AgriVisor Market Recap

Monday, February 22, 2021
Corn, soybeans, and wheat started out the week’s trade firm but turned mixed by mid-session. The grains held firm as trade starts to add risk premium to those contracts while soybeans were pressured from the advancing harvest in South America. The absence of any Chinese purchases following their Lunar New Year celebration weighed on the market as well. Trade is starting to show more doubt over the Ag Outlook Forum data though which provided support though, and caused all contracts to finish the day in positive territory. 

A couple of last week’s Ag Outlook Forum numbers are still being sorted through by trade. One set of numbers is the acreage increases for corn and soybeans. The USDA predicts increases in plantings of 1.2 million acres on corn and 8.7 million acres of soybeans. While these are sizable builds, especially on soybeans, they may not be enough. Models indicate that not only will acres need to increase this much, but yields will need to be above trend to prevent stocks from being depleted, especially on soybeans. 

Trade is also revisiting the wheat numbers that were released. Ending stocks on wheat are forecast to tighten to 698 million bu (mbu) by the end of the 2021/22 marketing year. This compares to ending stocks of 1.03 billion bu at the end of the 2019/20 marketing year. While this is still an adequate surplus, carryout has been declining for the past few years. There are also thoughts that this year’s production is overestimated and ending stocks will be even tighter than the forum indicated. 

Doubts are being cast over the current US soybean import figure of 35 mbu. Many analysts feel this is too low and actual imports will be twice as high, and possibly a record, topping the previous record of 72 mbu. The US may see more meal imports though, as it is easier to import that product than whole soybeans which then need to be processed. This is especially the case for the Southeast feed market. This shift in demand could easily alter the current soybean import figure. 

One factor that trade continues to monitor on soybean balance sheets is Chinese demand. While China is still in the market for soybeans, they are looking at sourcing from the cheapest point possible. Right now, this would favor Brazil over the US. The fact that China is in need of soybeans and crush margins are quite favorable in the country may keep China buying from all sources however, including the US. 

There are changes being proposed to China’s Agriculture Industry that could have significant long-term effects on global trade. These have been released in what China is calling their Number One Document. In these, China is proposing the allowance of GMO grain production, possibly as soon as 2022. There are also changes being made to livestock which would include the building of more modern production facilities. These changes are being made to not only make China more independent in the global market, but also to help limit inflation. 

Export inspections for the week ending February 18th favored soybeans over the grains. Soybean inspections totaled 26.5 mbu, and while the volume continues to decline, it is still twice the amount needed to reach the yearly USDA projected total. Grain loadings were under the volume needed with 48.5 mbu on corn and 11.9 mbu on soybeans. 

A benefit for US grain exports this year has been a lack of competition from Ukraine. So far Ukraine has only exported 30.8 million metric tons of grains, a 20% reduction from last year. Of this 13.3 mmt has been wheat and 13 mmt has been corn. This decline in Ukraine exports is from a smaller grains crop, with total production estimated at 45.4 mmt compared to last year’s 57 mmt. 

The February cattle on feed report contained some unexpected numbers. As of February 1st the US had 12.1 million head of cattle on feed, 101% of a year ago, and was in line with estimates. Cattle placements in January were higher than expected at 2.02 million, 103% of the number from a year ago. Marketings were less than expected at 1.82 million head, just 94% of last January’s total. 

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