AgriVisor Market Recap

Monday, March 01, 2021
Commodities were firm to start the new month as light buying surfaced following the weak end to February. A more optimistic economic outlook also supported commodities, especially the passing of the $1.9 trillion Covid relief package over the weekend. Futures became mixed though as grains were pressured by a lack of fresh news while worries over weather conditions in Argentina supported soybeans. Eventually sellers surfaced in the soy complex as well and dropped those futures into negative territory as well. All contracts found pressure from a shift in global demand to South America as harvest ramps up in those countries, as do their lower cost offers to importers. 

Export inspections for the week ending February 25th were released with mixed numbers. Corn inspections totaled 64.4 million bu (mbu). This is up from recent weeks and above the 61.1 mbu that is needed on a weekly basis to reach the yearly USDA projection. Soybean inspections totaled 32.3 mbu which fell short of the 44.4 mbu that is needed per week. Wheat loadings also fell short of the needed volume with 10 mbu, less than half of the 24.8 mbu required. 

It is quite likely our current yearly corn and soybean export forecasts are too low. Corn sales for the marketing year already total 2.32 billion bu (bbu), 89% of the projected total of 2.6 bbu. Soybean bookings already total 2.2 bbu, 99% of the 2.25 bbu projection. This means for the remainder of the marketing year the US only needs to sell 11 mbu of corn and 1 mbu of soybeans per week to meet projected totals. 

While trade remains heavily focused on the Brazilian soybeans crop, we are starting to see more interest on the country’s corn output. Groups in Brazil have gradually increased their corn crop estimates with several now at 108 million metric tons (mmt). This is still just under the USDA estimate for 109 mmt, but well above the low end of estimates at 105 mmt. The difference in these opinions comes mostly from acreage as farmers in Brazil claim they will keep planters rolling past the optimum window to try and capture record corn values. 

Last week’s US ethanol production was one of the lowest seen in recent production as plants took down-time to conserve natural gas. This caused weekly production to decline by a record 28% from the week before. This decline is expected to be very short-lived however, as the rally we have seen in energy values is supporting processing margins. We are also approaching the summer driving season which analysts believe will elevate fuel demand, especially with a rebuilding economy. 

Hopes of a rebound in the US economy are supporting commodities on a whole. There are models that indicate the US economy will expand by 6% this year, much higher than what was earlier predicted. This comes from the positive response we have seen to Covid vaccines and how cases have been on a steady decline, easing restrictions that have been in place for months.

The average spring crop insurance values have now been set. These are calculated using the average new crop values for the month of February. This average came out at $4.58 for December corn and $11.57 for November soybeans. These are much better than we have seen in recent years which is not a surprise given the highs that have been established in those contracts in the month. These values will likely limit new crop selling interest, as even though they are below the spot market, they are above break-even for many producers. 

The US beef industry is giving trade mixed signals. According to February slaughter numbers, January beef processing numbers were down 5% from a year ago. At the same time, US beef production was only down 3% on the year. This is from higher cattle weights, with the monthly average being 20 pounds higher than in January 2020. 

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