• Rachel Stevens

Market Thoughts 10.18.20

At end of commentary have included some what if scenarios as we start contemplating acres and yields for the 2021/22 crop year. Highly speculative at this point but will give some general idea on potential carryout for the upcoming crop year.

Corn Complex- Front month corn futures continued their move higher this week before setting back slightly at week end. Fund money flows were much of the action with new longs and shorts covering in the complex this week, funds at week end were estimated at nearly 200k long vs just 2 weeks ago at only 100k long. A couple underlying stories for the week was another sale of 16.5 mbu of corn to China midweek. Also, market continues to follow soybean planting progress in Brazil as slow progress could push ideal window for safrinha corn back too far into the dry season and could negatively affect potential yields. Export corn sales for the week were on the low end of expectations, but still showing total export pace above USDA forecasts.

Soybean/Canola Complex- Soys started the week stronger again, but could not hold onto a new high into week end. Funds here estimated around 230k long which has held steady week over week. Market continues to follow SA weather as forecasted rains will need to transpire to increase crop seeding progress across Brazil and Argentina. Of note this week was continued weakening of the Argentine unofficial exchange rates, which have Argentine producers tight holders of grains and oilseeds as they encounter monthly inflationary headwinds.

Wheat Complex- Wheat ended on a strong note with all complexes showing strong gains for the week. Chicago front month futures ended on a new contract high. All complexes are concerned about continued dryness and late moisture for Eastern Ukraine and more so into Central and Eastern Russian wheat growing regions. Some chatter in the market as much as 10% of Russian winter wheat planting may be abandoned or not planted. With supply concerns cash markets have been driving higher as many countries catch up on purchases. Unofficially there has been chatter of Russian export restrictions in the back half of their marketing year if internal wheat prices continue to run. On the US front the southern plains continue to miss out on significant moisture to alleviate drought conditions. Weekly Market Recap Week of Oct 16th, 2020

Outside Markets- US stock indices continue to shake off average economic data and increased Covid shutdowns around the world. Energy markets also continue to remain caught in sideways trade as the market tries to overcome the slowdown of energy use over the last 6 months.

2021/22 Projected Carryout for Corn- a couple of comments, Dropping 20/21 carryout another 267 million bushels (1900) vs USDA current projections (2167) to account for slightly lower yield and another increase in exports. Avg column is indicating a 3 million acre increase, high is 4 million acres and low is 2 million acres. At those increase in acres would seem to keep carry out levels quite comfortable.

2021/22 Projected Carryout for Soybeans- We drop expected carry for 20/21 crop by 15 mil bushels on potential for further yield revisions and potential for increase in exports. Avg column assumes a 4 mil acre increase, high is 5 mil and low is 3 million. As you can see the market is going to need to buy probably close to 5 or 6 million acres of beans to get carryout to acceptable levels. With around 10 million of PP this year and assuming a more normal 2.5 million PP acres we have around 7.5 million acres back in the picture for 21/22. Not all acres will go to corn/soy but would guess quite a few will. Quick take here though is Nov 21 beans will have to work harder to get acres pulled away from corn, likely will need to increase 5 to 6 million acres to get a comfortable carryout level.

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