AgriVisor Market Recap

Friday, December 11, 2020
Trade was relatively quiet early today as futures consolidated following the monthly WASDE report. While the data that was released was supportive for the market it was not bullish enough to encourage fresh buying interest in corn and soybeans. Wheat remained the leader of the market, as even though world production is rising, so is demand. Buying interest was also limited from ongoing concerns over the global economy as more shutdowns are announced due to Covid and a stimulus package is yet to be passed. We did see a flash sale this morning of 130,000 metric tons of soy meal to the Philippines which offered the soy complex support. 

Trade continued to sort through yesterday’s supply and demand report during today’s session. The majority of the data that was released was supportive for futures but given the amount of buying that has already taken place, there was not enough bullish take-aways to entice fresh activity. As expected, trade was quick to disagree with the numbers, mainly the soybean balance sheets. The USDA left soybean exports unchanged when an increase had been expected which would have cut ending stocks even more. Trade is now expecting to see this take place in the January release. 

Country movement of farm stored corn and soybeans remains minimal across the Corn Belt. As a result, some regions of the Corn Belt are seeing basis values appreciate in an effort to entice deliveries. This is more of a case in areas of feed demand and soybean processing. Ethanol manufacturers are not as willing to push bids right now as there is considerable uncertainty in the industry. This is a result of additional closures and travel restrictions from the rise in Covid-19 cases. 

When it comes to commodity movement, we are seeing more interest on US river systems. Drought in several regions of the US has lowered water levels on many rivers, including the Mississippi. This is starting to be a concern for commodity exporters as low water is restricting draft levels meaning barges cannot carry as much product. The concern is this could cause shortages at the US Gulf and possibly lead to purchase cancellations, especially on soybeans. 

Trade continues to pay close attention to the drought that is affecting the Southern US Plains. Drought is currently affecting 40% of the US winter wheat production and this may continue. Updated weather models indicate the current La Nina, which is a large reason for the current drought, may last through June. The wheat complex will monitor this and show more reaction as times progresses. 

We are starting to see increased export projections on US corn. Losses to the South American crop are being predicted and thoughts are this will elevate demand for US offers. Some projections put US corn exports at 2.9 billion bu this year which would decrease the stocks to use to 10%. This would be a seven year low on corn inventory and call for a slight increase in corn values. 

When it comes to US corn demand all interest is on China. China is expected to increase is corn buying in the near future to rebuild reserves. While China will play an important role in corn demand the United States has other buyers who are forecast to take a substantial volume as well. One of these is Mexico who is expected to import 620 million bu, along with Japan at 500 million bu. How much demand the US sees depends largely upon Argentina and if they finally start marketing their record corn inventory. 

Data from the Renewable Fuels Association is showing substantial losses to the ethanol industry from Covid-19. Sources from the RFA claim the lack of ethanol demand due to travel restrictions has cost the industry $3.8 billion. Given additional closures and disruptions it is likely this number will continue to increase. As a result, representatives of the renewable fuel industry are asking for government assistance in any economic stimulus package that is approved. 

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.