AgriVisor Market Recap

Friday, April 09, 2021
The early portion of today’s session was spent getting final positions in place ahead of the monthly WASDE release. For the most part trade was expecting friendly numbers, giving futures their support. Ongoing worries over weather in the Brazilian Safrinha crop and reports of Chinese wheat buying from the US were also supportive. Soybeans were not as strong as the grains to start the day as the rolling of Chinese purchases from this year to next may increase, alleviating some concern over the tight US stocks to use situation. The USDA data was less supportive than expected, and futures reacted accordingly. 

Much of the domestic supply and demand data in the April WASDE report was as expected. Corn carryout was reduced 150 million bu (mbu) as feed usage increased 50 mbu, ethanol demand was raised 25 mbu, and exports were bumped up 75 mbu. This left ending stocks at a comfortable 1.35 billion bu (bbu) which was in line with trade estimates. Soybean ending stocks were left at 120 mbu as 30 mbu reductions to crush and residual demand were offset by an equal increase in exports. Domestic wheat carryout was raised 16 mbu to an 852 mbu total from lower feed usage estimates. 

Minimal changes were also made to the global balance sheets. World corn carryout is now projected at 283.9 million metric tons (mmt), down 3.8 mmt from March from lower US ending stocks and a smaller Argentine crop. The world soybean reserves are expected to increase 3.2 mmt to an 86.9 mmt total as the USDA unexpectedly increased the Brazilian crop estimate. The world wheat reserves are forecast to end at 295.5 mmt, down 5.7 mmt from the previous estimate due to elevated feeding, mainly in China. 

South American production was updated in the April release with one surprise. The USDA is now projecting a Brazilian soybean crop of 136 mmt, a 2 mmt increase from last month. This puts the USDA in line with other estimates, including the CONAB numbers. Brazil’s corn crop was left unchanged at 109 mmt. The Argentine soybean crop projection was left unchanged at 47.5 mmt, but the corn crop was lowered 500,000 mt from ongoing drought, putting it at an even 47 mmt. 

Beef and pork balance sheets were updated as well. Beef production for 2021 is now projected at 27.64 billion pounds, a 60-million-pound increase from March. Pork production is now estimated at 28.28 billion pounds, a 405-million-pound reduction from last month. Compared to last month the USDA is predicting lower cattle weights but heavier hogs. A slower hog slaughter pace is the reason for the smaller pork production figure. 

Trade is keeping a close eye on the spread between corn and Kansas City wheat. This spread has narrowed to even which is not very common. This gave trade the indication that additional wheat would find its way into US feed rations. Wheat has started to firm back up, taking support from concerns of losses in the US Plains, and lowering the chances of widespread corn displacement. The spread remains narrow though and will continue to be monitored to see if long-term corn use needs to be adjusted. 

Another region of the world where corn use is being closely monitored is in China. China’s minister of ag is currently predicting corn imports of 22 mmt for this marketing year. Given the fact China has already booked 23 mmt of US corn this projection is being heavily questioned. The difference in opinion may be from the increase in China’s use of alternative grains for both feed and now ethanol manufacturing. China has been substituting wheat into feed rations for several weeks but is now using rice as well. Rice is also being used for ethanol manufacturing which may temper the country’s immediate corn demand. 

Trade is also closely monitoring China’s soybean needs. Yesterday’s weekly sales report showed the rolling of 8 mbu of Chinese soybean bookings from this marketing year to next. This is really not unexpected given China’s declining soybean needs and the ability to import cheaper soybeans and product out of South America. The fact that China rolled these purchases forward is actually less bearish than if they were simple cancelled altogether. The fact the Us may have over-extended its old crop sales also tempered the potentially negative market reaction. 
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.