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AgriVisor Market Recap

 
Thursday, December 17, 2020
Volatility increased in the market today as futures again made moves toward technical resistance, especially soybeans. Soybeans took additional support from reports of interest in shifting Brazilian soybean purchases to the United States. Higher than expected export sales totals and a sharp drop in the US dollar brought buyers to the commodities as well. Improved economic outlooks and the likelihood of a fiscal stimulus package also supported today’s trade. Advances were capped by increased chances of rainfall for much of Brazil. 

Export sales for the week ending December 10th were better than expected on both corn and soybeans. Corn sales for the week totaled 75.76 million bu (mbu) which were above estimates and nearly three-times the needed amount on a weekly basis to reach yearly projections. Soybean bookings were also above expectations and well above the 6 mbu needed with 33.9 mbu being sold. Wheat sales were at the top end of expectations and two-times the amount needed with 19.85 mbu. 

Sales of beef and pork were also favorable. Beef sales for 2020 totaled 10,100 metric tons, nearly twice what was sold the prior week. Pork sales for 2020 totaled 39,900 metric tons which were up 51% on the week. Sales for 2021 were light on beef at 4,500 metric tons but high on pork at 44,300 metric tons, with the bulk of the pork booked by China. 

News that some Chinese crushers are considering the shifting some of their soybean bookings from Brazil to the United States was supportive for the complex today. Sources claim Chinese crushers are looking at switching a few of their current bookings for February shipment to the United States on concerns over possibly loading delays. While China does have adequate soybean reserves at the present time any disruption in imports could quickly change inventories. 

Trade is also shifting of its attention on soybean demand from exports to the domestic side, especially following this week’s NOPA crush report. Given the NOPA crush total, we will likely see an official November soybean crush figure of 192 mbu. This would be 17 mbu larger than last year, even with higher soybean values that were supposed to ration soybean demand. 

Given the recent soybean crush rate we have seen, total crush for the first quarter will likely total 560 mbu. This would be 7% greater than a year ago. The USDA is currently projecting a 2.195 billion bu crush demand for the entire marketing year. Given the start we have seen, we will need demand for the rest of the marketing year to fall below a year ago to not surpass this projection, which seems unlikely. This means not only are soybean exports likely underestimated at the present time, but so is domestic usage, making the 175 mbu carryout estimate even less accurate. 

The primary cause of this elevated crush demand is the elevated demand we have seen for soy products in the global market. This is coming from the absence of Argentina who normally supplies the world with 50% to 60% of its soy oil and meal needs. Argentine farmers continue to withhold soybeans from the market, and the recent labor issues in the country have caused global stocks to tighten even further. This makes the United States the main source in the global market for these products. 

The analytical firm Informa was out today with their projections on 2021 plantings in the United States. Informa is predicting 2021 corn plantings of 91.16 million acre compared to 91.33 million last year. Soybean acres are expected to jump from 83.1 million in 2020 to 89.44 million in 2021. Wheat acres are also forecast to increase from last year’s 44.48 million to 45.1 million this year. A 1.2 million acre reduction to CRP acres and 6.5 million fewer prevent plant acres are behind the higher numbers. 

The global market is closely monitoring trade developments between the United States and Brazil. Early this week Brazil allowed its temporary 20% tariff suspension on ethanol imports to expire. The tariff has been renewed in the past, but Brazil feels it is no longer needed with ethanol manufacturing in the country on the rise. The need for government funding is also a reason for the termination. There are now concerns the United States may retaliate against Brazil and suspend some of its imports, mainly sugar. 

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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