AgriVisor Market Recap

Thursday, October 29, 2020
Losses were again posted in early trade today as funds continued to liquidate long positions. The primary cause of this was ongoing concerns over the rise in global Covid-19 cases and their impact on economies and commodity demand. Thoughts that Covid will be a market influence for another two years increased these concerns. Additional pressure came from month end profit taking and a general exit of the market ahead of next week’s presidential election. Losses were held in check by thoughts at least some production loss took place following last weekend’s winter storms in the Plains. We did see large flash sales on corn with a huge 1.43 million metric tons to Mexico for the 2020/21 and 2021/22 marketing years and an unknown taking 140,000 metric tons for 2020/21. 

Export sales for the week ending October 22nd favored the grains over soybeans. Weekly sales of corn totaled 88.3 million bu and wheat came in at 27.3 million bu, both above trade expectations. Soybean bookings fell in the middle of trade estimates at 59.5 million bu, which was still above the needs on a weekly basis. Several import buyers now report having soybean needs covered through the winter months though, which tempered the higher number.  

The United States continues to see limited competition in the global market on corn sales, especially from Ukraine. For the Ukraine marketing year that began in July the country has exported just 1.5 million metric tons of corn. This compares to the 3.6 million metric tons that were exported in the same period a year ago. This has been a great benefit for US exports as Ukraine was a leading competitor last year, especially into the Asian market. 

The one commodity Ukraine has not backed off on exporting is wheat. So far this marketing year Ukraine has exported 10.1 million metric tons of wheat, just under last year’s 10.9 million metric tons. The question is how long this export volume will last as Ukraine’s government has set an export limit of 17.5 million metric tons for the year. While stating there is no reason to limit the country’s wheat exports, that may change if this level is reached. 

The world market has seen corn values rally to record levels in many countries, and as a result, plantings are expected to increase. This is the primary reason Brazil is forecast to produce a 111 million metric ton corn crop this year compared to 102 million metric tons last year. South Africa and China are also forecasting larger corn production given current values. Even in the US it is believed high corn values will prevent a sizable acreage shift to soybeans. 

Even with the world market rallying, US corn remains very competitive with other sources. In fact, US corn is actually under the domestic values of corn in both South America and China. The immediate reaction is this will favor US exports, and while possible, a large build in sales is unlikely. This is because US port space is already heavily booked from previous sales. The next available opening for vessels is in early January, and by then the world is market is hoping for cheaper corn out of other sources. 

One factor that will determine weather in South America and several other regions of the world is the La Nina event. Current models indicate this system is strengthening which means dry conditions may shift from Argentina into Brazil. The La Nina is also holding Southern US states in a dry pattern. The question now is how long the La Nina may last, as even though its strengthening, if its short-lived its overall impact may be limited. 

The International Grains Council updated its world production forecast on wheat and corn today, and for the second consecutive month, lowered it on corn. The IGC is now predicting a world corn crop of 1.16 billion metric tons this year, down 1 million metric tons from the September estimate. This comes after a 6 mmt reduction to the global corn crop in September. Global grain production was only reduced 1 mmt to a 2.23 bmt total though as world wheat production is forecast to increase. World grain consumption also increased 3 mmt this month to a 2.22 bmt total. Global grain carryover is now forecast to total 619 mmt this year, 10 mmt less than the September estimate. 

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.