Volatility has been extremely heightened as the election results remain in limbo. Ag commodities as well as the outside markets have seen wide price swings as traders wait for clarification. As many expected and feared, the presidential results look to be contested and unknown at this time, but surprisingly the markets have leaned bullish despite the unknown. It is believed that since Congress looks to be divided, it is unlikely to see any major changes in policy with whoever eventually heads to the Whitehouse.
Corn, soybean and wheat futures all finished the month of October with gains. Global production concerns coupled with solid demand led to additional fund buying. December corn futures gained 19 cents on the month, and November soybeans closed the month with gains of 33 cents, with firmer interior basis values for both complexes. December wheat picked up 20 ¢ cents during October.
The fall option for crop insurance values released recently. The soybean value is $10.55 per bushel, while corn is at $3.99 per bushel, putting both at the highest values since 2013. Fall prices came in above the spring value for the first time since the drought-induced rally of 2012.
High corn prices in Brazil have trade wondering what that county will see for planted area. If prices stay strong, expectations are that producers will increase plantings even if delayed. Sources stated that an additional 15 million hectares could have been planted last year. Additional demand is expected to push these into production this year.
The additional corn demand is attributed to the growth of corn based ethanol production. The majority of Brazil’s ethanol is produced from sugarcane, but the addition of several new corn-based plants is taking place. Sugar-based ethanol is said to be more efficient, but high priced sugarcane is forcing the switch to corn-based ethanol production. Last year Brazil produced 2.5 billion liters from corn, this year expectations are for 3.35 billion liters, an increase of roughly 2 MMT of corn demand.
Dryness in Argentina is beginning to gain more of trade’s attention. While it is still early, many of the key growing areas are experiencing poor conditions increasing stress for the germination and early growth of the crops. The Buenos Grain Exchange has corn plantings estimated at 31%, and soybean seeding is estimated at 4%. Light showers are forecasted for some regions, but it is not enough to alleviate concerns. Trade will be monitoring forecasts closely for the next several weeks as shrinking U.S. supplies leave little room for production shortfalls.
Favorable export sales were again reported in the recent update. Corn sales to date stand at 1.307 billion bushels, which is 56% of the USDA’s forecast. The average for this time of year is 34%, putting current sales 500 million bushels or 22% ahead of the USDA’s estimate. However, actual loadings are trailing the total needed.
Using the same calculations for soybeans, sales are also well above the needed total. Year-to-date sales are at 1.782 billion bushels, which is 81% of the USDA’s forecasted total. The typical sales for this time run at 52% of the total. Current sales are 641 million bushels or 29% ahead of the needed pace. Unlike corn, soybean loadings are on track to meet the USDA’s target number.
For more information, you may contact Mick Hoover at (515)-200-5115, or e-mail at email@example.com. The opinions and views expressed in this commentary are solely those of Mick Hoover. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position. Please visit our Risk Disclosure Page for more information on commodity trading.
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