Evening Report | October 19, 2021
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Soybean hedgers: Exit the hedges in November futures… With November soybean showing stronger signs of a short-term low, we advise hedgers to claim profits on the 10% 2021-crop hedges in that contract. Our exit was $12.32 for a 41 1/2 cent profit on the position. We also advise hedgers to sell another 10% of 2021-crop production in the cash market to get to 60% sold. We’ll maintain the 15% 2021-crop hedges in January futures for now.
IHS Markit cuts 2022 corn acreage forecast, raises soybean area... IHS Markit Agribusiness cut its corn plantings projection for next year by 1.91 million acres from last month to 92.374 million acres, according to Reuters. That would be down 930,000 acres from this year’s corn plantings.
The private analytics firm raised its soybean plantings forecast by 735,000 acres from last month to 87.335 million acres. That would be up 100,000 acres from this year’s soybean seedings.
IHS Markit projects winter wheat seedings at 34.153 million acres, down 602,000 acres from last month’s forecast up but 505,000 acres from this year. It expects other spring wheat acreage to rise to 12.7 million acres, up 900,000 acres from last month and 1.28 million acres above this year. IHS Markit expects durum plantings to rise to 1.95 million acres next year, unchanged from its prior forecast but up 315,000 acres from this year.
The firm projects U.S. all cotton acreage for 2022 at 11.9 million acres, up 175,000 acres from its September figure and 738,000 acres above 2021.
Bayer: ‘Robust’ forward booking of inputs for 2022 crops... U.S. farmers are booking seed, fertilizer and chemicals they need for next year earlier than normal amid sector-wide supply-chain problems that are causing prices to soar, a top executive at Bayer told Reuters. “What we’re seeing is a pretty robust order book,” Liam Condon, president of Bayer’s agricultural unit said. “How extensive that is, it’s still too early to call from our point of view. But it’s clearly noticeable.”
“We lost five weeks of production [at the Louisiana factory due to Hurricane Ida]. This will, of course, involve some cost that will have an impact on sales, but nothing to any degree that would impact our full-year guidance for this year,” Condon told investors.
Condon said it’s too early to say if rising production costs will cause farmers to plant fewer corn acres and more soybeans.
Basse: More acres needed to meet rising demand... A renewable fuel push by President Joe Biden's climate agenda is set to trigger a boom in soyoil use, Dan Basse, president of consultancy AgResource, told the GrainCom conference in Geneva. "We need more acres," he said.
For renewable diesel, U.S. production capacity is set to double in the coming year as over 1 billion gallons in capacity comes onstream, Basse highlighted. He contends with U.S. states barring companies from using imported feedstocks for such fuel, that could in theory create the need for an additional 40 million acres (16.2 million hectares) of soybean plantings in the United States. "I don't think there is any way America can shift 40 million acres to soybeans from other crops, but you're going to see some sort of shift," Basse said.
U.S. planted acreage may have reached a ceiling, Basse said, adding further cropland growth would need to occur primarily in South America, Africa and the Black Sea region.
Fertilizer uncertainty could impact Brazil’s safrinha corn... Brazilian farmers have purchased approximately 40% of their fertilizer needs for their safrinha corn crop, which is about normal. But the recent surge in fertilizer prices has caught many producers by surprise, according to South American Consultant Dr. Michael Cordonnier, and they may face even higher prices with non-delivery as a possibility due to supply shortfalls. Brazil imports approximately 80% of their fertilizer needs, which puts the country at the mercy of foreign suppliers.
Cordonnier says farmers who have not purchased any fertilizers for their safrinha corn will probably apply less as a way to hold down production costs. Some farmers have even floated the idea they may plant their corn without fertilizers. Cordonnier says corn yields would probably decline 20% to 30% if no fertilizers were applied, but since domestic corn prices as so good in Brazil, a farmer could still maintain the same margins on his corn production due to the reduced costs.
Russian wheat exports down 11%... Russia exported 11.1 MMT of wheat between July 1 and Oct. 14, down 18% versus the same period last year, based on customs data. Barley exports were down 34.9% to 1.5 MMT, while corn exports fell 56.5% to 200,000 MT. Grain exports totaled 13 MMT, down 21.3% versus last year.
Russia’s ag ministry expects the country to export 45 MMT to 48 MMT of grain in 2021-22.
EU wheat exports surge nearly 36%... Soft wheat exports from the European Union from July 1 to Oct. 17 totaled 8.7 MMT, according to official data from the European Commission (EC), down 35.9% from the same period last year. However, the commission says the data was missing for France from the end of July. As of Oct. 17, France says it exported 718,765 MT of wheat outside the EU, though private industry sources signal the number was larger, including a Refinitiv wheat loadings estimate of nearly 2.3 MMT. EU barley exports totaled 2.7 MMT, down from 2.5 MMT during the same period last year.
EU corn imports declined 21% from year-ago to 3.9 MMT, EC data showed.
EU climate change chief warns against turning back to coal... EC Executive Vice President Frans Timmermans said turning back toward coal amid the current energy crisis would be a mistake. "It will be a tragedy if in this crunch we will start investing again in coal, which is an energy that has no future and is extremely polluting," Timmermans told Reuters during a visit to Indonesia. “The smart thing to do is, during this energy crisis, to reduce as soon as possible your dependency on fossil fuels," he said. Timmermans leads the commission's work on climate issues and was visiting Indonesia ahead of next month’s COP26 climate change talks in Scotland.
Currently, Indonesia sources around 60% of its power from coal but is looking to phase out the plants as part of its plan to reach net zero carbon emissions by 2060. Timmermans called Indonesia’s plan to boost renewables “laudable and ambitious” and said the EU wants to work with the country “to make sure we can invest and have technology transfers, bring some ideas to the market for offshore wind, or solar, or geothermal.”
China coal prices pull back from record highs... China’s coal prices have risen more than 260% this year, reaching record levels during Tuesday’s daytime trading session. But Chinese coal futures fell the daily limit of 8% overnight Tuesday as the country's state planner said it was studying ways to intervene amid the record prices. A shortage of coal, China's main source for power generation, has led to electricity rationing for industry in many Chinese regions and curbed economic growth.
“The current price increase has completely deviated from the fundamentals of supply and demand,” state planner NDRC said after calling a meeting of key coal producers, the industry association and the China Electricity Council. “The heating season is approaching and the price is still showing a further irrational upward trend,” NDRC added.
Chinese law allows the government to limit profit rates and set price limits, NDRC said, vowing to crack down on any irregularities and maintain market order.
China’s giant housing market slowed substantially in September... The country’s debt-saddled developers cut spending and demand from home buyers waned. Investments made by property developers fell 3.5% in September compared with last year, according to China’s National Bureau of Statistics. It was the first time property investment had fallen year-over-year since the beginning of the Covid pandemic. Home sales by value fell 16.9% in September from a year earlier, while the floor area of new construction projects that were started in the month fell 13.5%.
The data paints a bleak picture for China’s property market and the many developers that had banked on strong housing sales to help pay off large amounts of debt. Global investors have turned bearish on the prospects of Chinese real-estate developers, sending their dollar bond prices to deeply distressed levels. The yield on an ICE BofA index of high-yield bonds from Chinese companies climbed above 23% last week, its highest in more than a decade.
