AgriVisor Market Recap

Friday, April 16, 2021
Futures were on both sides of unchanged today with grains under pressure and soybeans showing strength. The grains were pressured by technical resistance and overbought indicators. Higher than expected production forecasts also weighed on the grains, including the Argentine corn crop that was increased 1 million metric ton. Grains losses were limited by building political tensions in the Black Sea and how they could bring more buyers to the US. Soybean values remained firm with support coming from the ongoing rally in the global oilseed market and the need to ration US inventory. 

Corn values have started to firm in China, which is supporting the global market. China has seen a considerable increase in wheat feeding recently and concerns grew that this was cutting into China’s milling wheat supply. As a result the Chinese government has established a floor price under wheat to keep feeding to lower quality inventory. This has pushed some feed demand back to corn and supported those values as well. Corn in China is now at a point where imports are likely to increase, and likely benefit the United States. 

Trade is also questioning China’s soy meal demand. China has been feeding a large volume of wheat in rations which has a higher protein content than corn and is cutting down on the need for supplements. Current data out of China indicates meal demand is down from 7% to 9% from elevated wheat feeding. We are also seeing questions arise on total animal numbers in China on feed, despite reports that the country’s hog herd is quickly rebuilding. 

Chinese hog numbers are again being reported and are higher than previously thought. According to the Chinese Bureau of Statistics, Chinese pork production in the 1st quarter was up 32% from the same period a year ago at 13.7 million tons. The group also put Chinese hog numbers at 416 million, 29.5% higher than a year ago, and up from the 406.5 million at the end of December. These numbers conflict with reports of ongoing hog losses in the country from ongoing African Swine Fever outbreaks. 

Another region of the globe that is seeing elevated corn demand is Brazil. Brazil is starting to shift away from sugar and more towards corn as a raw stock for ethanol manufacturing. Corn based ethanol production has increased 58% in Brazil and now has a 9% market share. Volatility in sugar values and supply is leading the shift towards corn. This has started to put a strain on Brazil’s corn balance sheets though and is a leading reason why Brazil has exhausted its corn supply in recent years. Even with elevated production Brazil will have to reduce exports to maintain adequate domestic reserves. 

A considerable amount of interest is being placed on what we will see for the planting pace in next Monday’s progress report. Last week’s report showed a 4% planting rate on corn, and even with less than ideal conditions this number is expected to increase. Farmers where conditions are dry are opting to move ahead with planting in anticipation of better conditions in the near future.  As long as corn planting does not fall behind average it will be supportive. 

Trade is also closely monitoring the US soybean planting pace. While the weekly numbers have not been released yet, a considerable amount of planting has been reported across the United States. We are also hearing reports of farmers going ahead with soybean planting ahead of corn which may be a reason for the lower than expected corn progress so far this year. This could easily give us a higher than expected soybean planting number to start the growing season. 

Retail meat values in the United States continue to rally. US beef values in March were 107% of a year ago at a record $6.48 per pound. Pork values were 108% of a year ago and poultry was 4% higher than last March. These costs are fueling inflation worries in the United States. 

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