AgriVisor Market Recap

Wednesday, January 13, 2021
All interest in the market has shifted to the corn complex where balance sheets are now at the stage where rationing is needed. This follows the 3.8 bushel per acre reduction to corn yield in the January WASDE report, which was the greatest decline from the November report since 1974. This drove corn values to their highest levels since July of 2013. Even with this move, US corn is still the lowest valued in the world market. Corn was limited by news the Argentine labor issues are now fully resolved and exports will resume. Soybeans and wheat were followers today, even though we did have a flash sale on soybeans of 464,300 metric tons to an unknown buyer. Soybeans were limited by a lack of buying interest and improved weather for South America, even if just short term. 

For the past several months we have seen global restrictions to oilseed exports, but we are now seeing these on grains as well. Initially wheat producers were raising taxes to limit sales and ensure adequate domestic supplies for food needs. We are now seeing this take place in corn, as Ukraine livestock producers are asking the government to limit exports to keep their margins profitable. Ukrainian feeders are asking for corn exports to be limited to 22 million metric tons (mmt) for 2021 compared to the 25.27 mmt that was exported in 2020. This is in response to losses of corn production in the country, with the crop going from 35.9 mmt in 2019 to just 29.3 mmt last year. 

Trade continues to focus on the soybean export pace and how it is likely too low, even with this week’s revisions. The United States has already exported 1.42 billion bu of soybeans this marketing year, a 614 million bu increase from a year ago. This total is already 85% of the volume of soybeans that were exported all last marketing year and we are only one-quarter of the way through this year. This means the US only need to load out 24 mbu of soybeans per week for the remainder of the year. 

While mostly overlooked, we did see sizable adjustments to the South American crops in yesterday’s WASDE update. The USDA left the Brazilian soybean crop at 133 mmt but lowered the Brazilian corn crop 1 mmt to a 109 mmt total. The Argentine corn crop was reduced by 1.5 mmt to a 47.5 mmt total. The greatest decline was to the Argentine soybean production though, with reduction trimmed 2 mmt to 48 mmt crop. 

The firm CONAB was out today with their Brazilian numbers and reduced both corn and soybean potential from recent weather conditions. CONAB now pegs the Brazilian soybean crop at 133.7 mmt, down from its previous 134.5 mmt estimate. The group pegged the Brazil corn crop at 102.3 mmt compared to the December estimate of 102.6 mmt. This is also just under last year’s record corn crop of 102.5 mmt. Brazil’s corn output depends heavily upon Safrinha production and CONAB does not predict as large of a crop as other firms, including the USDA. 

China updated its corn and soybean import forecast this week, but there are thoughts the corn number may still be too low. Demand for corn in China continues to rise as its hog industry rebounds from African Swine Fever. Chinese authorities now peg yearly corn demand at 185 million metric tons (mmt), a 2 mmt increase from its previous estimate. This increase comes as China sees a smaller corn crop with production estimated at 260.7 mmt, down 4 mmt from a year ago. China is expecting to see a slight decrease in industrial corn demand, but not enough to compensate for the elevated feed usage. 

Ethanol manufacturing for the week ending January 8th increased 42,000 barrels from the previous week. This put total production for the week at 6.587 million barrels, which was still down 14% from a year ago. Ethanol stocks made a sizable increase of 408,000 barrels as travel remains limited. This put US ethanol reserves at 23.69 million barrels compared to 23 million a year ago. 

The USDA is predicting mostly steady beef and pork production this year from last. US beef production in 2020 totaled 27.116 billion pounds according to USDA figures. In 2021 this is expected to hold nearly steady at 27.19 billion pounds, which is a 70-million-pound decrease from their previous forecast. The USDA pegged 2020 pork production at 28.3 billion pounds, and the 2021 output at 28.6 billion pounds. The 2021 estimate is up 55 million pounds from the last projection. 

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