Need to catch up on market news from this week? Here's what you missed.
USDA’s latest World Agricultural Supply and Demand Estimates (WASDE) report, out May 12, jostled the grain markets in some interesting ways. Corn prices actually firmed Tuesday, despite generally unsupportive data from USDA. But the data triggered some technical selling that pushed soybean and wheat contracts into the red. What does it all mean for grain prices moving forward? Ben Potter and Jacquie Holland took a look at all of the latest numbers to give you a clearer picture of what’s going on.
Ag Marketing IQ
Corn demand has been beaten to death due to lack of driving and ethanol buildup. Approximately 40% of ethanol plants have been cut. But demand for gas is not going to get worse. It is already upticking and there is really no more downside exposure. Feed use is also very strong and we believe is much higher than USDA has plugged in. Some of that is holding livestock until slaughter plants re-open, some is because test weights, some due to shifts in feed use back to corn from wheat.
How do you view the marketing of your crop? Is it, “I’ll wait for the right time, when prices are rallying toward the summer highs and then sell most of my crop?” This would be comparable to a 40-meter dash; a tremendous amount of focused effort for a very short time. Conversely, seeing marketing as a marathon -- a much longer period of time that requires hard work and discipline with little emotion – has a much greater chance of success.
Despite all the doom and gloom hovering over agriculture, and perhaps the planet right now, reports of your demise are greatly exaggerated. Mark Twain said something like that more than 120 years ago. It may be just as true today. Your cost of production, crop insurance plan and Farm Program choices matter. But those with on-farm storage, a good banker, the ability to trade and gumption to look for the best cash market may wind up doing all right with only modest rallies.
For the past two weeks soybean futures have traded back and forth in a 30-cent trading range. Prices seem content to continue in this pattern for the short term until fresh fundamental news emerges to finally justify a price breakout. This week’s USDA report had both bullish and bearish aspects in it, which continues to keep soybean prices in a modest trading range for now. Yet, a price breakout looks to be on the horizon. Here are three important indicators to watch in the short term.
There still appears to be a tremendous lack of understanding as to the depth that coronavirus is having on commodity demand. First, the report decreased ethanol usage by 100 million bushels, and then added back 250 million for next year. This seems rather dubious considering the current state of affairs. I realize many states are looking to reopen economies, but that doesn’t mean people are willing to travel again, especially when 20% of the workforce has abruptly become unemployed. There appears to be a disconnect between when businesses can re-open, equating that to the virus risk being contained. This could not be further from the truth. Many countries like Brazil, who happen to be our largest ethanol export market, are still grappling with how to deal with the virus. So even if we did manage to bring demand back to par domestically, our export market has been irreparably damaged, further hampering corn demand.
USDA’s latest grain export inspection report, covering the week ending May 7, had mixed but mostly bullish news for traders this morning. Corn volume was down fractionally from a week ago but still exceeded analyst estimates. Soybeans climbed moderately above the prior week’s tally and stayed in the middle of trade guesses. Wheat underperformed, meantime, spilling moderately below last week’s volume and tumbling below all trade estimates.
Farmers remained busy planting corn and soybeans this past week, as was confirmed by the latest USDA crop progress report, covering activity through May 10. More than 6 of every 10 U.S. corn acres are now in the ground, according to the agency, with soybean progress jumping to nearly 40%.
Wheat prices fell as domestic and global ending stocks for both 2019/20 and 2020/21 production swelled in today’s World Agricultural Supply and Demand Estimates (WASDE) report released by USDA. As expected, old crop corn and soybean stocks rose on COVID-19 demand destruction and export weakness. New crop U.S. soybean stocks ended on the lower end of analyst expectations and South American soybean forecasts were slashed as well.
USDA’s latest export sales report, covering the week ending May 7, had a mixed bag of data, as it often does. Corn sales continued to dominate overall grain exports, moving 39% higher from a week ago. Wheat sales were anemic, sliding 28% below the prior four-week average. And soybean sales were mostly steady, with China reemerging as the No. 1 buyer.
China bought soybeans on three days this week. The country also purchased soybean oil.
Corn prices received a price boost from the energy complex this morning as ethanol production follows energy demand higher amid the COVID-19 pandemic’s recovery. A soggy weekend weather forecast that would limit planting progress also contributed to this morning’s gains. A round of technical selling boosted the soy complex this morning after futures prices hit a one-week low yesterday. Recent export sales to China also helped to underpin strength to soybeans. Wheat benefited from a round of technical buying this morning after futures prices fell as much as 3% this week. A weekend forecast calling for rain will limit spring wheat planting progress in the Northern Plains.
With the latest round of USDA supply, demand, export and planting data firmly in the past, traders went pecking for a fresh batch of fundamentals Friday. The result was an uneven round of technical maneuvering that left corn, soybean and hard red wheat contracts slightly higher, with soft red and spring wheat contracts suffering a small setback in today’s session.