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AgriVisor Market Recap

 
Tuesday, September 22, 2020
Futures rebounded on the open today in a classic Turnaround Tuesday action. It was suspected that yesterday’s futures break would entice import buyers, and this was correct. This morning’s flash sales report included 140,000 metric tons of corn and 266,000 metric tons of soybeans to China. An unknown was also in and booked 320,000 metric tons of corn and 264,000 metric tons of soybeans. Harvest is more of a market topic though as progress is being made across the US. While early it is apparent this year’s crops will be highly variable in both yield and quality which is not surprising. 

Even with drought conditions building, Russia has started to increase its grain sales volume. Russia is on track to export 5.65 million metric tons of grain in September compared to the 5.1 million metric tons in August. The majority of September’s exports are wheat with 5 million metric tons. Corn sales out of Russia are down on the month and only expected to total 50,000 metric tons. 

When it comes to global corn trade, all interest remains on China. China has an estimated 22 million metric tons of corn on its import books. Just over half of this is expected to originate from the United States with 12 million metric tons. These numbers are significantly different than the 7 million metric tons China is claiming it will import. China has already confirmed it will have a corn deficiency this year and needs appear to be greater than they are indicating, which may be a ploy to keep values depressed. 

The unknown with China is just how great their corn deficiency is this year. Initial reports had the shortfall in Chinese corn production at 30 million metric tons. Since then we have seen some analysts predict the Chinese corn crop will be even smaller, and the country will have a deficit upwards of 80 million metric tons and possibly more. China’s corn crop started out the growing season with favorable weather conditions, but was soon affected by drought, and then the late season typhoons that have cut production. 

China is also seeing its corn demand build as the country rebounds from the African Swine Fever outbreak. It has been reported that China’s hog herd is up 31% from a year ago at this time. We are also seeing new hog farms in China with production increase for seven months straight. In August of this year alone China opened 2,030 new hog production farms. For the 2020 calendar year China has added a total of 11,123 new hog farms to production lines. 

There remain concerns in the US markets over the state of the global economy. This started yesterday and has spilled over into all markets. The concern is that many tech stocks have exhausted their run and are seeing profit taking. There are also concerns that renewed Covid travel restrictions will slow or stop more economies. In turn, this may again pressure commodity demand. One of the greatest concerns is in the livestock industry as consumers are again shopping for low-cost protein food products. 

We are already seeing private analysts release their new crop acreage projections for the United States. The latest was the group HIS Markit, formally known as Informa. Markit is projecting US plantings to increase on all three major US crops next year from the current year. Corn plantings are forecast to expand by 1.7 million acres, soybeans by 3.3 million acres, and wheat by 1.1 million acres. These predictions are in line with what most other analysts have projected. The fact remains there are many factors that will ultimately determine next year’s plantings though, and these numbers will change several times. 

Hog futures shot higher today, posting limit gains at times throughout the session. This came on the heels of a report that China may only have 100,000 metric tons of pork remaining in storage facilities. If correct, this is only about a two to three-month pork supply for the country. This may also lead to elevated pork imports, even higher than the already record purchases and imports we are seeing. 

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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