The biggest market news Nov. 9 was not directly about agriculture. No, the big news affecting agriculture was actually about COVID-19.
Pfizer announced Nov. 9 that its phase three trials so far show 90% efficacy for its COVID-19 vaccine, and that it could be available by the third week in November. The results of the announcement were immediate.
The stock market went up almost 5%, within reach of 30,000 on the DOW. Immediate enthusiasm was being shown for the future of economic matters, as people think about returning to jobs and the opening of business. Crude oil, for example, was up $3 on the idea that there will be more demand by people driving more and more business travel by car and truck.
The direct impact on grain markets was not immediate. We in the ag sector have suffered with demand issues, but some of that has turned around. The market currently is concerned more with getting a hand on crop size and the demand on the market of much higher exports than U.S. Department of Agriculture has figured into their supply and demand balance sheet. We got the latest USDA thinking in the form of the November supply and demand report Nov. 10. So far, we were expecting only minor adjustments in production.
Although many analysts think the crop is not as good as USDA thinks it is, USDA is said to be very confident in their yield model, and anecdotal evidence to the contrary, will likely make only fractional adjustments to yield. One current trade estimate is for corn production to be reduced less than a bushel, to 177.7, and soybean yield to come in at 51.6 bpa, down just .3 bushel.
Trading on the Chicago Board of Trade has been volatile recently, however. We made new highs in soybean futures, and corn futures recovered most of the dip since the December futures high of $4.221⁄4 posted Oct. 27, getting back to $4.171⁄2 Nov. 5 after a drop to $3.93 Oct. 29.
The soybeans had a January futures high of $1,1123⁄4 Nov. 5, and then another new high Nov. 9 at $11.18. Not that long ago, we were longing for $9 soybeans. In fact, we were at $8.651⁄4 Aug. 10.
The corn price feels like a high price, but it is within the normal range of the past several years. It is just so much higher than the $3.20 we had a few months ago. The soybean price actually is a high price. Beans in the teens! Well, not quite, but this is a big deal.
What is driving it? In recent weeks we have been focusing on the late planting in Brazil. There, farmers wait, not for the ground to dry up, but for enough rain to ensure germination. That planting has been late enough that, even though the situation has improved with rain the last few weeks, the crop is now seen to be late.
Normally export markets shift to Brazil by the end of January, as their northern areas have harvested by then. Now, that will not happen. In fact, the big news was that the Brazilian government paved the way to allow imports of GMO soybeans from the U.S. The fact is, they are oversold, and need help to get to the next crop, which is now delayed. Pity!
Then, there is speculation by some observers that by the time we get done with the year, our carryout may be reduced much more than USDA now says. This comes from exports to China that are higher than USDA has planned, and the exports to Brazil to keep them going.
The USDA is forecasting 235 million bushels of carryout, which is the amount left at the end of the marketing year, Aug. 31, 2021. One prominent analyst says we could be as low as 100 million bushels. The pipeline supply is somewhere between 150 and 200 million so we might have to ration demand.
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