AgriVisor Market Recap

Tuesday, February 23, 2021
Soybeans were the well-defined leader today as fresh buying interest surfaced in that complex. This came from questionable production data out of South America and the continued need to ration US reserves. A rally in the global oilseed market, including canola and palm oil, supported soybeans as well. We are also seeing more interest in new crop values with both corn and soybeans setting new highs overnight. Wheat futures struggled today on news that last week’s cold temperatures likely caused less damage than expected. 

Corn, soybeans, and wheat have all moved into sideways trading patterns. While we have seen gains and losses, the overall pattern remains sideways as trade awaits fresh news. The next chance of a market moving rally will likely be spring weather and a threat to US production. Any less than expected production in South America from current estimates will also have market impacts. The influence of the outside markets will continue to drive commodities as well, mainly the value of the US dollar. 

While improved, there are still concerns over Argentine weather. Widespread rains moved through the country in January, but these failed to materialize in February. As a result, February is going down as one of the driest of the of the past 30 years in the country. Analysts are quick to point out that Argentina experienced similar conditions in 2019 but still produced normal crops. 

It is no surprise that China is back in the news and wishing to renegotiate current trade deals with President Biden. China is hoping that tariffs will be removed, and existing deals will be renegotiated. The main one of these is the Phase 1 agreement, although China has not singled it out. China is also hoping the US will back out of Hong Kong and Taiwan political issues. Given China’s current commodity demand, it is unlikely they will back away from US imports if current sanctions stay in place. 

The US economy is becoming more of a market factor. Managed money traders have turned to financial markets, mainly bonds, as they are concerned with inflation taking place. This is also causing volatility to build in the US dollar and causing further weakness in its value, which is actually a benefit for commodity values. Traders are now waiting to see what will be included in the next government Covid relief package and how it may impact consumer spending. 

It appears as though soybean traders are finally starting to step up and push new crop futures harder to encourage plantings. November soybean futures topped the $12.00 market yesterday for the first time since July 2014 and extended this move today. Even with higher soybean plantings being forecast by the USDA, the stocks to use ratio on new crop soybeans is projected at a minimal 3.2%. It will likely take at least two years to get out of this situation in soybeans, depending heavily upon how much production we see in South America. 

The question is how much interest farmers will show in elevated soybean plantings, even with higher futures. The primary reason for this is that new crop corn is also rallying, keeping the spread at a level that does not favor one crop or the other. Many farmers in the US already have their new crop acres locked in, with several already having inputs booked or even applied which makes shifting more difficult. This will put more emphasis on the March 31st planting intentions report. 

Chinese officials have announced they believe the country’s hog herd will be back to 2017 levels by the end of June. This was just prior to the outbreak of African Swine Fever that devastated the country’s production. There are doubts over this target though as not only is ASF resurging in the country, but we are seeing other disease outbreaks as well. This has led to several of China’s hogs being culled, especially sows. As a result, it is believed that is may be well into 2022 before the Chinese hog herd can rebuild. 

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.