AgriVisor Market Recap

Wednesday, January 20, 2021
Long-liquidation and profit taking by managed money traders continued to weigh on futures in today’s session. Larger South American crop forecasts added to market pressure as did a firming of the outside markets, mainly the US Dollar. Reports that the incoming Biden Administration will not ease up on global trade restrictions, including those on China, were also negative for the commodity complex. Losses were held in check by the ongoing need for rationing of US corn and soybeans. 

Official data out of China show a sizable increase in US soybean imports in the 2020 calendar year. For the year China imported 25.9 million metric tons (mmt) of US soybeans, a 52.8% increase from 2019. The initial reaction to this number is that it was to meet Phase 1 obligations, but the simple need for soybeans was more of a factor. Even with this increase, China did fall short of its Phase 1 goal. Total Chinese soybean imports for 2020 were a record 100.3 mmt, a number that will likely increase in 2021. 

We continue to see uncertainty in the global corn market surrounding Ukraine export potential. Livestock producers in Ukraine have asked the government to limit corn exports to maintain adequate reserves for their needs. Feeders in Ukraine claim they need 7.5 mmt of corn to satisfy their needs alone. As a result, they are asking the government to hold exports at 22 mmt so there is enough for all consumers. 

Changes to the Ukraine corn export policy is not the only one taking place in the global market. Argentine officials have indicated they may re-instate their export licenses that were used to limit sales. As with Ukraine the reasoning for this is to limit corn sales and provide food security. Both countries are facing heavy competition to these decisions though, mainly from groups who want to be able to sell corn for higher market values. 

We are starting to see alterations to South American crops following recent rains in those countries. The first of these was the Argentine wheat crop which was not affected by drought as much as believed. We are now seeing the same on the Brazilian corn outlook with some firms claiming production could be as large as 113.5 mmt, much larger than what other firms are predicting, including the USDA. The range of estimates on the Brazilian corn crop is quite wide, ranging from this figure on the top to 102 mmt on the low end. 

Adding to this uncertainty was the release of projections the Brazilian firm Datagro today. Datagro predicts a Brazilian soybean crop of 135.6 mmt which is much larger than most other firms. Datagro is using elevated plantings, improved farming practices, and recent beneficial rainfall for their higher soybean crop estimate. The group also predicted a corn crop of 110 mmt which was less than their previous prediction. 

The South American harvest is starting to gain momentum. Soybean harvest in Brazil is off to a slow start though, with less than 1% of the crop collected compared to last year’s 2%. The initial corn harvest in Brazil is now a reported 3.4% harvested, well ahead of last year’s 1%. The question now is how much double cropping we will see in Brazil, as high Safrinha plantings and improved weather conditions are primary reasons for the elevated corn production figures we have seen. 

Trade is closely monitoring any changes that may come to global trade policy with the shift to a Biden Administration this week. Hopes are we will see an easing of restrictions, mainly on China. This may not happen though as China remains a primary buying of US commodities, even with current restrictions in place. Other countries hoping trade relations improve are Mexico and Canada as well as the European Union. 

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