Afternoon Market Recap for July 28, 2021

phongphan5922/Thinkstock markets charts - green with red line
Wheat rallies on spring wheat tour.

No new market news creates scant pricing opportunities for corn, soybeans

Good afternoon!  More moderate temperatures are on the horizon for the Corn Belt. How are your crops surviving the heat? Click here to take our ongoing Feedback from the Field survey on 2021 crop conditions. Our Google Map, updated daily, provides all past responses for farm readers. Check out our latest Feedback from the Field analysis to see the most recent farmer comments from around the country.

Corn

Corn prices edged slightly higher today, buoyed by the prospect of frost damage across the few acres remaining to be harvested from Brazil’s safrinha crop. Concerns about growing conditions for the crop in the Upper Midwest also lent some upward price support.

South Africa likely harvested 7% more corn in 2020/21 than a year ago. Higher acreage, timely rains, and favorable growing conditions drove the yield increase. South Africa’s government-led Crop Estimates Committee (CEC) pegs the 2020/21 crop at 647 million bushels, over half of which is expected to be processed and sold for human consumption.

USDA estimates the crop slightly higher at 669 million bushels. South Africa is the world’s ninth largest corn producer.

Corn prices received a boost this morning after fresh reports of frost in Brazil. AgBravo CEO Julio Bravo can attest to those weather conditions, noting that coffee, sugarcane, orange, and wheat crops are all at risk of damage following the recent cold snaps.

“Fortunately, the corn harvest is nearly complete and soybean planting doesn’t begin for at least another month or so,” Bravo shares in the latest South American Crop Watch column. “The Brazilian weather forecast is predicting a cold front again next week. Let’s see how things go.”

Fresh weekly ethanol data released today by the U.S. Energy Information Administration saw weekly output volumes shrink over 1% to 42.6 million gallons/day as stockpiles rose on flat consumer gasoline demand.

Weekly ethanol stocks rose 1% on the week to 955 million gallons – the highest stockpile since the mid-February cold snap. Weekly gasoline usage averaged 392 million gallons/day for the week ending July 23, which is in line with the 356 million – 398 million gallon/day- weekly range in which Americans have been purchasing gasoline this summer.

There was a glimmer of hope for the ethanol industry in today’s dataset. Ethanol blending by refiners increased 2.5% on the week to 39 million gallons/day. As drivers navigate the post-pandemic era, the fate of ethanol will increasingly rely on gasoline consumption breaking out of the current summer usage range to lift ethanol prospects for corn growers.

Farm Futures contributing analyst Bryce Knorr reminds growers that the August WASDE is coming up and farmers may want to start creating some hedges against further downside price risk ahead of USDA’s updated yield estimates.

“While new crop lags nearly a dollar below May contract highs, history suggests potential for more pain ahead,” Knorr cautions in the latest Ag Marketing IQ column. “Over the past 10 years futures dropped half the time the day of the August report, and were lower six times two weeks later.”

Knorr argues that puts can be a valuable strategy to pursue in the event prices continue on a downward spiral, though pursuing that strategy may depend on your cost structure. “Evaluating options in this fashion isn’t easy,” Knorr surmises. “But knowing how a position might respond can help decide whether it’s better to pay a little or a lot for a put – or perhaps forgo this type of protection altogether.”

Soybeans

Soybean futures eeked out a minor gain in today’s trading session, rising $0.01-$0.03/bushel. Traders bemoaned the lack of new market information to shift prices, though the current heat wave baking the Upper Midwestern soybean crop did manage to create some buying opportunities for investors in today’s trading session.

The Chinese government will introduce emergency measures to stabilize hog prices as high hog weights and the recovery of China’s hog herd from African swine fever (ASF) increase domestic pork supplies and weigh prices lower.

China’s hog market has seen high volatility after floodwaters swept away thousands of pigs and chickens in the central Henan province in recent weeks. High feed costs have weighed on farmers and crushers alike amid tight global supplies. Soy processing margins have tightened in the country as a result, slowing soybean trade flows into China from Brazil.

Wheat

The second day of the Wheat Quality Council’s spring wheat tour through North Dakota is expected to show more lackluster crop conditions and below-average yield projections as the tour enters northern North Dakota.

That prospect, paired with a weaker dollar and frost concerns in Brazil, sent Chicago and Kansas City futures 0.15-$0.18/bushel higher in today’s trading session while Minneapolis futures soared $0.20-$0.28/bushel higher as a heat wave continued to bake what is left of the spring wheat crop on the Northern Plains.

Yesterday marked the first day of the Wheat Quality Council’s (WQC) annual spring wheat tour, which resumed this year after last year’s tour was cancelled due to the pandemic. The tour kicked off yesterday by surveying crops in southern and east central North Dakota, where 100% of the state is experiencing moderate to exceptional drought conditions.

As expected, yield estimates are well below historical averages due to drought stress on the crop, with yesterday’s tour turning out an estimate of 29.5 bushels per acre after 100 field samples from the region. The five-year average estimate typically recorded by the tour stands at 43.3 bushels per acre.

Plants are also shorter than average, increasing the difficulty for combines to harvest it and dramatically shrinking hay output for livestock producers across the state as well.

Spring wheat is milled for flour used in artisanal breads, pizza dough, and bagels and is also frequently blended with lower grades of wheat to improve flour quality. North Dakota is the country’s largest producer of spring wheat. The WQC’s tour will resume today in the upper portions of the state.

Frost warnings forecast in Brazil’s southern and southeastern regions threatened to damage wheat crops in the flowering stages of development. Brazilian wheat yields are already expected to be lower than average due to drought conditions in the country’s southern states.

Weather

The recent heatwave finally has an end in sight, according to NOAA’s short-range forecasts. Temperatures will likely fall into the 80’s in the Upper Midwest by tomorrow, though blistering temperatures will likely remain in place in the Southern Plains. The cooldown bodes well for crops – especially corn crops that are entering into peak pollination activity this week.

While there is a chance of scattered showers in the Great Lakes region today and tomorrow, don’t expect significant accumulation for crop areas enduring heat stress. Wisconsin and Southern Michigan could see the best prospects for rain over the next 24 hours, with up to an inch and half expected to begin cooling down the region by tomorrow morning.

Financials

Coronavirus cases in the U.S. rose to 34,606,501 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. It was a daily increase of 71,065 cases – one of the largest daily caseload increases since vaccinations rates peaked earlier this year. The death toll increased to 611,304 deaths as of press time.

The CDC announced yesterday that all persons, vaccinated and unvaccinated, are recommended to wear masks in indoor spaces in areas of the country where COVID-19’s Delta variant is spreading at high rates.

According to the CDC, 69% of U.S. adults have received at least one COVID-19 vaccine. Over 163 million Americans (49%) are fully vaccinated. Over 3.9 billion vaccine doses have been administered worldwide.

It’s halfway through the 2021 growing season and Water Street Solutions CEO Darren Frye points out that it is a great time to evaluate how your farm’s progress towards financial goals are going. “You can revisit projections created earlier in the year to make updates and changes, now that you probably know more information about things like costs, revenues, and the current state of your crops,” Frye suggests.

In the latest Finance First column, Frye recommends that farmers take some time in the next few weeks to evaluate 2021 crop year projections, long-term operational goals, and financial metrics. “Once you’ve checked in with these three areas, you may have a clearer picture of where your operation currently stands,” Frye explains.

“Then, use that information to determine whether you need to make any changes to your marketing plans, as well.”

U.S. stock indices were mixed today following Federal Rerserve Chairman Jerome Powell’s comments to Congress that employment and inflation rates are recovering enough to justify the Fed slowing its bond purchases later this year. The bond buybacks were a tool the Fed used to ward off further economic distress in the early days of the pandemic.

Afternoon Ag Commodity Prices - 7/28/2021
Contract Units High Low Last Net Change % Change
SEP '21 CORN $ / BSH  5.5425 5.45 5.5 0.0125 0.23%
DEC '21 CORN $ / BSH  5.525 5.4275 5.495 0.0325 0.59%
MAR '22 CORN $ / BSH  5.6 5.505 5.575 0.0375 0.68%
MAY '22 CORN $ / BSH  5.64 5.5475 5.615 0.035 0.63%
JUL '22 CORN $ / BSH  5.635 5.555 5.6175 0.035 0.63%
SEP '22 CORN $ / BSH  5.145 5.08 5.1275 0.0225 0.44%
DEC '22 CORN $ / BSH  5 4.9375 4.97 0.015 0.30%
AUG '21 SOYBEANS $ / BSH  14.3575 14.105 14.3125 0.13 0.92%
SEP '21 SOYBEANS $ / BSH  13.7875 13.58 13.6975 0.0275 0.20%
NOV '21 SOYBEANS $ / BSH  13.71 13.505 13.61 0.015 0.11%
JAN '22 SOYBEANS $ / BSH  13.75 13.5575 13.6525 0.01 0.07%
MAR '22 SOYBEANS $ / BSH  13.645 13.47 13.56 0.02 0.15%
MAY '22 SOYBEANS $ / BSH  13.6 13.435 13.5275 0.025 0.19%
JUL '22 SOYBEANS $ / BSH  13.5675 13.42 13.51 0.03 0.22%
AUG '22 SOYBEANS $ / BSH  13.245 13.225 13.3075 0.03 -0.24%
SEP '22 SOYBEANS $ / BSH  12.855 #N/A 12.84 0.0325 0.00%
AUG '21 SOYBEAN OIL  $ / LB 66.89 65.62 66.61 0.35 0.53%
SEP '21 SOYBEAN OIL  $ / LB 65.26 63.88 64.94 0.55 0.85%
AUG '21 SOY MEAL $ / TON 360.1 354.1 356 -2.8 -0.78%
SEP '21 SOY MEAL $ / TON 359.3 353.2 355.1 -3.1 -0.87%
OCT '21 SOY MEAL $ / TON 358.7 351.7 354.5 -3 -0.84%
DEC '21 SOY MEAL $ / TON 362.6 355.1 357.8 -3.4 -0.94%
JAN '22 SOY MEAL $ / TON 363.1 355.7 358.3 -3.5 -0.97%
SEP '21 Chicago SRW $ / BSH  6.9625 6.7375 6.905 0.16 2.37%
DEC '21 Chicago SRW $ / BSH  7.055 6.84 6.995 0.1525 2.23%
MAR '22 Chicago SRW $ / BSH  7.12 6.91 7.0625 0.1475 2.13%
MAY '22 Chicago SRW $ / BSH  7.125 6.9275 7.0675 0.1425 2.06%
JUL '22 Chicago SRW $ / BSH  6.945 6.76 6.8925 0.125 1.85%
SEP '21 Kansas City HRW $ / BSH  6.6075 6.4075 6.6 0.185 2.88%
DEC '21 Kansas City HRW $ / BSH  6.72 6.52 6.71 0.1825 2.80%
MAR '22 Kansas City HRW $ / BSH  6.7925 6.5975 6.785 0.185 2.80%
MAY '22 Kansas City HRW $ / BSH  6.8125 6.7 6.8125 0.18 2.71%
JUL '22 Kansas City HRW $ / BSH  6.715 6.5225 6.6925 0.155 2.37%
SEP '21 MLPS Spring Wheat $ / BSH  9.0675 8.795 9.065 0.2825 3.22%
DEC '21 MLPS Spring Wheat $ / BSH  8.945 8.7 8.94 0.26 3.00%
MAR '22 MLPS Spring Wheat $ / BSH  8.805 8.635 8.7675 0.2 2.33%
MAY '22 MLPS Spring Wheat $ / BSH  8.665 8.5425 8.63 0.17 2.01%
JUL '22 MLPS Spring Wheat $ / BSH  8.4425 8.4 8.44 0.1 1.20%
SEP '21 ICE Dollar Index $ 92.785 92.27 92.34 -0.096 -0.10%
 SE '21 Light Crude $ / BBL  72.6 71.7 72.37 0.72 1.00%
 OC '21 Light Crude $ / BBL  72 71.16 71.79 0.65 0.91%
AUG '21 ULS Diesel $ /U GAL 2.1609 2.1417 2.1544 0.0105 0.49%
SEP '21 ULS Diesel $ /U GAL 2.1627 2.1429 2.1566 0.011 0.51%
AUG '21 Gasoline $ /U GAL 2.3328 2.2998 2.3091 -0.005 -0.22%
SEP '21 Gasoline $ /U GAL 2.3007 2.2711 2.2816 0.0003 0.01%
AUG '21 Feeder Cattle $ / CWT 161.025 159.7 160.125 -0.575 -0.36%
SEP '21 Feeder Cattle $ / CWT 164.475 163.15 163.55 -0.45 -0.27%
 AU '21 Live Cattle $ / CWT 123.675 122.85 123.075 0.15 0.12%
 OC '21 Live Cattle $ / CWT 129.25 128.175 128.6 0.175 0.14%
AUG '21 Live Hogs $ / CWT 107.7 105.4 105.675 -1.8 -1.67%
OCT '21 Live Hogs $ / CWT 92.375 89.525 89.525 -3 -3.24%
JUL '21 Class III Milk $ / CWT 16.55 16.48 16.48 -0.06 -0.36%
AUG '21 Class III Milk $ / CWT 16.69 16.32 16.39 -0.22 -1.32%
SEP '21 Class III Milk $ / CWT 16.66 16.46 16.5 -0.16 -0.96%



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