AgriVisor Market Recap

Monday, April 26, 2021
This week’s trade picked up right where last week ended, with sizable advances in corn, soybeans, and wheat. The most strength was in corn where limit advances were made in response to worsening weather conditions in South America for the Safrinha crop. There are now thoughts this could be no larger than 95 million metric tons. News that Argentina may impose tougher export taxes and limit their sales to help curb inflation in the country. Wheat took its support from global weather concerns and thoughts some acres may convert to soybeans this spring. Soybeans were also firm, but advances were not as great, even with a new crop flash sale of 120,000 metric tons to an unknown. 

Mixed production estimates are starting to be released on the Brazilian soybean crop. As harvest starts to wind down, we are seeing larger yields than initially reported. Even though Brazil continues to suffer from drought conditions, rains were received at just the right times to prevent considerable yield loss. The question now is if this has also taken place with Brazil’s Safrinha crop and production will come in at the top end of estimates. 

The most attention in Brazil is on the Safrinha crop. Weather in Brazil remains less than ideal for corn production and more analysts are lowering their crop estimates. In many cases these now range from 90 to 95 million metric tons (mmt), considerably less than the 109 mmt the USDA is using in global balance sheets. If the Brazilian crop is this small it will likely increase demand for corn from other sources in the global market, including the United States. This also makes the possibility of contracted sales being cancelled lower, especially to China. 

Soybean demand is starting to become mixed. While exports have slowed in recent weeks, domestic crush remains elevated. The USDA is currently using a 2.19 billion bu crush total, but all indications are total yearly demand will come in above that level. This is mainly from the need for soy oil in the global market which is generating favorable crush margins. These are strong enough that soybean processors are not concerned with paying current soybean values to secure coverage. 

The new crop price ratio between corn and soybeans is narrowing, which is seasonally not uncommon. The current ratio is 2.46:1, which is mostly neutral, but gives a slight edge to soybeans. Even so, it is not enough to sway acres away from corn. What may be more of a factor in any uncommitted acres shifting to soybeans would be weather and higher input costs on corn. The majority of acres are locked in however, and any changes from March intentions is likely going to be limited. 

The Argentine drought has impacted more than just crop production in the country. We are now hearing reports that waterways in Argentina are dropping from the lack of rainfall as well. The most interest is on the Parana River which is a main artery for Argentine exports. Vessels are now being forced to draft lower, meaning they can carry less product to export terminals, and slowed shipments. 

Export inspections for the week ending April 22nd favored corn over soybeans and wheat. Corn loadings for the week totaled 76.8 million bu (mbu), nearly 20 mbu above the needed amount per week to reach USDA projections. Soybean inspection fell 6 mbu short of the needed amount with just 8.6 mbu. Wheat inspections were also short of the needed amount with 20.7 mbu, 10 mbu under needs. China was listed as the top destination on grain inspections which was positive for those two commodities. 

The April Cattle on Feed report came out with mixed numbers. April 1st cattle on feed totaled 11.9 million head, up 5% from last year. This was at the low end of estimates, but still the 2nd highest number for this time since 1996. Placements in March totaled 2 million head which was again at the bottom of estimates, but still 28% more than a year ago. March marketings were as expected at 2.04 million head, 101% of last year. 

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