AgriVisor Market Recap

Monday, November 30, 2020
Trade was on the negative side much of today’s session as weekend rains in South America and technical resistance limited buying interest. While parts of Brazil did receive weekend precipitation much more will be needed to prevent production loss. The fact that January soybeans have tested the $12.00 mark several times and not been able to clear it also limited fresh interest. Corn found support from demand as flash sales totaled 344,000 metric tons, but even this did not generate buying interest. A hesitation to establish new longs at month end limited potential in all contracts. 

Export rumors and reports were abundant in today’s trade. China announced it may increase its import allotment on corn by 5 million metric tons this year. This was somewhat expected by trade though and had little overall impact. Russia announced it may expand its wheat export quota this year though, and that was a surprise to the market. Trade is currently more focused on soybean demand though and waiting for an indication of China’s intentions over the next several weeks. 

Russian officials surprised the market today when they announced a possible wheat export quota of 17.5 million metric tons. This is above the 15 million metric ton quota that was expected to be in place through June. This decision was met with considerable opposition in Russia though, as the elevated exports will make it difficult for interior mills to remain profitable if wheat rallies. 

Drought continues to take place in the Southern US Plains. Right now this is having the most impact on wheat as the conditions of the crop in that region has deteriorated in recent weeks. Before long this will start to impact corn and soybeans as well, especially if it looks like the drought will last into spring. The longevity of this drought depends heavily upon the La Nina event as that is a typical result of the weather pattern. 

Another impact from this drought could be felt in the livestock markets. Last fall we saw cattle being brought into feed lots sooner than normal as pasture conditions deteriorated in the region and grazing was not an option. If conditions do not improve in the near future, cattle producers may start to rethink their herd sizes. This is especially the case if feed grain values remain elevated. 

Even with less than ideal weather, wheat production in the US is expected to increase this year. This is mainly from a larger winter wheat crop. Winter wheat yields were very good last year, and with current market values, this quickly becomes an economical crop to produce. It is not out of the question that we could see enough expansion to winter wheat production in fringe areas to make up for losses in southern regions. 

A story that is not getting much attention at this time is the spread of bird flu around the globe. Several countries have reported cases on bird flu in recent weeks, and many have culled poultry flocks as a result. Bird flu tends to be very hard to control and can devastate the poultry industry. The reason the market has overlooked this is the ability of the poultry industry to rebound quickly from localized losses. 

As we start to approach year end trade is getting a clearer picture of Chinese imports. While Chinese imports are up from a year ago, the chances of meeting the Phase 1 trade agreement guidelines is nearly impossible. So far China has booked a reported $17.5 billion of US goods. While an improvement on the year, this is just over half of the $33.4 billion that was agreed upon. This brings into question the 2nd stage import increase that China is predicting for next year. 

Export inspections for the week ending November 26th were mixed. Grain inspections were up on the week with 35 million bu on corn and 18.47 million bu for wheat. These numbers were below the volume needed to reach yearly projections from the USDA, however. Soybean inspections were down on the week at 74.8 million bu but were still over twice the volume needed on a weekly basis. 

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.