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AgriVisor Market Recap

 
Wednesday, August 05, 2020
The market tried to recover today following yesterday’s losses, but only the grains were able to cling to the upside. The market is currently placing more interest on production than demand and without a crop threat, buying interest is muted. This is evident by trade ignoring the return of Chinese soybean buying, as that country was listed in the flash sales as booking 192,000 metric tons of US soybeans for 2020/21 delivery. One region of the Corn Belt that needs to be monitored is Iowa where reports of dry soils are being reported. 

Production forecasts for several countries have been increased recently, and now we are seeing this happen to the Ukraine corn crop. Ukrainian officials are now projecting a corn crop of 39 million metric tons this year compared to last year’s 36.8 mmt. In turn Ukraine is expected to export more corn, with corn sales now projected at 33 mmt, 3 mmt more than a year ago. Ukraine was a leading competitor for the US in the Asian market last year and likely will be again given these estimates. 

The most attention when it comes to world production remains on South America, mainly Brazil. The Brazilian firm Agroconsult has updated its production forecasts, and unsurprisingly raised them on both corn and soybeans. Agroconsult is expecting Brazil’s farmers to plant 98 million acres of corn and produce a 132.6 mmt crop. The group is projecting a 5% increase to Brazil’s Safrinha crop next year, bringing total corn production to 110.3 mmt. It goes without saying crops this size will elevate US competition in the global market. 

Brazilian soybean exports for the month of July continued to run above those of a year ago. Brazil exported a total of 10.37 mmt of soybeans in July, a 3 mmt increase from July 2019. Brazil only exported 4.2 mmt of corn in July though, down from last year’s 5.9 mmt of exports. A slower harvest pace is one reason for the sluggish export pace on corn, but so is a hesitation to export large volumes of corn as Brazil’s domestic demand is rising. 

Brazil has also released export data on beef and pork, and both levels are up on the year. Brazil’s beef exports in the month of July totaled 169,200 metric tons. This was a 27% increase from July 2019. Brazil’s pork exports for the month reached 90,200 metric tons, a large 46% increase from last July. It is no surprise than much of this meat went to China as the country continues to rely on imports to satisfy demand as its domestic hog herd rebuilds. 

Ethanol manufacturing for the week ending July 31st slipped lower from the week before. A total of 6.517 million barrel of ethanol were manufactured during the week, 189,000 fewer than the previous week. Ethanol stocks increased by 74,000 barrels during the week to stand at 20.35 million. This is still much lower than the 23.117 million that were in storage a year ago. 

The University of Illinois has released its return projections for farmers in the central and northern parts of the state, and the picture is bleak. On corn farmers are expected to see a negative return of $30.00 per acre in 2020, and a greater deficit of $75.00 per acre in 2021. On soybeans the return is an estimated positive $19.00 per acre for 2020, but a negative $50.00 per acre in 2021. These losses come even with the help of US aid packages. 

Even with this outlook, data for the first six months of 2020 indicates the number of US farmers filing for bankruptcy is slowing. According to the American Farm Bureau Federation, filings for bankruptcy in the first six months of the year are down 4% from the same period in 2019. Sources are quick to state this decrease may be from a shift to on-line filings, which distort the totals. It is also believed the decrease is the result of government funding, which sources claim is needed to prevent the loss of additional farmers. 

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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