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AgriVisor Market Recap

 
Friday, September 18, 2020
Trade was again on the positive side today as buying from the fund crowd continued. This remains a reaction to the elevated demand we are seeing for US commodity offerings, mainly on soybeans. This demand continues with flash sales this morning of 132,000 metric tons of soybeans and 210,000 metric tons of corn to China. There was also a 100,000 metric ton sale of soy meal to an unknown buyer. Advances were capped by a hesitation to establish new longs ahead of the weekend, building harvest pressure, and the fact commodities are leaning towards overbought. 

Export sales on soybeans continue to increase at a record pace. As of September 10th the United States had 1.188 billion bu of soybean sales on the books. This is 56% of the entire volume that is expected to be sold for the marketing year. Normally at this time the United States has contracted 34% of its soybean sales. The question now is if the current yearly estimate is too low or if our soybean sales are simply front-loaded. 

The high soybean demand we are seeing is overshadowing the current corn sales pace which is also record high. Cumulative new crop corn sales as of September 1st totaled 805.3 million bu. While less than for soybeans this is also a record and accounts for 35% of the yearly projection. Usually sales on corn are at 25% at this stage of the year. 

It is no secret that the majority of these sales have been to China. The question now is how long China will maintain their buying pace, especially on soybeans. Given China’s own import projections and cumulative sales, the country may be nearing the end of its buying from the US. China has shown no signs of backing away from the US soybean market though. This is generating ideas that China is buying soybeans for government reserve, and total purchases may be well above current projected totals. 

Corn has started to struggle in comparison to the other commodities, especially soybeans. This is from the fact that even with the recent decline to carryout estimates, the stocks to use on corn is holding at 17%. This is the highest amount since 2005. In a market structure such as this, the value of corn equates to $3.50, which is in line with the latest USDA projection, and under today’s market. 

Another reason for corn not posting the advances that soybeans have is simple supply. Unlike soybeans, buyers have more choices for corn right now than soybeans in the global market. Even with reductions to projected ending stocks, the US corn carryout is likely to increase this year from last. Global corn reserves are forecast to increase as well. This means the United States needs to remain price competitive to maintain a share of the global market. 

A number that has been revisited several times this week is the projected corn import figure from China. Chinese officials believe the country will import 7 million metric tons of corn both this calendar year and next as well. China already has 9.2 million metric tons of US purchases on the books, however. While most analysts believe China will up its corn import forecast, a few believe this could lead to cancelations, especially if other sources start to make offers under the US. 

President Trump has announced his plans for another Covid relief package for US farmers. The President is allocating funds of $13 billion for US farmers to help offset losses caused by the Covid 19 issues, mainly the loss of exports. This package was announced in Wisconsin, where the state has lost a reported 10% of its dairy farmers in the past year. Details of the subsidy package will be released soon. 

Soybean planting fired up in Brazil this week and with it comes acreage projections. Nearly all sources in Brazil are expecting to see an expansion to planting this year given the record returns farmers in the country are seeing. Thoughts are soybean planting will expand from 4% to 6% this year for up to 865,000 more acres. Normally Brazil expands its soybean plantings by 2% annually. Brazil has already marketed a large portion of the production from these acres, with China being the leading buyer. 

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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