AgriVisor Market Recap

Wednesday, March 03, 2021
Corn, soybeans, and wheat were all under moderate pressure today as long liquidation resumed. The buying that surfaced yesterday did not generate any follow through interest which was a primary cause of the correction. More favorable production estimates for South America and a noticeable decline in export interest added to the pressure on US markets. Investors are also showing more interest in outside markets as signs of inflation are building. Losses were held in check by the continued need for rationing of old crop inventory, both globally and domestically. 

As expected, ethanol manufacturing rebounded considerably after plants came back on-line from closing due to February’s polar vortex. Ethanol production for the week ending February 26th totaled 5.94 million barrels, a 29% increase from the previous week. Production is still down 21% from a year ago as more plants are still waiting to resume operations. Even with this increase ethanol stocks declined 360,000 barrels and now stand at 22.42 million. This compares to last year’s 25-million-barrel inventory. 

Country movement of corn and soybeans has dropped off considerably in recent weeks. Typically we see country movement increase ahead of the spring planting season as farmers empty bins prior to their busy season. We may not see much for movement this year though given the large amount of selling that took place last fall. Reports are now coming in from across the Corn Belt that remaining inventory will not be marketed until there is a better indication of this year’s production. 

The La Nina weather event continues to cause disruptions in global commodity production. The most talked about of these remains the drought in South America and also in the Southern US. An area that is getting more attention is what the La Nina may mean for Australian wheat output. Unlike other regions of the world, a La Nina tends to lead to elevated wheat production in Australia such as we had this year. It is believed that without this weather event Australia’s wheat production could be down as much as 25% this coming year. 

The La Nina is also having an impact on the US, mainly in the Plains and Southern States. Drought has developed in these states causing a depletion of soil moisture. This has combined with the February cold snap to cause damage in the wheat crop in that region, and now there are reports some fields will likely shift to alternative crops. While it is unlikely this will be a significant volume of acres, thoughts are it may add production to either corn or soybeans. 

US weather forecasts are becoming more of a market factor as we approach the spring planting season. Corn planting in the south has been delayed from the late-February winter storm and rain is delaying seeding in the Delta. It is still early though, and progress is expected to gain momentum quickly. The most interest is on the Corn Belt however, where an active planting season is being predicted. There are a few forecasters who believe rains may develop and slow progress, but not enough that is would impact plantings from current estimates. 

The United States is now just past the halfway point of the marketing year on corn and soybeans. Corn loadings are up 450 million bu from a year ago and soybean loadings are an incredible 825 mbu more than last year. Even with these elevated volumes there are concerns we may still miss the yearly projection on exports, especially on corn. With three months left to go in the wheat marketing year shipments are only up 29 mbu and may fall behind as well given the recent loading rate. 

The window to plant corn in Brazil and have it covered by crop insurance is closing. Typically this brings an end to the planting season in the country. Given the delay to the start of the soybean harvest and the current value on corn farmers are going to continue planting corn though, even without insurance coverage. This is a reason why some analysts are predicting a larger corn crop in Brazil than others. 

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