AgriVisor Market Recap

Tuesday, April 13, 2021
Futures posted a stereotypical “Turnaround Tuesday” today with a sizable recovery from yesterday’s losses. Thoughts that selling may have been overdone was a primary reason behind this, but so was a building of risk premium in the futures market. This came from weather concerns across the United States, although we are not seeing conditions that would impact production at this time. The simple fact planting is not moving forward as fast as trade expected is elevating buying interest, even though the current pace is still ahead of average. Advances were capped by a lack of fresh news and technical resistance. 

China has released its March import data. For the month China imported 7.77 million metric tons (mmt) of soybeans, an 82% increase from March 2020. For the calendar year China has imported 21.19 mmt of soybeans, 19% more than the same period a year ago. China’s corn imports were up a sizable 500% at 6.7 mmt. The country doubled its wheat imports on the year in March to a 2.9 mmt total. Meat imports were just over 1 mmt in March, the most China has imported in a month since January 2020. 

Questions continue to arise over Chinese corn demand estimates. US corn sales to China are already higher than what the country’s Ag Minister is predicting. This is similar to what happened with soybeans a year ago before China upped their import forecast. China is using a large volume of alternative feed grains in rations though, including wheat and rice. China is also making substitutes to ethanol stocks which may alter their long-term corn needs. 

The United States is starting to see a shift in its beef demand. China is starting to import more US beef, but this has been countered with declines to other typical buyers. The main ones are Japan who has bought 12% less beef and sales to Mexico are down 20%. Beef exporters are also monitoring South Korean beef demand as purchases by that buyer are rising as well. 

After a strong start to their program, Ukraine corn exports are starting to slow. Corn exports for the 1st half of the Ukraine marketing year already total 16 mmt. While this is down 25% from last year, it is 68% of the yearly forecasted sales. The question now is if this buying will subside as more corn becomes available from South America. Trade is also closely monitoring global demand to see if this lack of competition is beneficial for US sales. 

New crop soybean sales out of Argentina in recent weeks have also been very low. Even with elevated futures producers in the country are showing little interest in extending sales, and instead are holding the commodity as a hedge against a weakening Peso. This is not uncommon, but raises other questions surrounding the country’s potential soybean crop size. We are seeing heavy sales out of Brazil though, which are more than enough to supply world needs for the time being. 

We are seeing a difference in opinion when it comes to Argentine crops. The USDA left its forecast of the Argentine soybean crop at 47.5 mmt in the April balance sheets. Other analysts believe the crop is much smaller, with projections ranging from 42 to 43 mmt. We did see the USDA lower its Argentine corn crop estimate though, putting it at 47 mmt. This may still be too high, as early corn yields in Argentina are down 12% while the USDA has only lowered them by 4%. 

Commodity values continue to be influenced by the outside markets, mainly the global economy. Even with some countries again posting Covid restrictions, the global economy is improving, and thoughts are it will continue to do so into 2023. This has elevated commodity demand as world travel is increasing and consumers are getting back to more normal routines. There are indications that the world economy may become unstable in the future though as interest rates are likely to increase to cover Covid spending. 

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