AgriVisor Market Recap

Thursday, March 04, 2021
Futures were mixed to start today’s session but turned positive as the day progressed. The most support was in the soy complex with support coming from conflicting weather reports in South America, a rally in the global oilseed market, and ongoing large old crop export sales. A sharp rally in the crude oil market on news of expected OPEC production cuts also supported the oilseed markets. The grains were followers of the soy complex, and while did trade positive, fundamentals were less supportive. Ongoing strength in the US dollar limited today’s advances as did technical resistance and overall inflationary concerns. 

Export sales for the week ending February 25th were mixed. Soybean sales were again well over the 1.5 million bu (mbu) needed on a weekly basis with 12.3 mbu of old crop sales. This elevates the need to ration old crop inventory. New crop soybean sales were also high at 7.3 mbu. Corn sales for the week came in well under both trade estimates and the volume needed per week to reach yearly projections with 4.6 mbu on old crop and 1.5 mbu new crop. Wheat bookings were also on the light side with 8.1 mbu old crop and 900,000 bu of new crop. 

Beef and pork exports for the week jumped considerably from the previous week as buyers returned from their holiday breaks. Beef sales for the week reached 22,600 metric tons, almost three-times the volume sold the prior week. The primary buyers were South Korea and China. Weekly pork sales were double the week before with 59,600 metric tons. Half of this volume was booked by China and a quarter was purchased by Mexico. 

In addition to low export sales, grains were also pressured by elevated production estimates for Ukraine. Ukraine has experienced near perfect growing conditions on its winter crops which may push production to a record 75 mmt according to crop scouts. This would be over 10 mmt more than the country produced in 2020. Of this increase, 5 mmt is projected on wheat and 4 mmt on corn. Ukraine exports have risen as well, with sales expected to top last year by upwards of 8 mmt. 

Mild winter weather has also been a great benefit for the Russian grain crops. After getting off to a poor start weather has greatly improved in Russia and removed stress on developing crops. Farmers in Russia have also increased their winter plantings, mainly on wheat. Russia is still forecast to produce a smaller wheat crop than last year, but the gap is narrowing. Russian wheat export forecasts are rising as a result. 

The Brazilian soybean harvest is starting to advance after a slow start, and as it does, so do soybean exports. Brazil exported an estimated 5 million metric tons (mmt) of soybeans in February. While this was under initial expectations, it was still a sizable volume for the month. In March Brazil is anticipated to ship out a large 15 mmt. The combination of these two is 128% of the volume of soybeans Brazil exported to start the previous export program. 

The question now is how long Brazil may remain a soybean exporter. It is currently believed Brazil will remain the world’s leading soybean supplier through June. Last year Brazilian officials exported long after it was thought they would run out, but in doing so, exhausted its soybean reserves. While Brazil may be more reserved in its exports this year, it will likely depend upon what value it can make imports for if needed. 

Trade is also monitoring Brazil’s corn export program. According to Brazilian figures the country exported more corn than the USDA predicted for the 2020/21 marketing year. There are now thoughts Brazil had just 4.2 mmt of corn inventory prior to harvest, which is a minimal 15-day supply. This will remove Brazil from the corn export market until the Safrinha crop is ready which will be in August. This opens the door for elevated US exports, but also for Argentine sales, which is currently being offered at a sizable discount to US corn. 

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