AgriVisor Market Recap

Friday, January 15, 2021
Future were under pressure much of today’s session as profits were taken ahead of the long weekend, as markets will be closed Monday in observance of Martin Luther King Jr Day. This profit taking was not just on commodities, but the equity and energy markets as well. A sharp rally in the US dollar on thoughts of more economic stimulus under a Biden administration was the primary cause of this. Wheat values managed to rebound late in the session though, taking support from thoughts the US will see elevated demand as more countries slow their exports. The market still needs to ration inventory however, as daily flash sales showed us 110,000 metric tons of corn was sold to Mexico for 2020/21 and an unknown booked 318,000 metric tons of corn for 2021/22. 

The main fundamental driving factor in the market remains demand. Soybean demand during the 1st quarter of the marketing year consumed 37.5% of the total soybean supply. Total soybean demand during the quarter was up 42.4% while the supply was only 4.4% greater than the previous year. Total soybean demand in the quarter outpaced supply by an incredible 857% compared to last year’s demand. There is no way the United States can see this rate of demand continue and have any soybeans left. 

The same is true on corn demand. Corn usage in the 1st quarter consumed 30% of the total corn supply. Corn demand was up 3.6% during the quarter while supply only increased 1%. Total 1st quarter corn demand was 380% higher than last year when compared to inventory. While not as tight as for soybeans, trade does not want the complex to be faced with a potential shortage and is rationing demand now. 

Even with corn rallying, the United States remains the cheapest source in the world market. US corn is currently being offered at the Gulf for $243.00 per metric ton. By comparison, corn from Argentina is offered at $249.00/mt. Ukraine corn is even higher at $265.00/mt. Freight is higher for US corn into the Asian market, but even so the lower cost of the corn itself negates much of the difference. 

Russian officials announced today that they would be implementing a higher export tax on future wheat purchases. Starting February 15th Russian authorities will be taxing wheat exports at a rate of $1.65 per bushel. This tariff will remain in place through the end of the Russian marketing year on June 30th. This will likely push importers to the United States as most other suppliers have little room for additional exports at this time. 

The December National Oilseed Processor Association soybean crush data was released today with record usage. Soybean crush for the month totaled 183.16 million bu, and while just under estimates, was the highest ever for the month of December. It was also the 2nd highest monthly total ever. By comparison, soybean crush in December 2020 totaled 174.8 mbu. For the calendar year NOPA members crushed a record 2.08 billion bu of soybeans, breaking the previous record of 1.97 bbu set in 2018. 

Basis values across the interior market are starting to show more volatility. Basis values have remained firm even though futures have rallied to multi-year highs. Processor margins have started to suffer though, and many are now backing off on their strong basis bids. Instead, many are now posting quick-ship bids. While these offers can be favorable, the windows of opportunity to take advantage of them are typically narrow. 

Recent rainfall in South America has proven beneficial, especially in Argentina. The condition of the Argentine corn crop improved 7 points this week, putting it at 19% Good/Excellent. While this is well below last year’s 55% G/E, it gives the indication the crop may be larger than currently projected. Crop scouts in Argentina have already increased the country’s wheat crop estimate, and thoughts are the same could happen in corn and soybeans if rains persist. 

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.