Corn, soy, wheat all finish week lower

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Market week in review: What happened on Friday as corn capped first weekly loss since early December?

Missed some market news this week? Check out the latest in Ag Marketing IQ commentary as well as updates from Ben Potter and Jacquie Holland.

Ag Marketing IQ

Crop prices aren’t the only thing going up to start 2021. Input costs for fuels and fertilizer are also on the rise, with some outpacing the rally in 2021 crop corn futures. Urea led the charge last week. Swaps at the Gulf jumped $32 a ton to $300, a one-week increase of 12% as buyers scrambled to secure barges, with supplies limited by a slow pace of imports. International sellers had been focused on big tenders from India over the fall and early winter, along with demand from South America. Overall Gulf prices are up around 40% from early October lows and are 65% off the COVD-19 bottom last spring.

With U.S. soybean carry-out approaching unsustainable levels (sub-100 million bushels), questions are being asked as to whether or not soybean meal prices are at a point where demand rationing is starting to take place.

When the market makes a quick move up like it did recently, they can get over heated.  Markets don’t move in straight lines. There are several reasons for corrections. The market either runs out of buyers as it makes a new high as well as those long in the market begin to take profits, thus exiting the market. You also have fresh sellers coming in, believing the market has peaked. All of this is healthy in an uptrend.

The aftermath of the Derecho storm and extreme heat of August took a toll on U.S. yields. On last week’s report, 2020-21 yield fell from 175.8 bushels per acre to 172 bushels per acre. This yield reduction led to an overall production loss of 325 million bushels. USDA revised its Sept. 1 stocks estimate lower by 76 million bushels, (this would represent the 2019-2020 ending stocks). On paper USDA showed this truth as an increase to the 2019 feed and residual category, increasing demand to 5.9 billion bushels. That Sept. 1 stocks number is now 1.919 billion bushels, which then also becomes the number pegged as old crop carry-in for the 2020-21 marketing year.

Corn and bean markets have had quite a run over the last several months. With corn rallying two and a half bucks while beans were pushing a six-dollar rally, producers have been smiling from ear to year. However, all markets either top or have corrections at some point in time. This past week we were granted a big set-back. Was this a top in the market or did we simply flush out some of the weak longs?

E-Corn-onomics

In a recent Farm Futures survey, 2021/22 corn sales were a mere 6.9% compared to 18.7% for the same time a year ago. Respondents reported an average of 5.9% of new crop soybeans sold compared to 6.6% the year prior. Rising wheat prices last fall bucked the trend, with 11.5% of 2021/22 wheat sold among Farm Futures survey respondents, compared to 9.9% last year.

Despite the recent market correction in the corn market over the past two days, due in large part to biofuel blending exemption waivers granted to refineries on Tuesday night, corn bulls received the feed they needed in the January USDA reports to keep moving up. Even amid domestic demand reductions to livestock feed, ethanol, and – surprisingly – exports, worse than expected 2020 yields erased 151 million bushels from 2020/21 ending stocks according to the January World Agricultural Supply and Demand Estimates (WASDE) report last week.

Exports

USDA’s new batch of grain export inspection data for the week through January 17 held some bullish results for soybeans – but not much else. Soybeans turned in the best performance by jumping modestly ahead of the prior week’s tally and moving ahead of all trade estimates. But corn slumped moderately lower, with wheat down slightly week-over-week.

Export sales were reported on three days this week. China took soybeans and sorghum; Japan and Israel took corn and Nigeria took hard red winter wheat.

USDA’s latest export sales report, covering the week through January 14, held mostly bullish data for traders to digest. Corn export sales were nearly identical from a week ago, with 56.6 million bushels in old crop sales, plus another 1.8 million bushels in new crop sales. Sorghum export sales jumped another 54% higher week-over-week, reaching 11.6 million bushels. Soybean export sales were up noticeably from a week ago, reaching 66.8 million bushels in old crop sales plus another 30.5 million bushels for a total tally of 97.3 million bushels. Wheat export sales improved by 49% from a week ago, to 12.1 million bushels.

Recaps

Soybean futures tumbled over 2% lower this morning as rains in Brazil and Argentina reduced concerns about a potential crop shortfall in South America. Despite a large daily flash export sale announced by USDA yesterday, corn prices struggled this morning, falling 1.2% - 1.3% on a fresh round of profit taking and rains in South America. Buyer resistance at current price levels reported in the Asian markets overnight helped contribute to losses in the wheat complex this morning. Profit-taking also did the complex no favors.

Corn prices concluded a bad week with heavy losses Friday, capping off the first weekly loss since early December. Soybean prices took a dramatic spill this morning, finishing the session more than 4% lower on a wave of technical selling and profit-taking largely spurred by improving South American weather that is expected to fuel record production this season. Wheat prices followed corn and soybean prices lower, with worries about increased overseas competition creating additional headwinds that led to significant technical selling today

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