AgriVisor Market Recap

Wednesday, December 16, 2020
Futures started on the positive side today but became mixed by mid-session. Soybeans were the early leader of the market, taking support from demand and South American weather. While rains have fallen in South America their benefit is being questioned. Soybeans were halted by overhead resistance at recent contract highs. Grains did not find as much support as the stocks to use on those commodities is not as worrisome as it is on soybeans. 

The United States continues to see record demand for its corn, soybeans, and wheat in the global market. Current cumulative corn sales stand at 470 million bu (mbu) which is 185 mbu ahead of last years pace. Soybean bookings currently total 1.18 billion bu, a large 493 mbu more than a year ago. Wheat sales are also up on the year by 7 mbu with a 505 mbu total. The question is how long these demand levels will hold, especially on soybeans, with the South American harvest nearing. 

Given this large start to the export program, sales for the remainder of the marketing year do not have to be sizable to meet USDA projections. At the present time the United States only needs to sell 29 mbu of corn and 7 mbu of soybeans per week to reach their projections. Wheat sales only need to average 11 mbu per week. The United States needs to see higher export loadings though, especially on corn. Corn loadings need to average 58 mbu per week for the rest of the marketing year which is about twice what we have seen in recent weeks. Soybean loadings need to average 28 mbu and wheat needs to average 20 mbu, both of which will be easier to meet. 

Most of the attention on the South American crops is on Brazil but we are now seeing more attention on Argentina. Argentina continues to avoid making sales in protest of high tax rates and uncertainty over this year’s production. Only 10% of this year’s soybean crop in Argentina has been sold compared to the normal 20% at this time. Argentine farmers also have a large volume of old crop bushels they have not marketed. The question now is when these sales may start as storage space will soon become a concern. 

Another unknown in Argentina is on the country’s corn crop. Old crop carryout in Argentina is only expected to be half of what it was just four years ago this year at 2.9 million metric tons (mmt). This does not leave the country much of a cushion going into the new crop year where production is also being debated. The USDA is projecting an Argentine corn crop of 49 mmt and exports of 34 mmt for this coming marketing year. Sources in Argentina believe both will be smaller and exports may only total 27 mmt. This would open the door for more US trade into the global market. 

An announcement from the Brazilian government could change the face of agriculture in that country for years to come. Brazil has voted to allow the foreign ownership of land in that country, including farmland. This was met with immediate interest from investors, including China, who already buys a large volume of Brazil’s commodities. China can now produce its own crops in Brazil with an emphasis likely to fall on soybeans. Foreign land buying is expected to start in early 2021. 

As expected, ethanol manufacturing for the week ending December 11th was down from the previous week. A reported 6.7 million barrels of ethanol were manufactured during the week, 238,000 fewer than the week before. Ethanol stocks still increased by 867,000 barrels though and now stand at 22.95 million compared to 21.8 million a year ago. This is the 7th consecutive week of building ethanol reserves and puts them at the greatest volume since last May. 

Official ethanol production in Brazil has also been updated by CONAB. CONAB estimates this year’s Brazilian ethanol manufacturing at 32.9 billion liters, up from their previous estimate for 30.9 billion liters. This is still a sizable reduction from last year’s ethanol production of 35.7 billion liters. Even with this decline, the Brazilian government has not extended its tariff-free import quota, which is negative for the US ethanol industry. 

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