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Corn, soybeans finish Friday lower, while wheat finishes higher

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Market week in review: Jan. 12 WASDE report generates fallout.

Missed some market news this week? Here's what you need to know.

Ag Marketing IQ

Your marketing plan should be one in which the approach can be repeated year after year. In my opinion, your marketing plan needs to be repeated in up years, down years, and even flat years. There are many who only rely on the “sell or don’t sell” philosophy who are priced well below where prices are trading today. This is hard to repeat as prices are different each year and the emotions you feel are unique to each crop year.

Tuesday’s close in the grain market provided the best barometer of just how big a shock USDA’s Jan. 12 reports registered. Limit up moves in corn don’t happen often, especially in the dead of winter. USDA’s move to cut 2020 corn production tightened projected carryout  stocks at the end of the marketing year by another 150 million bushels. If realized, less than a 40-day supply of corn would be leftover Sept. 1, the least in seven years. This doesn’t mean the sky is the limit for corn, which has a “5” handle for the first time since 2014.

Class III milk futures have been able to find strength since early January following the USDA announcement that there would be a fifth round of government purchasing for the Farmers-to-Families Food Box program. The government set aside $1.5 billion for this round of purchasing. Earlier this week, the February Class III milk futures contract was able to climb above $20.00, reaching a price high of $20.08.

With March soybeans rallying $2.17 and March corn rallying $0.71, from the day of the December WASDE report to the day before the January report, it felt like we were set up for a classic "buy the rumor, sell the fact" reaction to the market, without any shockingly bullish numbers. The main numbers that the trade looks at - ending stocks - came out right at the trade's expectations on soybeans at 140 million bushels (mb) while USDA’s corn stocks estimate was 50 mb shy of the average trade estimate. It looked like the table was set to sell the fact, but that is not what happened. The price rally continued, and we ended the trading session with corn trading limit up 25 cents higher while soybeans were up 55½ cents.

E-corn-onomics

USDA released what may be its most highly anticipated batch of market reports for the year on Jan. 12. The 2020 production results will be at the forefront of everyone's minds. Trade estimates predict slightly lower corn and soybean yields for last year’s crops due largely to poor weather conditions.

WASDE

Tightening 2020/21 U.S. and South American corn and soybean production estimates led USDA to slash global ending stocks, powering price growth in the aftermath of USDA’s January 2021 World Agricultural Supply and Demand Estimates (WASDE) reports this morning. Higher-than-expected corn usage rates in late 2020 also depleted U.S. corn supplies more than the market was estimating. 2020/21 winter wheat sowings came in smaller than trade estimates, and the Argentine crop shrunk, lending support to the wheat complex. All told, corn, soybeans and wheat contracts all carved out double-digit gains immediately following the report’s release.

Exports

The latest export sales data set from USDA, covering the week through January 7, held mixed but mostly bullish numbers for traders to digest. Soybeans recovered from a marketing-year low in the prior week, with corn sales coming in better than all trade estimates. Wheat was the lone disappointment, falling below all trade estimates and sliding 49% below its prior four-week average.

Export sales were reported on four days this week, building on a string of sales that began Jan. 6. There have been seven daily export sales announced since 2021 began. This week, China, Colombia, Mexico and unknown destinations have been buyers.

Recaps

A round of profit-taking and a wet weekend forecast in Argentina took the tops off recent nearby contract highs for corn, though losses were limited by strong export sales reported in yesterday’s USDA report, which also helped pull up 2021/20 crop year prices. Rains in Argentina and profit-taking offset potential gains in the soybean complex this morning, despite rumors of confirmed Chinese soybean purchases and a looming Brazilian truck workers strike. Losses were capped by tight U.S. soybean supplies. A strengthening dollar could not offset massive gains in the wheat market this morning, as news of an increased Russian wheat export tax increased prospects for other international providers of wheat for the second half of the 2020/21 marketing year.

Corn prices tilted more than 0.5% lower Friday after a round of profit-taking and technical selling. Traders mostly shrugged off a large sale to Mexico this morning. Soybean prices followed corn prices lower on a round of technical selling and profit-taking, finishing the session down more than 1% after facing double-digit losses. Wheat prices were mostly higher Friday on a round of technical buying supported by news that Russia could impose higher export taxes through the end of the 2020/21 marketing year.

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