AgriVisor Market Recap

Friday, January 22, 2021
Corn, soybeans, and wheat were all under pressure today as fund liquidation continued. This was enough to give us our first lower weekly trade in several weeks. There have been a number of reasons for this week’s set back, with improved weather in South America and a stronger US Dollar being two of the primary ones. Concerns over future commodity demand as Covid-19 cases continue to rise also weighed on trade this week. A story that developed today was renewed African Swine Fever cases in China and how this strain is different than the previous one. Lower values continue to attract buyers though, as China was in and bought 136,000 metric tons of soybeans and 123,000 metric tons of sorghum. 

Export sales for the week ending January 14th were released today with favorable numbers on corn and soybeans. Corn sales for the week were above trade expectations and the volume needed on a weekly basis with 56.6 million bu (mbu). Soybean bookings were also above trade guesses and weekly needs with 66.8 mbu old crop and another 30.5 mbu for new crop. Wheat sales were in the middle of trade estimates with 12.1 mbu, but still more the needed to reach the yearly goal. 

Beef and pork sales for the week were also on the high side. Beef sales totaled 24,500 metric tons with Japan, China, and South Korea the leading buyers. Pork sales were a sizable 45,200 metric tons with Mexico, China, and Canada taking the majority. Brazil is going to increase is pork exports which may temper those US sales in the near future. 

Ethanol manufacturing data for the week ending January 15th was also released today. Weekly manufacturing totaled 6.615 million barrels, a 28,000-barrel increase from the week before. This volume is still a 10% decrease from last year as poor margins continue to impact the industry. Ethanol stocks decreased 64,000 barrels during the week and now total 23.63 million compared to last year’s 24.03 million. 

A story in the market this week that has been garnering attention is the transit issues in Brazil and Argentina. Transit officials in both of these countries are indicating they will strike on February 1st if they do not receive higher wages. Ahead of this we have seen roadblocks set up to deter deliveries. This is becoming more of an issue as harvest begins and exporters have vessels to load. Export facilities still have enough product to load but this will quickly diminish without deliveries. 

These transit issues also come when Argentine farmers are starting to sell more inventory, mainly corn. The Argentine government recently issued export restrictions on corn, and while they were lifted, there are thoughts they may be reinstated if Argentina’s corn supply drops. The major concern is inflation in Argentina which hit 4% and was partially due to higher grain values. Argentine farmers are making heavy sales ahead of this to try and capture the higher values being paid by the global market. 

Weather remains a driving fundamental factor in today’s market. Conditions in South America are mixed with parts of Brazil receiving widespread rains in recent weeks while other regions remain dry. The same is true in Argentina where we have seen rainfall but not enough to make up for the prolonged dry spell the country has experienced. Crop scouts claim rains have been enough to stabilize crops though, and in some cases improve. There are now signs the current La Nina system will start to break down by the end of winter which will benefit weather as well. 

Analysts are taking current weather conditions and trying to predict what it may mean for this coming production season in the United States. So far, this winter has been warmer and drier than usual in the United States, but comparing to recent winters, this is not that uncommon. In fact several of the most recent winters have been just as mild as the current one. Looking at production the following year there is not a definitive pattern when it comes to yields or crop sizes, as growing season weather is much more of a factor. 

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