AgriVisor Market Recap

Wednesday, March 31, 2021
The early portion of today’s session was spent getting final positions in place ahead of the USDA reports, as well as month and quarter end. We have witnessed elevated liquidation ahead of this, so to see futures rebound was not a surprise. Commodities took additional support from indications we may see additional Covid related stimulus packages and the improvement we have seen to the US economy. Weather was mixed today as even though conditions are mostly favorable around the globe, we are seeing some worries over drier conditions in parts of South America. The data from the USDA proved to be more bullish than expected, causing both corn and soybeans to post limit advances. Wheat tried to follow the other markets but news for that grain was not as supportive. 

Trade was surprised by the USDA’s acreage estimates, as for corn and soybeans the totals were well below average expectations. Planted acres for this coming production year are predicted at 91.1 million on corn, 87.6 million on soybeans, and 46.4 million on wheat. These acreage estimates compare to the 90.8 million on corn, 83.1 million soybean, and 44.4 million wheat acres that were planted a year ago. The most attention remains on soybeans, as even if the United States has a trend yield of 50.8 bushels per acre it is unlikely to produce a crop large enough to satisfy demand and allow for a build in reserves using today’s acreage estimate. 

Quarterly stocks numbers were closer to trade estimates. As of March 1st the United States reportedly had 7.7 billion bu (bbu) of corn, 1.56 bbu of soybeans, and 1.31 bbu of wheat in inventory. These totals were all down from March of 2020 when inventory totaled 7.95 bbu on corn, 2.25 bbu of soybeans, and 1.41 bbu of wheat. There is little surprise that the most attention has fallen on soybeans to see if stocks will remain adequate through the end of the marketing year. 

Now that all of this data has been released, trade has started to incorporate them into current balance sheets. Not only is this for potential old crop ending stocks, but new crop production and carryout as well. Our next official view of these will come in the April WASDE report, but trade is showing more interest in the May release, as that will give us our first official look at new crop balance sheet projections.
Ethanol manufacturing data for the week ending March 26th was released today and indicated a production rebound of 4.7% from last week. Production totaled 6.76 million barrels of ethanol, a 301,000-barrel increase from the week before. Ethanol stocks also declined following the previous week’s unexpected build. Ethanol stocks were down 695,000 barrels on the week to total 21.1 million, considerably less than last year’s 25.7 million barrels. We need to remember that a year ago the industry was being impacted by Covid closures which led to reduced demand and plant closures. 

Once again, Ukraine is becoming a player in the world grain market. Current Ukraine grain sales trail last year by 23% as the country suffered from a severe drought during the growing season. Production is expected to rebound this year, and the country is again making sales and competing with the US. The most noted of these has been corn to China for next fall delivery. This is already generating ideas that the US may lose business into not only China buy other buyers as well. 

Another country we are closely monitoring for demand is Mexico. Drought has impacted Mexico this year, cutting grain production as it did. Mexico is now importing large volume of grain from the US to cover needs, mainly corn. We are also seeing Mexico import beef and pork in larger volumes. This need for commodities is being verified by Mexico stating it will continue to import GMO grain as long as it is for feed needs. 

While it is not expected to be long-lasting, inflation is becoming more of a market in the factor. The Fed announced that inflation is expected as the US economy recovers but there are measures in place to combat it. The greatest concern on the economy is on the rising cases of Covid around the world and how some countries have reinstated restrictions. There are no indications these will happen in the United States, but that could easily change and again cause commodity demand to falter, primarily for renewable fuels. 

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.