AgriVisor Market Recap

Wednesday, December 02, 2020
Soybeans were under pressure for much of today’s session while corn and wheat worked to the positive side. Easing weather concerns in South America and technical liquidation were the primary causes of market pressure today. There is a lack of technical support in today’s market which is allowing losses to escalate. While rains in South America may benefit corn and soybean crops, they are delaying the start of the Argentine wheat harvest and provided that complex support, as did a push in end user buying. Losses in all contracts were held in check by thought current demand on US commodities is underestimated and carryout will be less than projected. Rumors of Chinese interest were positive as well. 

Usage data for the month of October indicates 432.7 million bu of corn was consumed by the ethanol industry. This was a 7.8% increase from September as plants started to ramp up production. This produced 1.8 million tons of distiller grains for the feed industry as well. Trade is now questioning if this number will continue to grow given a lack of travel from Covid restrictions and building ethanol reserves. 

Soybean crush for the month of October was a record at 196.5 million bu. This was also a 15% increase from the month of September. This crush generated 4.34 million tons of meal and 2.26 billion pounds of oil. Oil stocks at the end of the month totaled 1.97 billion pounds which was a larger volume that expected. 

Ethanol manufacturing data for the week ending November 26th was non-supportive for the industry. Ethanol production for the week decline 1.6% from the previous week at 6.82 million barrels. Ethanol stocks increased for the 5th consecutive week though, building a large 374,000 barrels. US ethanol reserves now stand at 21.24 million barrels compared to 20.64 million a year ago. 

We are starting to see a split in opinion when it comes to US commodity demand. US corn sales currently total 1.45 billion bu. Given this volume we only need to see average sales of 30 million bu per week for the remainder of the marketing year to reach our projected goal. Soybean bookings currently total 1.98 billion bu and only need to average 7 million bu on a weekly basis. The difference is in loadings, as soybean loadings are also ahead of average, while corn loadings are 3% under expectations and continue to fall short of the needed amount per week. 

This does not mean all corn traders are negative the corn complex. In fact, there are some who believe corn demand is currently underestimated, mainly exports. The USDA is currently projecting yearly corn exports of 2.65 billion bu, but some feel this will be closer to 3 billion bu. This is from the fact that the US will not have export competition until June this year. While this may be an accurate thought, elevated exports may simply offset declines to domestic usage if current trends continue. 

Another discrepancy in the market at the present time is on Brazil corn production. The size of Brazil’s first corn crop has been reduced in recent weeks due to the dry conditions. This is expected to be made up for with a larger second Safrinha crop, however. It is believed this crop will be 14% larger than last year and more than cover losses to the initial crop. Several analysts believe Brazil’s total corn production will fall between 106 and 107 million metric tons, but a few claim it will be closer to 113 million metric tons as plantings are set to increase. 

There is a building concern in the market over recent activity. Managed money traders are holding sizable long positions and not seeing enough fresh news to warrant additional buying. Even with supportive news, the fact that much of it is already factored into today’s values is also preventing buying interest. It is not uncommon to see the market focus on technicals at such times, and these are not giving futures much support. 

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.