AgriVisor Market Recap

Monday, December 07, 2020
Corn, soybeans, and wheat all started out the week’s trade on the negative side as selling from last week carried through into today’s session. This was from a combination of ongoing favorable weather in South America and a lack of buying interest. Weekend rains were widespread through South America, and while beneficial, more precipitation will be needed. Cooler temperatures are also favorable for South America as they will limit moisture loss. Concerns over the state of the global economy and continued closures due to Covid-19 also weighed on today’s trade. Losses were held in check by an unwillingness to short the market ahead of Thursday’s WASDE release. 

Chinese oilseed demand remains a driving force behind the entire global market. China has turned from being a massive buyer of oilseeds to making cancellations as crush margins in the country are deep into negative territory and supplies of oilseeds are building. This includes a cancellation of 133,000 metric tons of US soybeans listed in last week’s sales report. China still has 9.9 million metric tons of US soybeans on the books and now there are thoughts a portion of these will be washed out of as well. A factor in this will be what happens in Argentina and if that country finally starts exporting is soybeans and products, both of which have been withheld from the market in recent months. 

Chinese corn buying is showing more promise, however. China has already booked 7.8 million metric tons of US corn which is above their initial 7.2-million-ton estimate. The United States also has 6.2 million tons in sales to unknown buyers, and thoughts are a large portion of this may be to China. If correct and sales are shifted it may fulfill much of the additional 5 million metric ton import quota that the Chinese government has proposed. 

Another commodity that is getting more interest in exports is sorghum. In the 1st 13 weeks of the marketing year the United States has exported 1.28 million metric tons of the grain. This is the highest export volume on sorghum since the 2014/15 marketing year and is the result of countries trying to avoid high-priced corn, mainly China. Chinese sorghum purchases are up 400% on the year and likely to keep growing as sorghum is not subject to import restrictions such as GMO testing. 

The United States is also seeing elevated demand for its meat products, mainly beef and pork. The United States currently has 2 million metric tons of pork sales on the books which is record large. The majority of this is to China who is accountable for 36.4% of sales. US beef sales are also record large at this time with 917,000 metric tons being booked. 

For several weeks we have been monitoring the La Nina weather event and what it is doing to global commodity production. The event is the leading cause of the drought that is taking place in Argentina and Southern Brazil which is not uncommon. Drought conditions in the Southern US are also a result of a La Nina. Other regions of the world suffer from excessive rainfall in a La Nina though, mainly Australia and Asia. There are thoughts this could impact the Australian winter wheat crop, not only on production, but possibly on quality as well. 

Another area of the United States being monitored right now is Colorado and Kansas where extreme drought is being reported. We are also seeing drought conditions build in the Dakotas and Minnesota as well as a wide swath of central Illinois. The most interest is falling on western Iowa though as the drought that impacted production last year continues. The question now is if these conditions will be remedied prior to the spring planting season and if they will influence new crop acres. 

Export inspections for the week ending December 3rd were released today with mixed numbers. Corn inspections totaled 28.9 million bu, half of the amount needed on a weekly basis to reach yearly expectations. Wheat inspections for the week were right at the needed amount with 19.5 million bu. Soybean loadings were well above needs though at 84.4 million bu. 

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.