Closing Comments; Thursday, November 14th, 2019

Soybeans and wheat were under pressure for much of today’s session while corn held to the upside. Corn futures took their support from a higher cash market and oversold indicators. Even with a flash sale on soybean of 129,000 metric tons to China the contract struggled today from a lack of fresh long-term news. A weaker global market pressured all US commodities as did concerns over the world economy. A lack of active selling kept losses in check.

The market has failed to react to the export news on soybean sales this week to China. Even with a large supply in port and ongoing trade friction, China continues to buy from the US, with over seven cargoes being sold this week already. This is because trade feels these sales are just to cover the gap between South American crops, and demand will drop once the South American harvest begins. To negate this, we will need to start seeing soybean sales for late spring and early summer months, when US sales tend to erode.

A news story that has generated as many questions as answers is the developments between Brazil and China. Yesterday it was announced that China and Brazil were working on developing plans for free trade. Brazil was quick to reject this claim, stating instead the country was looking at expanding trade with several countries. Either way this is concerning to the US market, as other countries are quickly trying to step in to provide China its needs while the trade dispute with the United States lingers on.

Conflicting reports are coming out on the size of Brazil’s corn and soybean crops. The firm CONAB pegged crops at 120.9 million metric tons and corn at 98.4 mmt in its latest projection. Private firms in Brazil are projecting larger crops though, with some up to 124 mmt of soybeans and 101 mmt of corn. The difference in how the data is collected is the main reason for the discrepancy in estimates.

Even with winter weather moving through the Corn Belt, few farmers are showing urgency in getting their corn out of the field. Many have elected to leave corn stand as long as they can in hopes remaining fields will continue to dry down naturally. This has caused a tightness in the cash market that is being reflected by current basis levels, especially in regions where production is down from last year. It is not uncommon to hear of significant basis pushes in these areas, with cash bids above futures in select regions.

As the corn harvest progresses, we are gathering more information on crop quality. This seems to be as variable as everything else that has been associated with the crop. Several reports are coming in from the northern regions of low test weights, with some struggling to reach fifty pounds per bushel. This has some elevators pushing for higher test weight corn for blending purposes. The unknown with this situation is what it may mean for end users and final products, as well as the impact it may have on export demand.

Ethanol manufacturing data for the week ending November 8th was supportive for the corn complex. Production for the week averaged 1.03 million barrels per day, a 13,000-barrel increase from the week before, and the highest level since last August. At the same time, ethanol stocks dropped a large 889,000 barrels. This puts US ethanol inventory at 20.89 million barrels, the lowest in two years.

The US poultry industry received friendly news today in that China would be lifting its ban on imports. China placed a ban on US poultry imports in 2015 following the outbreak of avian influenza. China now needs US poultry to combat the high prices of its domestic pork which have nearly doubled in the past year. Chinese consumers have also shifted to poultry over beef and pork as a staple in their diets.

This commentary is the sole opinion of Karl Setzer, Senior Commodity Risk Analyst for AgriVisor, LLC. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to send an e-mail to ksetzer@agrivisor.com.




 

Market Commentary provided by:

Karl Setzer Grain Commentary