AgriVisor Market Recap

Friday, April 03, 2020
Corn, soybeans, and wheat all started today’s session high, but struggled to gain upside momentum as fresh buying did not surface. This was most surprising in corn as a large flash sale of 567,000 metric tons to China was announced. While positive, this failed to ease worries over the decline that is taking place to domestic usage in the ethanol sector. The fact the 504,000 mt of this corn was for 2020/21 shipment also tempered market reaction. The exact difference is taking place in soybeans, where strong crush numbers are failing to compensate for sluggish exports, even though weekly sales are enough to satisfy yearly projections. Wheat was the leader today, taking support from news Russia will finalize its export quota and new Egypt is going to double its strategic reserve to a six-month supply, opening the door for additional US exports. 

The greatest hindrance in the corn complex right now remains ethanol. Gasoline demand in the United States has fallen 25% from travel restrictions, which in turn is cutting into ethanol demand. Thoughts are from now until the end of May the US will lose 740 million gallons of ethanol demand. This correlates into 250 million bu of corn usage. While elevated corn exports and feed demand will consume some of this, it is highly likely we will see ending stocks increase from current projections. 

Brazil’s President Bolosaro has released a statement that caught the world market by surprise. President Bolosaro is stating there will be no more quarantines issued in the country due to the Coronavirus as they are devastating Brazil’s workforce. The main concern is what the impact is on exports, especially at one of Brazil’s highest soybean loading periods of the year. The concern with this is that it may allow the virus to spread, not just around Brazil, but to other countries as well. 

We are starting to see a shift in farmer attitude across the US. More farmers are now getting ready for the spring planting season, which will take attention away from marketing. Historically, this has created favorable basis opportunities for farmers who are willing to move inventory while planting is taking place. This year may be different though, as interior demand has taken a hit in recent weeks, especially from the ethanol industry. Soybean basis is likely to remain favorable though as crushers try to secure inventory and capture elevated margins. 

The Buenos Aires Grain Exchange has updated its Argentine soybean crop estimate, lowering it from previous expectations. The exchange is now expecting to see a 49.5 million metric ton soybean crop in the country. This comes as Argentina’s soybean harvest gains momentum with 8% of the crop being collected, giving analysts better yield data. The previous soybean crop estimate in Argentina was for 52 mmt, and the USDA is projecting a 54 mmt crop for the country. 

By next week the Mississippi River is expected to be fully open for barge travel. Not only is this good news for the export market, but for suppliers along the river that are waiting for spring inputs. While the river is open, there are some concerns over high water levels and the impact they may have on movement in both directions. The greatest impact of this opening will likely be felt in interior basis. 

Heavy losses were made in the livestock industry this week and the immediate thought is this was from poor demand. In all reality, the US is seeing record monthly demand for both beef and pork. We are just 13 weeks into the year and US beef exports are up 29% from last year. In February alone the United States exports 257million pounds of beef, a record for the month. Pork exports in February were also a monthly record at 658.2 million pounds. February marks the 9th consecutive month of record pork exports.