AgriVisor Market Recap

Tuesday, April 20, 2021
Considerable advances were again posted in today’s session with weather being the primary driver. While planting is progressing in the United States, we are seeing renewed concerns with the South American crops, mainly Brazil corn. News that Brazil will remove import tariffs on corn and soy products added to market strength. This was enough to make several new contract highs, especially in the deferred months. Positioning ahead of first notice day on the May contracts was also supportive today, as was a flash sale of 114,300 metric tons of corn to Mexico. 

The Brazilian government announced today that it would be suspending its import tariff on corn through the end of the calendar year. This is being done to benefit Brazil’s corn processors and livestock feeders as domestic corn values in Brazil have rallied to record highs. Import tariffs will also be suspended on soy meal and oil to provide relief to feeders and biodiesel manufacturers.  

While there is little doubt that simple demand is a primary reason for this change in Brazilian import policy, there may be another reason. Much of the corn that will be imported by Brazil will come from Argentina and Paraguay. This will be used in Southern Brazilian feedlots. While Brazil could move corn down from the north to these regions, it will take much less freight to simply import it, and make it more affordable for buyers. 

Soybean consumption in the United States has shown no sign of slowing in spite of rationing attempts. According to data from Ag Resources, US soybean consumption for the marketing year currently totals 3.37 billion bu (bbu). This is a record pace and 35% greater than last year. It is also 11% more than the previous usage record. This demand shows no sign of slowing into next year either and will likely keep soybean reserves tight. 

When it comes to US soybean usage most attention has fallen on exports, but just as much should be placed on domestic crush. Cumulative crush through March currently totals 1.3 bbu. This leaves just 900 million bu (mbu) of needed crushings through the end of August to meet the USDA yearly projection of 2.2 bbu. Crush will only need to average 150 mbu per month which should be easy to achieve. The unknown in this scenario is if elevated wheat feeding and distiller grain availability will reduce meal demand. 

Trade is also debating corn ending stocks, with more of an emphasis on new crop balance sheets. There are models that indicate new crop corn carryout in the US will total 1 billion bu (bbu) at the current rate of old crop usage and potential for a smaller new crop production figure. The greatest unknown with new crop balance sheets is how much demand we may see if Brazil produces a smaller than expected crop and importers turn to the US for needs. This is already generating rationing in the corn complex. 

There are several other factors that are currently impacting potential corn balance sheets, both domestically and globally. One is the use of alternative grains to displace corn in feed rations, mainly wheat and sorghum. We have seen an increase in demand for both of these recently and no sign of them decreasing. Any decline in feed may simply be negated by elevated ethanol manufacturing as that use is increasing around the world. 

Trade seemed to pay little attention to the weekly planting report. Corn seeding came in at 8% and soybeans were at 3%. The corn number was right at the five-year average and soybeans were ahead of the normal rate. As always, trade believes planting is likely taking place at a faster rate than these numbers are indicating. The most concern will be if planting falls behind normal as that is when we tend to see elevated chances of acres being abandoned. While this is not likely to happen at this stage of the year, any threat of it will receive a market reaction. 

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