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AgriVisor Market Recap

 
Wednesday, April 14, 2021
Futures continued to strengthen today as fresh buying interest again surfaced in the market. Open interest increased in corn, soybeans, and wheat indicating new buyers had entered the market following the early week break in futures. This was most noted in new crop corn where another contract high was made. Global weather was also supportive today, mainly the cold temperatures in the United States and ongoing dry conditions in Brazil. Even with dry conditions in the US we are seeing planting take place which tempered strength. A general lack of fresh news was also a limiting factor. 

Feed grain values in China have started to slip lower, putting pressure on the global market. While lower, corn in the country is still at $10.40 per bushel and soy meal is holding at $520.00 per ton, both of which are historically high values. China continues to make large imports of both of these commodities which is pressuring domestic values. This is being done in an effort to lower costs for Chinese feeders. There are also thoughts China is maintaining large imports to rebuild domestic reserves. 

China continues to use a large volume of wheat in its feed rations, but this may soon change, which is also keeping corn and meal imports elevated. Chinese officials have announced they will be raising the floor value on domestic wheat reserve auctions in an effort to slow the use of high-quality reserves. China started these inventory auctions to try and benefit feeders, but there are now concerns it may be creating inflation in the country’s food costs. At the latest wheat auction just 12.8% of the volume offered was sold. 

When it comes to the global wheat market, values are currently being driven by the Black Sea. The size of the Russian wheat crop has increase and is now thought to total 81 million metric tons (mmt). Ukraine has also indicated its wheat production this year will total 75 mmt compared to last year’s 65 mmt. The combination of these higher crop estimates will allow for elevated exports, likely at lower values than we are seeing now. 

A split opinion is forming on the Brazilian crops. Harvest of Brazil’s soybean crop is in its later stages and more analysts are in agreement of a large crop. Just the opposite is happening on Brazil’s corn crop estimates though, with several being lowered recently. In the April WASDE report the USDA predicted a 109 mmt corn crop for Brazil, as have several others. We are also seeing crop estimates as low at 103 mmt though as ongoing dry conditions are impacting production. As with soybeans this will be debated well into the Safrinha harvest which is months away. 

The corn situation in Brazil is gaining more attention as the country has fully depleted its current reserves. As a result Brazilian corn values have rallied to record levels. This has led Brazil to make corn imports, with news this week of two vessels have been booked from Argentina. Brazil may restrict its corn imports this coming year after putting itself in this position, especially with domestic demand continuing to rise in the country. 

Ethanol manufacturing for the week ending April 9th was 3.5% less than the previous week when an increase in production had been expected. For the week US ethanol plants produced 6.6 million barrels of ethanol, 238,000 fewer than the week before. Ethanol stocks decreased 124,000 barrels on the week to a 20.5-million-barrel total. The is the lowest US ethanol inventory of the past five months and a large 7 million barrels fewer than a year ago. 

After a brief reduction to processing, Brazilian beef packing plants are resuming operations. Cattle values in Brazil have recently risen 60% due to low inventory numbers and rising export demand. Same as with the United States, much of this demand was from China. Packing plants were only able to pass long a portion of this cost to consumers and opted to instead halt operations until profitability returned. Now that these plants are again functional it is starting to take business away from the US. 

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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