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AgriVisor Market Recap

 
Thursday, December 03, 2020
Trade reversed its recent trend today with soybeans rebounding and grains mixed. Nearly all of this was technical as fundamentals have not changed. South America is still forecast to receive beneficial rains in the next several days to favor crop development. We are still seeing good demand for US commodities, although soybean demand has dropped considerably from its recent pace. The lack of confirmation on Chinese buying rumors limited market potential. 

Export sales for the week ending November 26th favored the grains over soybeans. Corn sales were at the top end of estimates and above the needed volume on a weekly basis at 54 million bu. The same was true on wheat sales at 16.4 million bu. Soybean sales on the week were poor at just 14.95 million bu, and while still twice the needed amount per week, were at the very bottom of trade expectations. We did see a Chinese cancellation on 132,000 metric tons of soybeans, verifying recent rumors. 

Beef and pork sales were also mixed on the week. Beef sales totaled 13,700 metric tons for 2020 and 3,200 metric tons for 2021. While up from last week, these are down from the four-week average. Pork sales rebounded last week for 2020 at 31,300 metric tons, a 66% increase on the week. Sales for 2021 were also up at 4,200 metric tons. 

One of the most debated sources of commodity demand in the United States right now is ethanol. Corn use for ethanol in the month of October totaled 437 million bu and only trailed last year by 6 million bu. Economists expect ethanol demand on corn to hold steady at the current rate for the next few months. We only need corn grind to average 420 million bu per month to meet the USDA yearly estimate, so even if usage slows it is not impossible to reach the 5.05 billion bu projection. 

These projections are being clouded by the current poor ethanol margins many plants are currently reporting. It is not uncommon to hear reports of plants operating at 5 to 10 cent losses per gallon on ethanol that is produced. An overall decline in energy product demand is the primary cause of these poor margins. Several plants are reporting very good margins on their distiller grains though, which is actually keeping them profitable. 

Deferred US and Brazilian soybean values have started to become equal in the global market. This starts in February which is when new crop soybeans out of Brazil will become available. This is not that much of a market factor as many buyers already have large bookings with Brazil and the spot price is irrelevant. One thing the equilibrium may prevent is heavy shifting of US purchases to Brazil for origination. 

We are starting to see a difference in opinion on the Brazilian corn production. It is thought dry conditions have lowered the potential on first crop production by 3 to 5 million metric tons. The Safrinha crop is expected to be larger than initially thought though as rains are expected to develop before that crop is seeded. It is not out of the question that these improved conditions could give us a larger crop than currently being predicted. 

Opinions on total production in Brazil have a wide variance this year. On soybeans we have seen analysts lower production to 130 million metric tons in recent sessions while other have bumped the crop up to 133 million metric tons. The same trend is developing on corn with production ranging from 104 million metric tons to over 109 million metric tons. The reason for the increase in some estimates is improved weather, but also from thoughts acres are expanding as well. 

Stats Canada was out with the country’s revised production estimates today. For canola the country is projecting a crop of 18.7 million metric tons compared to last year’s 19.6 million. Corn production in the country is nearly unchanged at 13.6 million metric tons. Canada raised its wheat crop estimate to 35.18 million metric tons from last year’s 32.7 million, applying additional pressure to that complex today. 

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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