are also starting to see stockpiling of grain products which is keeping those values elevated. 

When it comes to global weather and growing conditions much of the current interest is on South America. While this is a major factor in global production, we are also starting to see more interest in Russian wheat conditions. Russia has been suffering from drought for several months, and while conditions have improved recently, the current wheat crop in the country is one of the poorest rated in the past several years. Russian wheat production is still expected to be large though as planted acreage expanded 2.5 million acres this year. What we see for total Russian production will depend heavily upon winter weather. This will also impact demand for US wheat in the global market. 

We are also seeing more interest on Ukraine weather. Ukraine has suffered from drought to start the year and then localized flooding. As a result, the Ukraine corn crop production estimates have receded, and values have rallied. This corn is now too high for many buyers to take and pushed more interest to the United States. While the South American harvest may temper this demand next spring it is unlikely to totally remove it. 

The unknown with the global corn supply right now is when the South American crop will become available. The soybean crop in Brazil has been slow to germinate and this could slow development all year. If the crop does not germinate soon it could delay harvest enough that the planting of the Safrinha crop will be in later March. While this could still allow for a normal corn crop to be produced, it may push pollination into the dry season that starts in May and reduce total production. 

We are starting to see more issues with Chinese imports. It is not uncommon to see China “find” quality issues with grain and soybean imports and want to renegotiate contracted prices. We are now starting to see China use Covid as a price negotiation tool. This has started to take place on several products, including beef and pork. While possible, China is not providing any proof to back up their claims.  It is quite likely China is simply using this excuse to protect their domestic market from cheaper imports. 

Ethanol manufacturing for the week ending November 13th showed a slight 1.5% decrease from the week before. A reported 6.734 million barrels of ethanol were manufactured during the week, 105,000 fewer than the previous week. Ethanol stocks still crept higher with a 44,000-barrel weekly increase. This puts US ethanol reserves at 20.2 million barrels, just 300,000 under a year ago. 

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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