AgriVisor Market Recap

Monday, April 05, 2021
Trade was mostly firm to start the week, especially on soybeans and wheat. Corn was mixed to start the week as concerns over possible export cancellations weighed on nearby contracts while the deferred months were supported by the need for new crop acres. Reports that China is now using rice as an alternative to high-priced corn also weighed on the nearby contracts. An overall need to ration soybeans provided that complex with much of its support, although renewed worries over drier conditions in South America were also beneficial. Sparse fresh news and technical resistance capped all gains. 

February corn usage for ethanol has been released and it was not surprising that consumption was down. A total of 332.8 million bu (mbu) of corn was used in ethanol manufacturing in February, a 20% decline from January and 23% less than in February of 2020. As expected, Distiller Grain production was down as well with monthly output at 1.4 million tons versus 1.75 million tons in January. These lower numbers were the result of several plants across the US taking down time due to the cold snap that strained heating needs. 

The official soybean crush for the month of February was also released, and as with corn, was a lower number. February crush totaled 164.3 mbu which was at the low end of trade expectations and the lowest monthly total since September 2019. Year to date crush is still up 3.7% from a year ago at 1.1 billion bu (bbu). This keep the US on track to meet its yearly projected crush total of 2.2 bbu. 

Export inspections for the week ending April 1st were mixed. Corn loadings totaled 75.2 mbu making it the only main commodity to top its needed amount to reach USDA projections. Soybean inspections fell short of the needed amount with 10.9 mbu as did wheat with 21.8 mbu. Trade is going to closely monitor the soybean loading volume for the next several weeks for any indication that sales may be cancelled. 

A concern that keeps coming up in the export market is the large volume of unshipped sales the United States to China. At the present time China has 590 mbu of unshipped corn bookings with the US. China also has 370 mbu of unshipped soybean purchases, but this could be as high as 740 mbu given a large volume of sales in the unknown category. The concern is that China will cancel a portion of these as more inventory becomes available from other sources. While this is possible, China has these sales booked at a favorable level and an overall need for imports that should limit cancellations. 

Trade continues to try and determine how the African Swine Fever outbreak in China is going to impact the country’s feed grain demand. Chinese officials claim total hog losses in China are down roughly 15% from the beginning of the calendar year. We are now hearing that upwards of 25% of the country’s northern sow herd has been lost from the virus. Not only will this limit immediate feed demand, but likely that for the next several months, if not longer. China continues to add in alternative feed grains to rations, including rice, to likely further reduce the country’s corn needs. At the same time, this will likely keep China’s pork imports at record levels. 

The United States is seeing elevated political tensions that may disrupt future trade. This is mainly with China where the US continues to stand firm on current trade regulations and sanctions. This may not be the case though as China is in the same political situation with Australia and is still booking wheat from them. This will likely continue until China feels more comfortable with its domestic reserves. 

Even though soybean harvest is in its later stages in Brazil weather conditions are still impacting futures. There are thoughts that ongoing dry conditions will reduce the output of later planted fields. The most concern right now is on the Safrinha crop however, with some firms lowering their crop estimates. Others have opted to increase production though as they feel planted acres are being underestimated. These is little doubt this will be an issue until the crop is fully harvested which is not for another several months. 

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.