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With each passing week it looks like we are moving into a long-term demand-driven bull market.

Jim McCormick, Hedging strategist

December 18, 2020

4 Min Read

There are two types of bull markets: demand-driven and supply driven. What’s the difference?


Supply scare rallies tend to come on fast and top out quickly as the world ramps up production to meet the short-term shortfall. And sometimes the market realizes that not as much production was lost as initially thought or priced in.

Demand-driven bull runs take time to build, but they tend to last much longer.  With each passing week, it looks like we are moving into a long-term demand-driven market.

On Thursday, the weekly export report showed that we sold 33.9 million bushels of soybeans, putting the year-to-date sales at 1,977.8 million bushels.  We have now sold 89.9% of the USDA anticipated export totals; the 5-year average pace of sales is 66.6%.  Coming into this week, we needed to sell an average of 6 million bushels per week to hit the USDA target.  This week alone we sold a little more than 5 ½ times what we need to sell to hit USDA targets.

The current sales pace strongly suggests that USDA need to revise the balance sheet's export portion higher, sooner than later. The AgMarket team believes this adjustment will show up on the January USDA report.

On the domestic front, this week's NOPA (National Oilseeds Processors Association) crush number suggests domestic demand is just as strong. In the month of November, NOPA crushed 181.018 million bushels of beans, topping the previous record set in 2018 by 8%. It was the 3rd highest monthly crush ever reported by NOPA.  It was also the 10th record crush month seen during 2020.

Corn exports surge

Corn export demand continues to run well above its traditional pace. The weekly export sales reported corn sales at 75.8 million bushels putting the year-to-date total at 1,636.9 million bushels. We have now sold 61.8% of the USDA anticipated sales figure of 2,650 million bushels; the five-year average sales pace is 46.2%. This week's sales were a little less than three times the 27.4 million bushels weekly sales pace we need to hit to reach the USDA goal. 

Adding to the positive outlook for exports is the U.S. dollar index, as it is making new monthly lows as we wrap up the 2020 calendar year. This will be the first monthly close below the 100-month moving average since June of 2014.  The weaker the U.S. dollar, the more competitive U.S. exports are on the international market.

We anticipate both the soybean market as well as the corn market to find continued support due to the strong export program we are seeing until the world is comfortable that there is another source of beans or corn to supply their import needs.

 Weekly Corn Sales

Weekly Bean Sales

If you have questions, feel free to contact me directly at 815-665-0461 or anyone on the AgMarket.Net team at 844-4AGMRKT

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The opinions of the author are not necessarily those of Farm Futures or Farm Progress. 

About the Author(s)

Jim McCormick

Hedging strategist, AgMarket.Net

Before joining AgMarket.Net, Jim was a senior broker with a nationally recognized firm and has 24 years of experience as a registered commodity representative, servicing both commercial and individual trading and hedging customers. He specializes in hedging and trading strategies using combinations of forward contracting, futures and options for corn and soybean farmers and livestock producers. He has a Series 3 futures brokerage license and earned a bachelor’s degree in Agribusiness Management from Purdue University.

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