AgriVisor Market Recap

Tuesday, January 12, 2021
The early portion of today’s session was spent getting final positions in place ahead of the USDA reports. Traders have bounced back and forth on their opinions on what will be released in this data, but for the most part, all were expecting friendly numbers. Trade was also monitoring South American weather as rain chances increased for much of Brazil and Argentina over the next few weeks. Not only will this benefit current crops but likely increase double cropping as the soybean harvest advances. We did have a flash sale on soybeans this morning with 120,000 metric tons to an unknown buyer. Wheat was the leader early in the session, taking support from news Russia may increase is export tax on that grain. 

The long-awaited January supply and demand figures were more friendly for corn than expected. The US corn yield was lowered 3.8 bushels per acre (bpa) to a 172 bpa average. This lowered the US crop size by 324 million bu (mbu) for a 14.18 billion bu (bbu) production estimate. The USDA also adjusted last year’s carryout down 76 mbu. Total corn demand was lowered 250 mbu, with reductions coming to feed, ethanol, and exports. This is enough to put ending stocks at 1.55 bbu, down from last months 1.7 bbu estimate. 

Soybean balance sheets also tightened this month. The US yield was lowered ½ bpa to a 50.2 bpa average. This was enough to lower the US crop to 4.135 bbu, down 35 mbu from December. On the demand side the USDA increased crush 5 mbu and exports 30 mbu but decreased residual usage by 13 mbu. A 20 mbu increase to soybean imports was also made. These changes were enough to put the US carryout at 140 mbu, down 35 mbu from December. This is a very thin 3.1% stocks to use ratio. 

Wheat balance sheets were also adjusted with feed demand increased by 25 mbu and seed usage up 1 mbu. This lowered the US carryout estimate to 836 mbu. The stocks to use on wheat tightened from 49% last month to 39% this month and continues to shrink. Winter wheat planting for 2021 were also released and came out at 32 million acres compared to estimates for 31.4 million and last year’s 30.4 million. 

Changes were also made on the global side of balance sheets. The world corn inventory came out at 283.8 million metric tons (mmt), just under trade expectations but well under the 289 mmt December estimate. Global soybean inventory was estimated at 84.3 mmt which was above estimates but down from the 85.6 mmt projection from December. The world wheat supply also came in under expectations at 313.2 mmt compared to guesses for 315.3 mmt and December’s 316.5 mmt. 

The USDA also released its quarterly stocks data today. As of December 1st the United States had 11.3 bbu of corn, 2.93 bbu of soybeans, and 1.65 bbu of wheat in storage. These compare to year ago volumes of 11.37 bbu on corn, 3.26 bbu on soybeans, and 1.84 bbu on wheat. 

Chinese officials were out today with revised import figures on corn and soybeans. For the 2021/21 marketing year China is now expected to import 10 mmt of corn, a 3 mmt increase from the previous projection. This comes on a 4 mmt reduction to the Chinese corn crop. Chinese officials have also upped their soybean imports by 3 mmt to a total of 98.1 mmt. Private analysts feel Chinese soybean imports will be even higher and may total between 102 and 104 mmt. They also believe that 2021/22 yearly imports will fall between 108 and 110 mmt. 

Even with all of this fundamental data, the underlying driving force of today’s trade remains managed money interest. Managed money longs in the commodity market are currently the largest since 2011. Thoughts are these will continue to increase as more government stimulus is provided and consumer spending rises. While this is giving us inflated commodity values, it sets the market up for a sizable correction when the money is removed. 

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