AgriVisor Market Recap

Monday, November 23, 2020
Trade started out the holiday shortened week on the positive side with soybean leading the way. Strength in soybeans remains the result of dry weather in South America and the likelihood of a smaller carryout in the United States. Several regions of South America did receive rains over the weekend, but precipitation totals were on the light side and forecasts remain mostly dry. Corn took additional support from a flash sale of 334,000 metric tons to an unknown buyer that was believed to be China. 

Trade is receiving mixed signals from China on trade. Chinese officials have stepped forward to claim trade will improve between the two parties and expand to reach the second segment of the Phase 1 trade agreement. While this is supportive news, China is likely not going to meet this year’s obligations, raising doubt over an expansion. As always actual trade will come down to economics and if trade works for the Chinese. 

Chinese officials have upped their future soybean import forecast as well. It is now believed China will import 100 million metric tons of soybeans next year. This volume is expected to steadily increase by 3 to 4% over the next ten years. The question now is if global production can expand enough to satisfy this added demand. All eyes are on South America to achieve this, mainly Brazil. 

For this year, trade is paying close attention to Chinese demand. According to data from MidCo commodities, China accounts for 69% of all US soybean sales on the books. There are also 371 million bu of soybean sales to unknown buyers, and it is believed a large portion of these are to China as well. Total Chinese soybean purchases could total 1.4 billion bu at the present time. This would leave just 50 million bu of purchases to reach the yearly Chinese projected import total, which seems quite low at this time. 

Even with these improving relations, The White House is pushing for tougher regulations on Chinese trade. These are not necessarily on current trade but what could happen in the future. The US wants a process in place for when China attempts to block imports from other countries on unfounded issues. 

Although conditions have been less than ideal, soybean planting in Brazil continues to advance. A reported 70% of the Brazilian soybean crop is now seeded which is equal to the normal pace for this time. Sources in Brazil believe the record values being seen on soybeans will encourage planting to continue and total acres will likely be higher than initially thought. As a result, many believe the Brazilian soybean crop will be large even if yield per acre is reduced. 

Weather forecasts have been released for the next several months for the United States. Temperatures are expected to be above normal for much of the United States through the winter months. Precipitation is forecast to be mixed and heavier in northern states. These patterns are not uncommon in a winter that is influenced by a La Nina system. The question is how these may impact next spring’s conditions if they are still in place. 

Export inspections for the week ending November 19th favored soybeans over the grains. Corn inspections for the week totaled 32.8 million bu and wheat came in at 13.16 million bu, both of which were under the volume needed on a weekly basis. Soybean inspections totaled 73.9 million bu, over twice the volume needed to meet yearly expectations. China was listed as the destination for nearly 25% of the corn inspections and over half of the soybeans. 

Last Friday’s cattle on feed report showed a continued large US cattle inventory. As of November 1st the United States had 11.97 million head of cattle on feed, 101% of the number of a year ago. This is also the highest November on-feed total on record. Placements in October broke their 4-month record of building numbers with 2.2 million head. This was only 89% of the year ago total and the 3rd lowest volume for October. October marketings were 100% of the 2019 total. 

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