AgriVisor Market Recap

Thursday, April 01, 2021
Trade continued to react to yesterday’s USDA data in today’s session, with more of an emphasis on how the numbers will impact balance sheets going forward. This actually benefited corn more than soybeans and wheat as up to this point trade has not been concerned with corn stocks to use. Given current acreage estimates and demand, it is not out of the question corn reserves could drop to a rationing level. Soybeans are already at this point, and the higher than expected March 1st inventory number actually tempered the bullish sentiment for the complex. Today’s advances were also held in check by technical resistance and favorable weather around the globe. 

The main question in the market now is what yesterday’s acreage projections mean for production, mainly on corn and soybeans. Using historical differences between planted and harvested acreage and using trend yield estimates, the United States may produce crops of 14.87 billion bu (bbu) on corn and 4.37 bbu on soybeans. These would both be more than what was produced a year ago, but likely not enough to satisfy projected demand let alone allow a build in reserves, especially on soybeans. 

Export sales for the week ending March 25th were mostly as expected for corn, soybeans, and wheat, as all fell within trade guesses. Corn sales for the week totaled 31.39 million bu (mbu) on old crop and 2.36 mbu for new crop. Soybean sales were split with 3.89 mbu old crop and 4.81 mbu new crop. Wheat sales totaled 9.19 mbu old and 2.98 mbu new crop. While the United States has seen its old crop soybean demand slow, sales are still above the volume needed per week to reach yearly projections and indicate more rationing is needed. 

Export sales of beef and pork for the week were mixed. Beef sales came in at 18,700 metric tons, 1% below a week ago. Of the beef sales Japan and China accounted for 66% of the business. Pork sales were a marketing year high though at 61,000 metric tons, a 58% increase from the previous week. Half of these sales were to China, and Mexico was the buyer of 16,000 metric tons. 

We are now starting to see more interest on new crop export demand. While old crop sales of both corn and soybeans have remained active, new crop demand has been less than stellar. We are now seeing sellers such as Ukraine start to make corn sales for next fall, which will compete heavily with the US. The question now is if this is a long-lasting shift or just China spreading out their buying risk as they have been attempting in recent years. 

Going forward we will continue to see elevated interest in old crop stocks to use, especially on soybeans. The current stocks to use on US soybeans for this marketing year is 2.6% which is incredibly tight. This ratio is expected to remain tight through our next marketing year as well. Tight soybean stocks are not just taking place in the United States, but globally. The world stocks to use on soybeans is currently 9.8%, the tightest level since 1993/94. This makes is necessary for the world to continue producing larger soybean crops. 

Outside markets continue to be key factors in commodity trade. Of these, the US dollar is a primary one. The US dollar index increased 2.2% in March as the US economy showed signs of improving. This weighed on commodities as it generated ideas of inflation which can limit demand. A stronger dollar also tends to curb export demand. 

A reminder, the Chicago Board of Trade will be closed tomorrow in observance of Good Friday. When trade resumes next week nearly all interest will be on the upcoming WASDE report that will be released next Friday, April 9th. As it has been, the soybean balance sheets will dominate market attention when numbers are released. We will also see attention on South American production as several primate firms have started to raise their production forecasts on the Brazilian crops as harvest advances. 

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.