AgriVisor Market Recap

Friday, November 27, 2020
Futures were on both sides of unchanged during today’s shortened session. Early selling was met with buying, especially after the sizable losses that were posted during Wednesday’s trade. Weather in much of Brazil remains concerning which provided support, while we have seen a shift to a wetter pattern for Argentina. A reduction to the global grain production estimate was also supportive today, along with a flash sale of corn to Mexico of 302,160 metric tons. Market strength was limited by a hesitation to add long positions ahead of month end. 

The International Grains Council was out yesterday with revised world balance sheets. The IGC is now predicting world grain production of 2.19 billion metric tons this year, down 7 million tons from their previous estimate. This was mainly from a reduction in world corn production of 10 million metric tons. This was the 3rd consecutive month of corn production declines. World grain demand was also lowered by 3 million tons, but consumption will still outpace demand at 2.2 billion metric tons. World wheat production was left unchanged from last month, while the global soybean production estimate was lowered 5 million metric tons to a 365-million-ton total. 

Export sales for the week ending November 19th favored grains over soybeans. Corn sales were above estimates and the needed weekly amount at 65.57 million bu. Wheat was also above estimates and needs at 29.2 million bu. Soybean bookings were at the bottom of trade guesses at 28.2 million bu, but were still four-times the volume needed to reach yearly expectations. 

Beef sales for 2020 were a marketing year low at just 15,500 metric tons. Sales for 2021 were also light at just 1,500 metric tons. Pork sales for 2020 were down 35% from the previous week at 18,800 metric tons, and 2021 sales totaled 6,600 metric tons. 

Estimates on the Brazilian soybean crop continue to be released with several different outlooks being seen. Some forecasters have lowered their estimates on Brazil’s soybean crop to 128 million metric tons, while others are holding it at 132 million metric tons. Analysts who are holding to higher projections claim the market is not taking into consideration the ability of soybeans to withstand drought conditions, especially in early development. Their opinion is we may see declines to crop sizes, but they will come later in the season. 

Another reason analysts such as this are holding to high crop estimates is acreage. In Mato Grasso alone soybean acres are forecast to increase 2.8% this year from last to total 25.1 million. The majority of this increase was from pastureland which is easily converted into farmland. Analysts in Mato Grasso have also increased their soybean yield to 52 bushels per acre, a 2.7% increase from a year ago. 

We are also seeing crop estimate revisions to the Argentine crops. Analysts in Argentina now claim their soybean crop will total 49 million metric tons, well below the initial 55 million metric ton estimate. The country’s corn crop is now pegged at 48 million metric tons, down 4 million from the initial projection. These estimates compare to the 51 million metric tons the USDA is predicting on soybeans and 50 million metric tons on corn. 

These smaller crop estimates, along with high tax rates, are keeping Argentine soybean sales to a minimum. Argentine farmers have marketed just 70% of their old crop bushels which is creating concerns for crushers. The Argentine crush industry is only operating at 60% of capacity due to low inventories of soybeans. This is concerning for the global market as Argentina provides the world with 50% of its soy oil and meal needs. This is why US values have rallied as much as they have in recent weeks. Argentine farmers have only marketed 7% of the soybean crop that is currently growing compared to nearly 60% in Brazil. 

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