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Afternoon Market Recap for July 14, 2020

Falling crop quality helps soybean prices.

Corn finishes Tuesday’s session narrowly mixed, with most wheat contracts tracking higher today

Grain prices were mixed but mostly higher on a round of technical selling anchored by the announcement of two large grain sales to China this morning. Crumbling quality ratings for corn and soybeans lent additional support, although traders still appear to be mostly bearish on any substantial weather rally right now, with plenty of rain still in the forecast later this week. Most wheat contracts benefited from some short-covering after mixed news on world supplies today.

Rainfall potential will be mixed to close out the week, per the latest 72-hour cumulative precipitation map from NOAA. Some areas, including northern Missouri, eastern Iowa and all of Illinois, could see another 1” or more total accumulation between Wednesday and Saturday, while Minnesota and South Dakota will be relatively dry during this time. Further out, seasonally wet weather is likely from July 21 to July 27, with drier conditions emerging in the Central and Southern Plains, per NOAA’s latest 8-to-14-day outlook. The entire U.S. is likely to see above-average temperatures during this time.

Rising tech stocks is keeping Wall St. buoyant this week, with the Dow up another 398 points in afternoon trading to 26,483. Energy futures were mixed, with crude oil creeping 0.4% higher this afternoon to stay above $40 per barrel. Diesel is also up around 0.4% this afternoon, with gasoline dropping more than 2%. The U.S. Dollar softened moderately.

On Monday, commodity funds were net sellers of all grain contracts, including corn (-32,500), soybeans (-12,000), soymeal (-8,000), soyoil (-2,000) and CBOT wheat (-7,500).

Corn prices were narrowly mixed on an uneven round of technical maneuvering today, after traders mostly ignored a massive sale to China this morning and are still largely preoccupied with how much yield-replenishing rains the Midwest will see later this week. July futures inched ahead 0.75 cents to $3.3475, while September futures retreated 3 cents lower to $3.2575.

Corn basis bids moved 2 cents higher at an Illinois river terminal and two Midwestern processors while holding steady elsewhere across the central U.S. Tuesday. Sales have been generally slow so far this week after futures prices took a major step back yesterday.

Corn crop quality fell another two points last week, moving from 71% of the crop rated in good-to-excellent condition down to 69%. Analysts only expected USDA to dock quality one point. Another 23% of the crop is rated fair (unchanged from last week), with the remaining 8% rated poor or very poor (up two points from last week).

Physiologically, 29% of the crop is now silking, which is well above 2019’s pace of 14% but slightly behind the prior five-year average of 32%. And 3% of the crop has made it to dough stage, which is in line with the prior five-year average.

Private exporters reported to USDA the sale of 69.4 million bushels of corn for delivery to China during the 2020/21 marketing year, which begins September 1. That’s the fourth-largest daily corn sale since USDA began tracking this data.

A South Korean feedmill group has purchased 5.2 million bushels of corn from optional origins in an international tender that closed earlier today. The grain, split between two consignments, is for delivery in November and December.

With increasing confidence, weather forecasters are expecting a return to La Niña conditions, notes grain market analyst Bryce Knorr in the latest Ag Marketing IQ blog. “The event, however, isn’t expected to hang around into the 2021 summer, when it might threaten U.S. corn and soybean crops, since La Niña is associated with some of the biggest droughts historically,” he adds. “And odds are only a little better than 50-50 the episode will occur at all.” Click here to learn more about how the El Niño Southern Oscillation (ENSO) can affect grain production around the world.

Preliminary volume estimates were for 241,245 contracts, falling significantly below  Monday’s final count of 415,235.

Soybean prices moved moderately higher Tuesday on a round of technical selling amid another large sale to China announced this morning, along with lower-than-expected crop quality ratings. July futures firmed 5.75 cents to $8.8225, with August futures up 4.5 cents to $8.7850.

Soybean basis bids dropped 5 cents at a Nebraska processor and dipped 1 to 2 cents lower at two interior river terminals Tuesday while holding steady elsewhere across the Midwest today.

Soybean crop quality took a big step down, moving from 71% rated in good-to-excellent condition a week ago down to 68% through July 12. Analysts only expected USDA to dock quality one point. Another 25% of the crop is rated fair (up one point from last week), with the remaining 7% rated poor or very poor (up two points from last week).

Physiologically, 48% of the crop is blooming, versus 2019’s pace of 19% and the prior five-year average of 40%. And 11% is now setting pods, versus 2019’s pace of 3% and the prior five-year average of 10%.

Private exporters reported to USDA the sale of 4.7 million bushels of soybeans for delivery to China during the 2020/21 marketing year, which begins September 1.

Customs data confirmed Chinese soybean imports in June jumped 71% and topped prior records, with 410 million bushels. The bulk of last month’s purchases came from Brazil

Preliminary volume estimates were for 142,350 contracts, falling moderately below Monday’s final count of 226,247.

Wheat prices were mixed but mostly higher on a round of short-covering amid expectations of a smaller crop coming out of Russia. September Chicago SRW futures rose 2.75 cents to $5.2750, September Kansas City HRW futures dropped 6 cents to $4.43, and September MGEX spring wheat futures picked up a penny to reach $5.1975.

The winter wheat harvest continues to move a bit closer to the finish line, moving from 56% complete a week ago up to 68% through July 12. Analysts expected a bit quicker pace, with an average trade guess of 70%. This year’s progress remains slightly faster than the prior five-year average of 66%.

Spring wheat harvest will also kick off in a few short weeks, with 80% of the crop now headed. That’s above 2019’s pace of 72% but behind the prior five-year average of 85%. Quality-wise, USDA docked the crop another two points, with 69% of the crop now rated in good-to-excellent condition.

Russian consultancy Sovecon has lowered its estimates for the country’s 2020 wheat production by 1.4% to 2.928 billion bushels, citing drought stress in Russia’s southern regions. Russia is the world’s No. 1 wheat exporter (technically No. 2, if you consider the European Union as a single exporting unit).

In Ukraine, analyst APK-Inform boosted the country’s wheat production estimates by 3.3% to reach 929.6 million bushels. Ukraine’s wheat exports for 2020/21 also received an upward revision, now at 635.7 million bushels.

Egypt purchased 4.2 million bushels of wheat from Russia in an international tender that closed earlier this week. The grain is for shipment in late August.

Japan is seeking to purchase 4.6 million bushels of food-quality wheat from the United States, Canada and Australia in a regular tender that closes later this week. Of the total, 56% is expected to be sourced from the U.S.

Jordan purchased 2.2 million bushels of hard milling wheat from optional origins in at ender that closed earlier today. The grain is for shipment in late December.

Preliminary volume estimates were for 75,322 CBOT contracts, spilling moderately below Monday’s final tally of 123,210.

Closing Prices for Key Commodities 
  High Low Last Change
Corn                     $/bushel  cents/bu    
20-Jul 336.5 324.5 334.75 0.75
20-Sep 332 325.75 326 -3
20-Jul 875   882.25 5.75
20-Sep 879.25 870.25 874.25 3.5
Soymeal                $/ton        
20-Aug 286.9 284.6 285.2 0.7
Soyoil                    cents/lb        
20-Aug 28.61 27.78 28.46 0.44
Wheat                    $/bushel        
20-Jul     524.75 0
20-Sep 533.5 522.75 526.75 2.75
KC Wheat        
20-Jul 445.25 445.25 438.25 4.75
20-Sep 457.75 442 442.25 -6
MPLS Wheat        
20-Jul     510  
20-Sep 524.75 518 518.75 1
Live Cattle             cents/lb        
20-Aug 99.95 98.55 98.95 -0.7
Feeder Cattle         cents/lb        
20-Sep 138.325 137.25 137.575 -0.5
Lean Hogs             cents/lb        
20-Aug 51.675 49.7 49.975 -1.3
Crude Oil  $/barrel *Energy prices may not represent final settlements      
20-Aug 40.57 39.07 40.22 0.12
20-Aug 1.23 1.2027 1.2173 -0.0062
Unleaded Gasoline   $/gallon        
20-Aug 1.2588 1.217 1.2466 -0.0268
Natural Gas        
20-Sep 1.813 1.765 1.78 -0.017
Ethanol Futures        
20-Aug 1.233 1.232 1.233 -0.097
U.S. Dollar Index        
  96.67 96.125 96.195 -0.212
Gold                      $/ounce        
20-Aug 1815 1791.1 1811 0
20-Jul 2.921 2.8945 2.9155 -0.0265
Fertilizer Swaps     (as of 7/10)  
DAP Tampa-index              313.0 3
DAP-New Orleans              339.0 24
Urea-New Orleans              226.0 9
Urea-Middle East              240.0 0
Urea-Black Sea              211.0 0
UAN (32%) New Orleans              129.0 -1.65
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