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Afternoon Market Recap for Aug. 7, 2020

Record yields ahead?

Grain prices see red in Friday’s session on consensus of above-trend yields

Because more and more people are now bracing for record or near-record corn and soybean yields this fall, prices have sputtered, even though export trends have been pointed in a positive direction recently. Corn and soybean prices each dropped another 1% Friday, as traders began to square positions ahead of USDA’s next major supply and demand data dump, out next Wednesday. Wheat prices also spilled into the red today, although losses were generally not as severe after getting sliced earlier in the week.

Between Saturday and next Tuesday, some wetter weather is likely to return to the upper Midwest, with some parts of Minnesota and Wisconsin ready for another 2” or more total rainfall, according to the latest 72-hour cumulative precipitation map from NOAA. The agency’s 8-to-14-day outlook, covering August 14 to August 20, predicts seasonally wet weather could persist in the upper Midwest, as warmer-than-average temperatures will stretch back across the entire Corn Belt during this time.

On Wall St., investors applauded a round of better-than-expected jobs data but are still anxious that lawmakers haven’t settled on a new stimulus package, which pushed the Dow down 76 points in afternoon trading to 27,310. Energy prices shifted lower, with crude oil falling 1.7% to fall back below $42 per barrel. Diesel dropped nearly 2.5%, with gasoline down around 1.5%. The U.S. Dollar firmed moderately.

On Thursday, commodity funds were net sellers of most major grain contracts, including soybeans (-2,000), soymeal (-2,000) and CBOT wheat (-7,000) but were net buyers of corn (+500) and soyoil (+1,500).

Corn prices were sniped by another round of technical selling Friday, pushing prices another 1% lower. Most experts are now pegging this year’s yield potential at above 180 bushels per acre. September futures fell 3.5 cents to $3.0775, with December futures down 2.75 cents to $3.21. It was a rough week, all things considered, with contracts losing 2.3% of their value since Monday’s open.

Corn basis bids were steady to slightly mixed Friday, trending 2 cents higher at an Iowa river terminal while sliding a penny lower at an Iowa ethanol plant today.

Next week, USDA will release its August World Agricultural Supply and Demand Estimates (WASDE) report, and analysts expect the agency to show average yields at 180.4 bushels per acre, for a total production of 15.170 billion bushels. Both numbers would be higher than USDA’s July estimates, if realized. Global stocks for 2020/21 are also expected to increase moderately, to 12.610 billion bushels.

In the latest Ag Marketing IQ blog, grain market analyst Bryce Knorr suggests that yields could be even higher than 180.4 bushels per acre. Looking at USDA’s national crop ratings and making some statewide adjustments weighted by June acreage, Knorr calculated a state model of 183.9 bpa and a national model of 184.0 bpa. Click here to learn more.

According to Naomi Blohm, traders are now expecting record or near-record corn yields this fall. “While export demand has picked up and been impressive, the notion of a 15-billion-bushel crop overshadows all at the moment,” she says, explaining why corn prices have been hit so hard in recent sessions. Click here to learn more.

France’s 2020 corn crop is under some weather stress, with crop ratings declining from 77% rated in good-to-excellent condition a week ago down to 74% through August 3. An incoming heatwave could further damage crop quality there.

Preliminary volume estimates were for 302,747 contracts, moving fractionally higher than Thursday’s final count of 302,110.

Soybean prices followed corn prices lower Friday on a growing consensus of a bin-busting crop this fall, which triggered some technical selling even after the third large sale to China this week was announced earlier today. August futures dropped 10.5 cents to $8.7025, while September futures lost 7.25 cents to $8.6750.

Soybean basis bids were mostly steady across the central U.S. on Friday, although they did slip a penny lower at an Illinois river terminal today. Farmer sales have been relatively muted this week.

Private exporters reported to USDA the sale of 16.8 million bushels of soybeans for delivery to China during the 2020/21 marketing year, which begins September 1. It was the fourth large soybean sale reported this week – two of the others also went to China, with the last marked for unknown destinations at this time.

China has imported 370.7 million bushels of soybeans total in July, sliding 11.2% lower month-over-month. The world’s No. 1 soybean importer primarily purchases its grain from Brazil and the United States. Year-to-date purchases have topped 2.026 billion bushels.

Ahead of the August WASDE report from USDA, out next week, analysts expect the agency to show average soybean yields at 51.3 bushels per acre, for a total production of 4.258 billion bushels. Both numbers represent a moderate increase from USDA’s July estimates, if realized. Global ending stocks for 2020/21 are also expected to move higher, to 3.598 billion bushels.

Historically, the weather model for soybeans has been the best predictor of yields, according to grain market analyst Bryce Knorr. “This year it points to a yield of 50.4 bpa, but that assumes the mostly average weather forecast for August by the National Weather Service,” he says. Yield estimates based on crop ratings are even higher – click here to learn more.

Preliminary volume estimates were for 168,544 contracts, sliding slightly below Thursday’s final count of 178,071.

Wheat prices stumbled Friday on a round of technical selling partly spurred by spillover weakness from corn and soybeans, although the usual specters of large domestic and global stocks are still creating downward pressure. September Chicago SRW futures dropped 5.25 cents to $4.96, marking the first time it has closed below $5 per bushel in a month. September Kansas City HRW futures lost 1.5 cents to $4.157 and September MGEX spring wheat futures slipped a penny lower to $4.95.

Ahead of next week’s WASDE report from USDA, analysts expect the agency to show moderately higher global wheat stocks for both 2019/20 and 2020/21, with an estimated 10.896 billion bushels and 11.532 billion bushels, respectively.

Domestically, analysts predict USDA’s latest U.S. production numbers will hold mostly steady from its July numbers, with 1.833 billion bushels. Individual trade guesses ranged between 1.799 billion bushels and 1.856 billion bushels.

Due to relatively poor growing conditions in France, Romania and other countries, total European Union wheat production could fall to 2018 levels of around 4.7 billion bushels.

Ukraine’s 2020 wheat harvest is 87% complete, according to the country’s agriculture ministry, with a production of 848.8 million bushels so far. Total grain production is expected to decline 9.5% this year. Ukraine is the world’s No. 4 wheat exporter.

Bulgaria’s wheat production is expected to tumble 20% year-over-year to 166.4 million bushels, according to the country’s agriculture ministry after dealing with extensive drought. The country’s barley harvest may only rise 3%, meantime, despite an 18% rise in planted acres this season.

Pakistan issued an international tender to purchase 55.1 million bushels of wheat from optional origins, which closes August 18. Individual bids must be for at least 7.3 million bushels apiece.

Preliminary volume estimates were for 185,030 CBOT contracts, moving slightly higher than Thursday’s final tally of 167,182.

 

Closing Prices for Key Commodities 
  High Low Last Change
Corn                     $/bushel  cents/bu    
20-Sep 311.75 307.25 307.75 -3.5
20-Dec 324.25 320 320.75 -2.75
Soybeans        
20-Aug 878.75 871 870.25 -10.5
20-Sep 875.75 864.5 865.75 -7.25
Soymeal                $/ton        
20-Sep 283.9 281.9 282 -0.9
Soyoil                    cents/lb        
20-Sep 31.38 30.71 30.85 -0.33
Wheat                    $/bushel        
20-Sep 503.75 490.5 495.5 -5.25
20-Dec 511 498.5 503.5 -4.25
KC Wheat        
20-Sep 420 409.75 415.5 -1.5
20-Dec 430.75 420.75 427.25 -0.75
MPLS Wheat        
20-Sep 497.75 491 494.5 -1
20-Dec 512.5 506.5 510.5 -0.25
Live Cattle             cents/lb        
20-Aug 103.7 102.425 102.725 0.1
Feeder Cattle         cents/lb        
20-Sep 146.55 144.975 145.3 -0.575
Lean Hogs             cents/lb        
20-Oct 51.85 49.725 51.075 1.875
Crude Oil  $/barrel *Energy prices may not represent final settlements      
20-Sep 42.22 41.06 41.41 -0.54
Diesel        
20-Sep 1.2562 1.2174 1.2246 -0.0253
Unleaded Gasoline   $/gallon        
20-Sep 1.2378 1.1956 1.2105 -0.0176
Natural Gas        
20-Oct 2.389 2.283 2.363 0.058
Ethanol Futures        
20-Sep 1.12 1.11 1.12 -0.04
U.S. Dollar Index        
  93.625 92.74 93.43 0.662
Gold                      $/ounce        
20-Sep 2074 2011 2023.6 -27.9
Copper        
20-Aug 2.874 2.792 2.793 -0.1125
Fertilizer Swaps     (as of 8/7)  
DAP Tampa-index              325.0 9
DAP-New Orleans              358.3 2
Urea-New Orleans              263.5 23
Urea-Middle East              271.5 12
Urea-Black Sea              235.0 10
UAN (32%) New Orleans              130.6 1.1
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