Closing Comments; Friday, October 23rd, 2020

Much of today’s session was spent consolidating into the weekend. This limited corn and soybeans, especially with improving global weather conditions. Wheat was in positive territory today as the contract attracted fresh buying interest. Much of this was in reaction to the weekend freeze that is expected for the Northern US Plains. Grains are again overbought, but this did not deter this interest. We had a flash sale 100,000 of corn to an unknown, but nothing on soybeans and no interest from China.

When it comes to global corn balance sheets all eyes are centered on China. China has started to import more corn and is only forecast to elevate its needs in the future. China liquidated much of its usable corn reserves and now needs to refill this void. There are questions on how much corn China will need, with estimates ranging from 7 million metric tons to 30 million tons. Even if imports fall in the middle of this range it will be enough to alter global balance sheets, especially if weather continues to impact South American production.

We are seeing a shift in grain demand that could end up impacting corn balance sheets. Over recent weeks we have seen more wheat used as a feed grain in several countries. Two of these getting the most attention are China and South Korea. While wheat is more expensive, it is more readily available, and attracting buyers.

Brazilian producers have already marketed a reported 55% of this year’s soybean crop. This is considerably higher than average as record returns were seen following currency exchange rate changes. Many of these sales took place prior to the recent rally we have seen in soybean futures though, and many are now wanting to renegotiate contracts. This may prove to be difficult as not only do Brazilian farmers outright sell soybeans, but many barter with them for inputs.

US soybean sales for export are starting to be monitored. The USDA is currently projecting marketing year soybean exports of 2.2 billion bu. Some analysts feel this number will be higher though, and possibly approach 2.3 billion bu. While this is only a minimal increase, it would drop new crop ending stocks below 200 million bu. We have already started to see usage rationing though, and our demand will likely decrease even more once the South American crop becomes available.

Trade is receiving more estimates on the Australian wheat crop for 2020/21. At the present time the crop is estimated at 28 million metric tons, nearly 80% more than the 2019/20 crop. This is from an end of the drought that has impacted wheat production for the past several years. Many regions of the country are predicting record production this year, an in turn higher exports. At the present time Australia is expecting wheat exports to double next year, with most of the grain going into the Asian market.

A story that has been visited several times recently is what impact current market values will have on new crop acres in the United States. There are several who believe we will see a considerable shift from corn to soybeans given the recent price spread, but numbers may be exaggerated. Some forecast a shift of nearly 7 million acres, and while we have seen this great of a volume in the past, recent history does not indicate we will see that many altered this year. Current models indicate the numbers may be closer to 6 million, and even then, it is questionable.

The cold storage report for September has been released with numbers that are supportive for pork. A reported 466.5 million pounds of pork were in storage facilities at the end of September, 132 million fewer than a year ago. Pork bellies in storage totaled 24.8 million pounds, well below the 40.5 million a year ago. Beef in cold storage was also down, decreasing 7 million pounds to total 462 million.

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.




 

Market Commentary provided by:

Karl Setzer Grain Commentary