AgriVisor Market Recap

Tuesday, November 24, 2020
Trade was under moderate pressure to start today as long-liquidation and technical resistance weighed on the entire commodity market. The most pressure was in soybeans as the contract failed to break through $12.00 resistance yesterday. Rumors that some Chinese buyers may be washing out of bookings added to the negative tone in the soy complex. More interest was on the equity markets today as easing political tensions in the United States was viewed as favorable for the market, causing the Dow to top 30,000. Additional Covid vaccine news and hopes for a stimulus package were also beneficial for equities. Ongoing weather concerns in South America limited commodity market losses, and wheat took additional support from a deteriorating condition rating in the US. 

Rumors hit the market today that some Chinese crushers have opted out of current US soybean purchases. Crushers in China are facing poor margins as soybeans in the country are at a four-year high. While no exact number of cancellations is being given reports claim there were many being washed out of. Sources claim the vessels being cancelled were for December and January shipment. Trade will be closely monitoring upcoming sales reports for verifications of these reports. 

Covid 19 remains a factor for the global markets; both commodities and financials. More countries have again limited non-essential travel and placed restrictions on businesses and schools. Australia is a leading one of these as the virus is spreading at a rapid rate amongst that population. The United States and EU are other leading countries who are limiting services at this time. The concern is what this will do to consumer spending as we move into the holiday season if there is not some sort of a financial stimulus package put together. 

Trade is starting to pay more attention to the US corn balance sheets. The USDA is currently predicting a 1.7 billion bu corn carryout for the 2020/21 marketing year, but others claim it will be lower, with some at 1.5 billion bu. This is based off the rise we have seen in export demand in recent weeks. The same analysts believe carryout will hold at 1.5 billion bu next year as well. While this is much tighter than the initial carryout estimate at the beginning of the marketing year, it is not at a level that would warrant rationing at this time. 

Much of the increase in corn demand that would lead to a carryout reduction is coming from exports. Export sales on corn remain above expectations and indicate a larger yearly total than the USDA is predicting. We are also seeing elevated feed demand as the number of cattle being fed in the United States is historically high. There is uncertainty on US ethanol manufacturing and demand though, and this could simply offset any increase from other sources of demand. 

Export inspection totals on corn and soybeans are also giving us mixed indications at the present time. Soybean inspections currently total 897 million bu, a 69.6% increase from a year ago, and a record for this time of year. Corn inspections total 364 million bu which is a 65% increase from last year. The difference between the two is that soybean inspections are well above the needs on a weekly basis to meet the yearly USDA export projection, while the corn number has been trailing the amount needed. 

The October Cold Storage report has been released with mixed numbers. On October 31st the United States has 500.5 million pounds of beef in storage compared to 466.3 million pounds in October 2019. Pork in cold storage totaled 448.2 million pounds at the end of October, down from 612 million in 2019. Pork bellies had the greatest decline, going from 45.4 million pounds a year ago to just 19.7 million at the end of October. 

A leading source of demand for pork in the global market is China. In the month of October China imported 330,000 metric tons of pork, an 80% increase from the same month in 2019. Yearly Chinese pork imports now stand at 3.62 million tons, a 126% increase from last year. How long this demand will last is questionable as China continues to rebuild its domestic hog herd. 

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.