Grain Spreads: Strong Exports

Sean Lusk General Commentary Leave a Comment

Commentary:

Export Sales for Corn exceeded expectations this week amid a purchase from Mexico this morning for 300K metric tonnes. Net sales of 1,665,600 MT for 2020/2021 were up 53 percent from the previous week, but down 4 percent from the prior 4-week average said the USDA. Mexico was the initial top buyer last week at 555K metric tons while “Unknown Destinations” which is spelled C-H-I-N-A, came in at 524K with China in for another 75.9K in a separate purchase. The totals put China as the top buyer at 600K. Meanwhile bean sales for future shipment dwindled. Net sales of 768,100 MT for 2020/2021–a marketing-year low–were down 42 percent from the previous week and 47 percent from the prior 4-week average. However its important of note that a domestic carry of 190 million bushels is not going to endear anyone to the short side of the bean market until more is known about South American production. I think the market stays bid unless we have an abrupt cooler and wetter outlook for South America which would be a 180 degree turn from current forecasts.

We are just short of 12.00 beans for old crop. A major feat considering where we were trading in early August. The debate and tug of war in the market in my view comes on if prices are warranted on this $3.40 rally moving forward. Regardless I see this as most beneficial for Corn. I find it undervalued at 4.30 old crop. In my view buy dips. Speculation continues over whether China will raise its corn import quota to 22, 26, 30 or more million metric tons, but thus far we only have evidence to suggest that it  added another 5 (MMT) million metric tons to boost its current-year tariff rate quota to 12 (MMT) of corn imports. I find it important to pay attention to what the Chinese do, not say, so the proof will be in these sales numbers and flash sale announcements. Regardless the late bean plantings in South America could bode well for higher corn prices down the road. While It’s still early enough that the bean crop could turn for the better, the delayed crop will add risks for the safrinha corn planting which accounts for 70 percent of Brazil’s corn production, and have consequences later for emergence and development. Regardless, if beans hold above 10.00 in the weeks and months to follow, look for US farmers to increase bean plantings by at least 6 to 7 million acres with some at corn’s expense.

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Sean Lusk

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