Been busy in the field? Here's the marketing news you missed.

Ag Marketing IQ

After an extended bearish corn price environment, things are looking brighter for U.S. corn producers. On the heels of huge Chinese corn buying, adverse August weather across significant parts of the Midwest, and, most recently, a surprisingly tight Sept. 1 stocks report, nearby December corn futures this week surged to 3.85 ½, which is the highest price for the contract in nearly 7 months. In addition, CFAP 2.0 payments were announced several weeks ago, amounting to roughly 23 cents/bu. for corn on the producer’s 2020 Actual Production History. Furthermore, corn basis levels in many areas have firmed recently, and in a number of markets, are extremely strong during the post-harvest timeframe.

The Sept. 30 data kept the good times rolling, at least for now. USDA slashed its estimate of Sept. 1 leftover 2019 crop inventories by around 10%, bullish surprises that triggered double digit gains. December corn surged to its best showing in nearly seven months while November soybeans jumped 30.5 cents.

USDA is bound to stay influential with the October WASDE report coming out this Friday. What should you look for? One tip is to be wary of possible traps that can come along with buying or selling nearby puts or calls that build up enhanced implied volatility premium in the time leading up to the release of a report.  Have price targets established well before report day and consider option spreads that would establish a covered sale. With current focus on finding opportunities to re-own previous sales with the purchase of call options, we will also watch for values for a bull-call spread that would involve simultaneous sale of a call. 

When visiting with producers about how to manage risk and capture opportunity from current markets, many are unsure of what to do. The hypnotic trance of higher prices sometimes compels producers to do nothing, and “wait and see.” The distraction of harvest, and working long days, adds to the haze. Tomorrow’s report may provide information that could justify corn futures to trade to $4.50 or soybeans futures to $11 per bu. But what if it doesn’t?

Exports

The latest export inspection report from USDA, out Monday morning and covering the week through October 1, held mostly bullish data for the second consecutive week. Soybeans once again climbed above all trade guesses to land moderately higher than the prior week’s total. Corn and wheat also made moderate adjustments higher week-over-week, landing on the high end of analyst estimates.

Export optimism has been high throughout much of September and October, and USDA’s latest weekly recap held plenty of supportive data to keep up the current momentum. Corn and wheat volume landed on the high end of trade estimates, with the soybean tally exceeding all trade guesses for the second straight week.

Crops

Relatively dry weather across the central U.S. kept combines rolling, as evidenced by the latest USDA crop progress report, out Monday afternoon and covering the week through October 4, which showed both corn and soybean harvest made moderate inroads this past week. Corn harvest progress moved from 15% a week ago up to 25% through October 4, according to USDA. The 2020 soybean harvest is even farther along, reaching 38% through Sunday.

Yield reports from Feedback from the Field survey respondents have been variable, at best, over the past week. An Ohio farmer summed it up best, saying “Some fields are very poor. Some fields are average.” An Indiana farmer estimated that “[yield] potential deteriorated 10-20 bpa in the last several weeks prior to harvest.” But not all farmers reported yields in complete disrepair. “50 to 65 bpa so far,” a Northeastern Ohio farmer stated. Another Northern Illinois grower “made 95% of APH [yields].”

Soybean futures soared after USDA cut 2020/21 ending stocks to a mere 290 million bushels on tightened ending stocks and increasing exports – 170 million bushels lower than the agency’s September 2020 estimate. Yield estimates were largely unchanged this month, despite analyst expectations of significantly reduced production forecasts. Global soy stocks also fell on decreased South American production estimates.

Recaps

Traders were on track to settle mostly higher prices this morning ahead of today’s WASDE report, though many were mindful of a potentially new price direction that could be pursued depending on the results of USDA’s monthly report. Dry planting conditions in Brazil also threatened potential yields in the South American exporting powerhouse. Dry weather in Brazil continued to drive prices in the soy complex higher. Steady Chinese demand showed few signs of weakening, providing an extra layer of support for the recent rally. Russia’s winter wheat acreage could see a 10-15% decline this fall as farmers continue to delay planting in hopes of rain. U.S. farmers are in the same boat, with few chances of rain in the weekend forecast.

All eyes were on USDA’s monthly World Agricultural Supply and Demand Estimates report out Friday morning. The agency showed significantly lower corn and soybean stocks, which helped spark a wave of technical buying that pushed corn prices nearly 2% higher, while soybeans added gains of around 1.5%. Wheat prices were mixed on an uneven round of technical maneuvering, meantime. Chicago SRW contracts saw a moderate decline, while Kansas City HRW contracts emerged with solid gains and nearby MGEX spring