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AgriVisor Market Recap

 
Thursday, January 14, 2021
Trade was mixed to start today with futures seeing both sides of unchanged. Buyers were quick to surface though giving us a sizable recovery in soybeans. A main focal point of the market remains South American crop sizes, as even though weather has turned favorable in Brazil, crop scouts are reducing yield potentials in Argentina. Technicals are also becoming more of a trade factor as we continue to see fresh interest, even though indicators are over-bought. A gap was left on the March corn chart yesterday which will be closely monitored as we progress. The US dollar is also starting to firm and may temper buying enthusiasm in commodities, especially if it impacts demand. 

Export sales data for the week ending January 7th was released today and demand rebounded from the holiday breaks. Corn sales for the week were above estimates and the volume needed per week with 56.6 million bu (mbu). The same was true on soybeans where old crop bookings totaled 33.4 mbu on old crop and 12 mbu on new crop. Wheat sales were on the light side with just 8.2 mbu, which was below both trade guesses and the volume needed to reach yearly expectations. 

Weekly meat sales were also strong. Beef sales totaled 16,800 metric tons with the majority going to South Korea and Japan. Pork sales totaled 23,800 metric tons with Mexico the primary buyer with 6,600 metric tons. China was listed as a small buyer on beef, but no sales were listed on pork. 

China published its soybean import numbers for the month of December with 7.52 million metric tons (mmt) being unloaded. While high, this was down from the 9.59 mmt that were imported in November. For the 2020 calendar year Chinese soybean imports grew by 13%. Total soybean imports came in at 100.3 mmt compared to 88.5 mmt in 2019. 

The International Grains Council updated its world grain production forecast today and lowered it due to drought in South America. The IGC now estimates the world grain crop at 2.21 billion metric tons (bmt), a 10 mmt decrease from the November prediction. The majority of this reduction was made to corn where the crop is expected to be down 13 mmt. Even with the decline world grain production will be record sized in the 2020/21 year. 

While at a slower than normal pace, the Brazilian harvest is underway. Harvest has been slowed from the delays to plantings and sluggish development from drought conditions. Field scouts in the country claim yield has not been hurt as much as thought though and a record crop is still expected. These individuals put the crop from 131 to 133 mmt. As the Brazilian harvest pace increases, we will start to see US exports slow. 

Even with a slower harvest pace, Brazil is selling a large volume of soybeans. According to the firm Safras, Brazil has sold 58% of its intended soybean production. This is up from the 43% that was sold last year at this time and the normal sales pace of 39%. Record high returns have prompted the elevated selling. It was thought Brazil may slow its selling rate after depleting its reserves a year ago, but this is not the case. Safras is basing its sales percentage on a 133 mmt crop, so the actual percentage amount booked may be even larger. 

Earlier this week China announced it will be approving two GMO corn and soybean varieties for production in that country. Up to this point China has allowed GMO grains to be used as feed ingredients but not for production. This change is the result of China wanting to improve its food security ability. GMO production will allow China to produce higher yielding crops on fewer acres, making them more self-reliant. 

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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