AgriVisor Market Recap

Wednesday, April 21, 2021
Futures started today’s session on the positive side and after a brief set-back, rallied as the day progressed. Futures are approaching overbought and this limited fresh buying initially. Ongoing weather concerns in South America, sluggish planting reports from across the US, and an unwillingness to liquidate long positions gave futures their support. We are also seeing more positioning for first notice day on the May contracts where light deliveries are expected, if any. 

Chinese officials have announced it will be shifting to feed rations in the country that will require even less corn. China is going to increase the volume of alternative feed grains to try and reduce costs for livestock feeders. In some cases this will reduce corn demand by 15% from current levels. By doing so China will increase its vegetable oil consumption to balance out energy needs in feed rations, giving the soy complex additional support. 

Another source of support for the world vegetable oil market is the increase in biodiesel production. We have seen a considerable increase in global biodiesel production at the same time oilseed production has decreased. While we will see oilseed production rebound, in the meantime it is putting a strain on the world vegetable oil supply and pushing values higher. 

The proposed shift in Chinese corn demand may not be that negative for overall corn demand. At the present time China imports roughly 175 million metric tons (mmt) of corn for feed. China is elevating its industrial use of corn though, mainly for ethanol, which is what has driven the corn market higher in the country. Even if we see a decrease in feed usage China will still need corn for other uses, and most of it will be imported. 

US weather remains a primary factor in price discovery. The most impact now is coming from the unseasonably cold temperatures across the Corn Belt. Overnight lows are forecast to drop into the freezing range in several areas for the next 5 to 7 days. While the US corn crop is not far enough along for this to cause major issues, the cold temperatures could easily slow germination and development. The big question is if these conditions will cause a shift in acres. 

Even though the Brazilian soybean harvest is winding down we continue to see a large range in production estimates. Some firms claim the crop is as small as 130 mmt, while others claim it will be closer to 135 mmt. While this seems like a small variance it will have a large impact on the global balance sheets as the United States continues to see its soybean reserves depleted. 

This is also taking place in the Brazilian corn production estimates. Some firms claim Brazil will produce no more than 95 mmt of corn this year given ongoing weather issues in the country. Others, including the USDA and the official Brazilian estimate are at 109 mmt of corn production. These are based more on acreage than yield though, as farmers in Brazil are pushing plantings as far as they can. There are also thoughts the 3rd corn crop in Brazil may be larger than thought and make up for any loss in the Safrinha crop. 

The global economy continues to rebound from the initial Covid 19 outbreak. Thoughts are this will continue, and as it does, support the commodity market. Economists predict the world commodity market will remain above 2020 for the rest of 2021, with Ag product values up 14% on the year. Several other products are also forecast to increase, including energy products, that will further support ag values. 

Ethanol manufacturing data for the week ending April 16th was released today mostly as expected numbers. Production for the week totaled 6.59 million barrels, an equal amount to the previous week. Ethanol stocks dipped 71,000 barrels on the week, making it the 9th consecutive week of reduced inventory. US ethanol stocks now stand at 20.4 million barrels compared to last year’s 27.7 million barrels. 

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.