AgriVisor Market Recap

Friday, March 05, 2021
Corn, soybeans, and wheat were all firmer to start today’s session as pre-weekend buying developed. Soybeans were the leader of the market with much of its strength coming from South American weather, mainly in Argentina. Thoughts we will see reductions to ending stocks in next week’s balance sheet updates were also supportive. We continue to see inflationary buying in the outside markets though which capped today’s advances, as did technical resistance. 

Drought conditions persist in much of Argentina and they are taking their toll on crop conditions. The Argentine soybean crop is now only 10% Good/Excellent, down 5% from last week. The soybean crop is also 20% Poor/Very Poor, up 5% on the week. This does leave the bulk of the crop rated as normal though and is why analysts have been hesitant to reduce their production estimates at this time. The Argentine corn crop holds a 25% Good/Excellent rating, down from 30% last week, and well below the 50% from last year. 

We continue to hear of excessive rainfall in Brazil and the delays it is causing to both soybean harvest and corn planting. While these are main factors, there are other complications being caused by the rainfall. For one, soybeans are not drying in the field which may cause storage issues and quality loss in months to come. We are also hearing some reports that corn may need to be reseeded due to localized flooding. Persistent rainfall is also causing delays to vessel loading at some terminals. 

Basis values across the interior US market are firming, mainly on corn. Not only is domestic corn elevated at a time when producers are not making sales, but we are starting to see more demand in the export market. Exports are trying to encourage commercial movement, and at the same time, entice more farmer selling as well. This is creating favorable windows of opportunity to make cash sales. 

According to data from the news group Reuters, the US share of the world commodity market continues to shrink. The US will provide the world with 25% of its corn, soybeans, and wheat needs this year compared to over 50% just 30 years ago. The biggest decline has been to soybeans as the United States used to supply the world with 95% of its needs. Elevated production in other countries is the primary reason for the declining US market share, but years with low production also pushed buyers to other sources where they remained. 

Analysts are closely monitoring Chinese buying habits. China has a large volume of corn and soybeans booked for import, but in recent weeks it appears as though their interest in extending coverage has lessened. The question now is if Chinese buyers have adequate coverage or are waiting to see how much of an impact renewed cases of African Swine Fever has on demand. The longer China remains absent, the more likely this will pressure futures. 

The recent rally in energy values has been met with mixed responses. Consumers are feeling negative effects of the rally as it heightens their costs and elevates the impact they are feeling from inflation. The US renewable fuel industry has benefited from the rally though and brought profitability back to many plants. Not only is this for ethanol but for biodiesel as well. Thoughts are these margins will get even better as more travel takes place this summer. 

Elevated commodity values continue to impact world food values. The world price food index rose in February making it the ninth consecutive month of higher values. World food values are now at their highest levels since July 2014. This is mainly from elevated vegetable oils which were up 6.2% in February and are at their highest value since April 2012. Along with higher energy costs, these food values are adding to global inflation. 

RISK DISCLAIMER: The risk of loss in trading commodity futures and options is substantial. Before trading, you should carefully consider your financial position to determine if futures trading is appropriate. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results. The information contained in this report is believed to be reliable but is not guaranteed to accuracy or completeness by AgriVisor, LLC. This report is provided for informational purposes only and is not furnished for the purpose of, nor intended to be relied upon for specific trading in commodities herein named.  This is not independent research and is provided as a service.  As such, this is considered a solicitation.