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Grain market week in review—June 18, 2021

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The soybean market bottomed out Thursday but bargain hunters lifted prices significantly Friday

Missed some market news this week? Here’s a quick recap.

Ag Marketing IQ

The weather dominated the markets for the most part this week. Dry fields are impacting the corn and soybean plants and that’s a big weight on many farmers shoulders. And if the weather isn’t enough of a concern, then throw in renewable fuels.

Soybean oil rally screeches to a halt

This week, the Biden Administration was discussing possible relaxation of Renewable Fuels Standard mandates to help petroleum refiners hurt by higher biofuel prices. Like many shoot first, ask questions later events in the commodities market, it was highly unclear whether any changes would actually take place

Of course, soybean oil, the primary feedstock for biodiesel, really isn’t the issue in the seemingly never-ending showdown between the corn and petroleum industries over ethanol. But it was caught in the crossfire between the two camps over controversial waivers granted some small refiners, who say the high cost of ethanol is forcing them out of business. The curious timing of the latest stories – just a day after USDA increased its estimate of 2020 corn crop ethanol demand – only added to the intrigue.

One inch won't be enough...

The recent drawback in grain prices has revealed the markets bias as overly bearish when it comes to the slightest bit of moisture in the forecast. If I were to write a letter to the market, it would say a couple of things. First, it has to rain eventually even to get just an average crop. Traders are acting as if a single rain will guarantee a bumper crop and send us on direct path for higher ending stocks when nothing could be further from the truth. Second, at this point in time, for a large part of the Midwest, even if the best case scenario of half an inch to an inch does materialize in the forecast, it will not even begin to address the deterioration that we are seeing. As one of our customers puts it: “In north Central Iowa the corn is rolling up today, beans are not growing. This could be a regional disaster of epic proportions soon in corn at least."

My farm is a couple hours from him and the situation is not much different. My crop does not need one inch of rain….it needs four inches! 

So it’s easy to understand how the problem could grow really fast.


Trading a potential drought

“My corn is burning up!  The plant looks like more like a pineapple than a corn plant.  And it’s not just my corn that looks like this, it’s all over Iowa and the Northern Plains!”

I’ve heard this more than once this week, probably closer to a dozen times. The drought crippling Iowa, North Dakota, South Dakota, and now Minnesota is intense. The images on social media show exactly how stressed the corn crop is in those states.

It is going to be HOT for much of the Midwest this weekend. There is a chance for rain early next week thanks to a tropical storm forming in the Gulf of Mexico. This storm is expected to reach the shores of Louisiana on Saturday. Trade is hopeful that this storm and changing weather fronts will bring much needed moisture into Midwest. It might not be a soaker of the rain to alleviate the drought, but it might be enough to get the crop to survive one more week.


Weather continues to dominate markets

This has been a very serious price decline for reasons that we either do not know…..or the market truly did not represent the news we had to decipher. As of Thursday’s close, both corn and beans fell a record 77.25 cents and $1.86 respectively for the week. This unprecedented volatility created huge adverse swings for any account with an ownership position of futures or short puts. This move however has also created a huge, unexpected opportunity for anyone needing to buy grains.

Weather Change  - Last week hot and dry. Last Sunday night the models changed and called for below temps and above precip including a general 1-3 inch rains followed by more. The market opened 20 lower versus a 20 higher call. That change in pattern has not happened and as of tonight, 2 models have gone dryer for Central IA and west. One front has already moved through, and the most potential rain is on Sunday. Some follow up scattered stuff next week and then some models are hotter and drier from June 22 to mid-July. Thus, if on Sunday we realize the western belt missed most of the rain, and the warmer and drier pattern verifies, this market could be volatile higher.


Ag exports

The 2021/22 marketing year has already begun for the wheat crop (as of June 1), and there are only a handful of weeks left in the 2020/21 season for corn and soybeans. As such, a shift from old crop sales to new crop sales is slowly unfolding, as evidenced by some data from the latest USDA export sales report, out Thursday morning and covering the week through June 10.

Old crop corn sales tumbled 95% below the prior four-week average, to less than 709,000 bushels. New crop sales fared better but were still disappointing overall, with 10.9 million bushels. That was toward the lower end of trade estimates, which came in as high as 35.4 million bushels ahead of today’s report. Cumulative sales for the 2020/21 marketing year still far exceed last year’s pace, with 2.148 billion bushels.

Corn export shipments were much more robust, with 65.4 million bushels, but that was still 16% below the prior four-week average. China (24.2 million) and Japan (21.7 million) were the top two destinations. Mexico, Colombia and Morocco rounded out the top five.

Net sales for old crop soybeans were tepid, at 2.4 million bushels, and new crop sales only chipped in another 240,000 bushels, for a total of 2.8 million bushels. That was on the low end of trade guesses, which ranged between zero and 18.4 million bushels. Cumulative totals for the current marketing year are still nearly 800 million bushels ahead of the prior year’s pace, with 2.127 billion bushels.


The markets are closed, but all eyes will be on the markets Monday morning after this weekend's weather. 


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