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AgriVisor Market Recap

 
Friday, April 23, 2021
It is not surprising that after a week of consistent gains and new contract highs we had profit taking develop ahead of the weekend. This is especially after futures moved into overbought territory on the charts. Improved US weather outlooks and expectations for an active week of planting next week added to market pressure. Corn was further pressured by reports Argentine vessels are headed to the Southeast US feed market. Losses were limited by a weaker US dollar and the ongoing need to ration old crop inventory, which were enough more than erase early losses. We also had several flash sales on new crop corn, with an unknown booking 336,000 metric tons, China taking 132,000 metric tons, and Guatemala buying 136,680 metric tons. 

China remains the world’s leading source of commodity demand, but we are seeing mixed signals on their usage. China is crushing fewer soybeans domestically and their overall demand was lowered by 2 million metric tons (mmt) in the last WASDE report. Crush margins are deep in the red which is limiting China’s processing. China is also importing a larger volume of meal, further reducing their need to crush domestic soybeans. China’s overall feed demand is being questioned as African Swine Fever cases remain high, despite reports the disease was under control. 

China is also expected to see a considerable build in soybean reserves in the next ninety days. Chinese soybean deliveries are expected to total 7 mmt in April and 10 mmt in both May and June. This may further pressure crush margins in China, especially if animal numbers do not continue to build. This may give China enough of a soybean reserve that late summer deliveries from the United States will not be needed. To see additional old crop sales rolled to new crop delivery would not be surprising given these circumstances. 

While China is a major corn and soybean importer, trade is closely monitoring the country’s unshipped purchases. China has taken delivery of most of its soybean bookings and currently has just 29.4 million bu (mbu) of unshipped purchases. Even with a portion of the unknown sales this total is just 55 mbu. It is doubtful we see much of these cancelled, but even if we do, it may not be that bearish given the tight ending stocks being forecast for the US. More interest is on the unshipped corn purchases, as China has a known unshipped book of 516.1 mbu. 

Trade is paying more attention to the topsoil moisture levels across the Corn Belt. Iowa is currently reporting a 29% deficient topsoil moisture level, and Minnesota is 22% short. The greatest deficiencies are in the Dakotas, with North Dakota 78% short and South Dakota 58% short. These conditions are now moving into the Eastern Corn Belt with Indiana being 18% short and Illinois 9% short on topsoil moisture. While these conditions can be favorable for planting, we will need to see rains develop soon to prevent possible yield implications. 

We are starting to see as much attention on the Brazilian corn crop quality as we are on yields. According to sources in Brazil the corn crop is currently rated 62% Good/Excellent. This compares to 90% G/E to start the month. As it does in the United States, the greatest concern with a low rating is what is may mean for test weight. It is not uncommon to see low test weights on corn under drought conditions. Not only does this mean more bushels will need to be consumed, but that buyers may be less willing to pay for the corn that is produced. In turn, the US could see elevated demand even after the Safrinha crop is harvested. 

The April cold storage report showed declining US meat supplies continues. The US beef supply on April 1st was reported at 483.6 million pounds, down 3.7% from last year. Pork supplies totaled 451.75 million pounds, the lowest amount since 2004. Pork belly inventory was 35.2 million pounds, the lowest supply since 2017. Overall meat supplies on April 1st were the lowest since 2014. 

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. 
 

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