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Afternoon Market Recap for Oct. 20, 2020

Wheat extends latest rally.

Corn and soybeans also add moderate gains Tuesday

Grain prices moved higher once again on Tuesday. Corn and soybeans each trended about 1% higher on another round of technical buying that was largely spurred by ongoing export optimism. CBOT wheat prices moved higher for a fifth consecutive session, meantime, reaching levels not seen since late 2014. Kansas City HRW contracts reached the highest levels since August 2018. Dry weather for some major overseas producers (including Russia, Argentina and others) has been the key driver for the latest rally.

Rain and snow continued to fall on large portions of the Corn Belt last weekend and earlier this week. More wet weather is likely for the rest of the week, with some areas likely to see another 1” to 1.5” between Wednesday and Saturday, according to the latest 72-hour cumulative precipitation map from NOAA. The agency’s 8-to-14-day outlook calls for seasonally cool, dry weather for much of the central U.S. between October 27 and November 2.

House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin have made progress in coronavirus stimulus negotiations, according to a spokesperson, which triggered some fresh optimism on Wall St. and helping the Dow move 257 points higher in afternoon trading to 28,453. Energy prices also made some moderate inroads. Crude oil trended more than 1.5% higher this afternoon, climbing back above $41 per barrel. Gasoline rose around 2%, with diesel picking up 1%. The U.S. Dollar softened moderately.

On Monday, commodity funds were net buyers of most grain contracts, including corn (+9,000), soybeans (+5,000), soymeal (+5,500) and CBOT wheat (+2,000) but were net sellers of soyoil (-3,500).

Corn

Corn prices trended moderately higher Tuesday, staying just under 14-month lows captured late last week. Technical buying pushed prices nearly 1% higher today, fueled by export optimism, with spillover strength from wheat lending additional support. December futures added 3.75 cents to $4.09, with March futures up 2.5 cents to $4.13.

Corn basis bids were steady to narrowly mixed Tuesday, tracking 1 to 2 cents higher at three Midwestern locations while dropping 2 cents lower at an Illinois river terminal today. Farmer sales have picked up in recent days after futures prices cleared $4 per bushel, and as harvest progress continues.

Corn harvest reached 60% completion through Sunday, jumping up from 41% a week ago but slightly behind trade estimates of 61%. Total progress is way ahead of 2019’s pace of 28% and the prior five-year average of 43%. Nearly all of the crop (97%) is now fully mature, up from 94% a week ago.

Corn quality ratings held steady this past week, with 61% of the crop rated in good-to-excellent condition, which was also in line with analyst expectations. Twenty-five percent of the crop is rated fair, with 14% rated poor or very poor – all unchanged from a week ago.

Ethanol production has seen two consecutive weeks of decline, moving to a one-month high of 937,000 barrels per day through October 9. Will that forward momentum continue? The U.S. Energy Information Administration releases its next batch of data tomorrow morning.

Despite a big crop in the U.S. and more than ample supplies, average basis levels are surprisingly decent, notes grain market analyst Bryce Knorr. “Even more noticeable for hedgers: Carry in the futures market is at very low levels,” he notes. “That’s making it more difficult for farmers to protect inventory they’ll store on farm into 2021 by selling futures or hedge-to-arrive contracts while they wait for the cash market to strengthen.” Learn more in the latest Ag Marketing IQ blog.

Algeria purchased 1.2 million bushels of animal feed corn in an international tender that closed last Thursday. The grain was likely sourced from the European Union or Black Sea region and is for shipment by November 20.

Preliminary volume estimates were for 306,951 contracts, moving slightly ahead of Monday’s final count of 289,269.

Soybeans

Soybean prices found double-digit gains Tuesday after a large export sale announced this morning triggered another round of technical buying. November futures climbed 10.75 cents and January futures added 11 cents – with both contracts closing at $10.65 today.

Soybean basis bids were steady to firm Tuesday, rising 3 to 7 cents higher across half a dozen Midwestern locations today.

Private exporters reported to USDA the sale of 4.9 million bushels of soybeans for delivery during the 2020/21 marketing year, which began September 1.

The 2020 soybean harvest made it to 75% completion through October 18, versus 61% a week earlier. Analysts were expecting even more progress, with an average trade guess of 79%. Most of the 2020 crop (97%) is now dropping leaves, versus 2019’s pace of 91% and the prior five-year average of 95%. USDA is no longer tracking quality ratings for this year’s crop.

Preliminary volume estimates were for 237,392 contracts, moving ahead of Monday’s final count of 217,203.

Wheat

Wheat prices enjoyed another round of gains Tuesday, as traders continue to monitor overly dry conditions among some key overseas competitors. Growing drought in the U.S. High Plains is also concerning – 98.3% of the region was affected as of October 13. A weaker U.S. Dollar lent additional support. December Chicago SRW futures gained 6.5 cents to $6.3350, December Kansas City HRW futures rose 9.25 cents to $5.7225, and December MGEX spring wheat futures added 8.75 cents to $5.78.

Planting progress continues for the 2020/21 winter wheat crop. Progress reached 77% this past week, up from 68% a week ago. That’s moderately ahead of the prior five-year average of 72%. There’s quite a bit of variability among the top 18 productions states, ranging from North Carolina (15%) all the way up to Colorado (98%). Just over half (51%) of the crop is now emerged, versus the prior five-year average of 48%.

Sudan hopes to acquire 36.7 million bushels of wheat from newly announced U.S. assistance. Details are still being worked through at this time.

A South Korean feedmill group has purchased 4.8 million bushels of animal feed wheat, at least partially sourced from the U.S., in a series of private deals. The grain is for arrival by mid-May.

A feed mill association in Thailand issued an international tender to purchase 7.1 million bushels of animal feed wheat from optional origins, which closes on Wednesday. The grain is for shipment between December and March.

Japan is looking to purchase nearly 3.0 million bushels of food-quality wheat from the United States and Canada in a regular tender that closes later this week. Of the total, 36% is expected to be sourced from the U.S.

Preliminary volume estimates were for 128,834 CBOT contracts, spilling below Monday’s final count of 148,212.

Closing Prices for Key Commodities 
  High Low Last Change
Corn                     $/bushel  cents/bu    
20-Dec 409.75 403.5 408.75 3.75
21-Mar 414 408.75 413.25 2.5
Soybeans        
20-Nov 1065.75 1051.25 1064 10.75
21-Jan 1065.5 1051.25 1063.75 11
Soymeal                $/ton        
21-Jan 371.1 363.8 366.6 0.1
Soyoil                    cents/lb        
21-Jan 33.43 32.32 33.31 0.9
Wheat                    $/bushel        
20-Dec 638.25 623.5 632 6.5
21-Mar 636.5 622.75 632 7.25
KC Wheat        
20-Dec 572.5 560.25 571 9.25
21-Mar 579.5 568 578 9
MPLS Wheat        
20-Dec 578.75 567.5 577.75 8.75
21-Mar 588.75 579.5 588 7.5
Live Cattle             cents/lb        
20-Oct 104.95 102.975 104.05 0.05
Feeder Cattle         cents/lb        
20-Nov 131.725 127.9 130.3 0.225
Lean Hogs             cents/lb        
21-Feb 70.15 68.3 69 -1.85
Crude Oil  $/barrel *Energy prices may not represent final settlements      
20-Nov 41.7 40.25 41.51 0.68
Diesel        
20-Nov 1.1786 1.1445 1.1722 0.0141
Unleaded Gasoline   $/gallon        
20-Nov 1.1925 1.1521 1.1858 0.0235
Natural Gas        
20-Dec 3.342 3.251 3.26 -0.02
Ethanol Futures        
20-Dec 1.4   1.444  
U.S. Dollar Index        
20-Dec 93.505 92.975 93.06 -0.369
Gold                      $/ounce        
20-Nov 1913.6 1893.6 1909.1 2.7
Copper        
20-Oct 3.14 3.14 3.14 0.059
Fertilizer Swaps     (as of 10/16)  
DAP Tampa-index              355.0 0
DAP-New Orleans              394.6 1
Urea-New Orleans              239.8 2
Urea-Middle East              258.0 -2
Urea-Black Sea              241.0 1
UAN (32%) New Orleans              132.3 0

 

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