AgriVisor Market Recap

Tuesday, April 06, 2021
Trade was once again mixed today with soybeans and wheat firmer and corn on both sides of unchanged. The need for rationing continues to support old crop soybeans while a push for plantings benefitted new crop values. Soybean advances were tempered by large crop prospects out of South America. Wheat futures found support in a lower crop rating than a year ago, but this was negated by a large global production estimate. Prospects for a larger than predicted corn crop acreage number weighed on that grain today, as did ongoing competition in the global market from alternative feed grains. 

The initial crop progress and condition report for the year was released with few surprises. The US corn planting pace is 2% which was the same as a year ago and equal to the five-year average. The winter wheat crop rating came out at 53% Good to Excellent compared to an initial rating of 62% G/E a year ago. This wheat rating is fully expected to improve as weather conditions are becoming more favorable. This is also expected to give us a rapid corn planting pace, and elevates the likelihood of larger acreage. 

We are starting to take a stronger look at potential US yields and overall production possibilities. The most interest is falling on corn yield as some analysts believe it will fall below trend given the likelihood of elevated plantings on less than ideal acres. The United States is still likely to produce an overall larger corn crop though as acres will be up considerably from a year ago. According to the USDA trend yield on corn is 179.5 bushels per acre this year, but there are thoughts final yield will be at least 2 bushels under this. 

We are seeing more optimism when it comes to the potential US soybean yield. The USDA has projected a trend soybean yield of 50.8 bushels per acre. It is thought soybeans will be planted on higher quality land which will add to yield potential. One difference between corn and soybeans is that we cannot afford to have a soybean yield below trend, nor lose any acres from planting intentions given current stocks to use numbers and the need for elevated production. 

We are also seeing adjustments made to the South American crops with an upward opinion. After more favorable weather patterns developed forecasters started to raise their crop estimates, mainly in Brazil. We are now seeing the soybean crop estimated near 134 million metric tons (mmt) and the corn crop near 108 mmt. The corn crop will likely increase as we see higher plantings with the improved weather. Argentine crops have also benefited from current weather and thoughts are both corn and soybeans will total close to 46 mmt. As long as the La Nina continues to weaken, we will see these numbers stabilize and possibly continue to increase. 

These higher crops have been verified by lower asking prices on South American corn and soybeans. These have declined in recent weeks and are now well below the United States’ offers. Not only has the taken much of the demand off US offers, especially on soybeans, but the spread is now to a point where US imports are possible. The US/South American spread is also at a point where we are more likely to see cancellations develop. 

The United States is already seeing pressure from Ukraine in the global market on new crop corn, and this may increase over the next several weeks. Grain stocks at the end of the Ukraine marketing year in June are expected to be 17% higher than a year ago. This is mostly from increased corn reserves that are 51% larger than last year as yields recovered following drought losses. As a result, Ukraine will likely resume its active export program. 

Trade is starting to again focus on US weather. While most of this is on conditions that will impact the planting season, livestock producers are also closely monitoring weather patterns, especially for the US Plains. Drought impacted pastures in this region a year ago causing an elevated need for feed usage. Hopes are rains will benefit the pastures and less feeding will be needed. This adds uncertainty to the feed usage numbers being predicted by the USDA. 

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.