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Traders shrug off massive corn sale

Corn, soybeans end week lower, wheat ends mixed.

Missed some market news this week? Catch up on the latest WASDE, Ag Marketing IQ and more.

Ag Marketing IQ

This last week was a game changer for U.S. agricultural commodities. December corn closed the week up 28.25 cents. Corn experienced a monthly key reversal between Friday and Monday on dry weather forecast. Funds came into the week short 316,000 contracts (a record for this time of year) and bought 20-30,000 contracts per day in the last 3 days of the week. November soybeans rallied 35.5 cents confirming a headed shoulder technical bottom. December Kansas City wheat closed up 5.75 cents as combines moved into frostbitten wheat fields. These dramatic moves changed the entire attitude on the farm as hopes for a profitable price exploded just ahead of the 4th of July fireworks celebration.

On June 30, the market was shocked on USDA’s updated acreage estimate with a record miss versus trade expectations, taking corn acreage down 5 million acres from March intentions to 92 million. Total planted acreage in the U.S. is estimated to drop 7 million acres versus a year ago, which is hard to fathom considering last year they lowered total planted crop acreage 6 million acres as excessive moisture delayed planting. The report and ensuing rally gave farmers an opportunity to liquidate old crop ownership and add to new crop execution of marketing strategies. The market has rallied 38 cents since the June 26th low on Dec futures, $3.22, but is still 70 plus cents off the start of Jan2020.

After fast planting this spring and lack of weather extremes in June, July rainfall and temperature in major corn-growing states are used in a model popular with traders for assessing yields. Average precipitation and heat during the month would produce a yield right where crop ratings predicted last week, and with it selling price targets in a range of $3.57 to $3.70. December futures traded up to $3.63 before the Independence Day holiday. Increasing average temperatures by 1 degree and cutting rainfall 5% cuts the projected yield to180 bpa, boosting the selling range to $3.69 to $3.85. Cooler and wetter July weather would have just the opposite impact.

Last week’s USDA acreage report should go a long way to putting the corn market on more steady ground. What happens now will mostly be up to the weather and wouldn’t you know it, there seems to be little consensus on what the short-term weather will do.  Some are calling for cooler temps with sporadic rainfall and others are calling for hotter temps.

After a mostly quiet week of grain trade wheat futures enjoyed a surprise rally higher on Wednesday this week. Funds exited short positions in Chicago and Kansas City futures swiftly as news emerged of declining production estimates in the United States, France, and Russia. The French Farm Ministry announced that production could be cut to 31.3 million tonnes, which is a 21% drop from a year ago. Looking at Russia, their weather forecast is calling for hot and dry weather, which may affect their spring wheat production.

Crops

Analysts were expecting USDA to dock corn quality a point for the week ending July 5, but the agency made even bigger cuts in its latest weekly crop progress report, out Monday afternoon. There was a small shift in soybean quality as well, but ratings held mostly steady compared to the prior week. Winter wheat quality ratings dropped a point this past week, moving from 52% in good-to-excellent condition down to 51%. Another 32% of the crop is rated fair (unchanged from last week), with the remaining 17% rated poor or very poor (up a point from last week).

Rainfall last week helped stabilize growing conditions, a Kentucky grower noted in Feedback from the Field. A Kentucky grower reported “fighting poor stands all year,” after a cool and wet May. Check out the latest Feedback from the Field here and leave your comments here.

Today’s July WASDE report showed few surprises for soybeans, but eroded recent price gains in the corn and wheat complex. While new crop ending corn stocks tightened on a smaller crop thanks to 5 million fewer acres planted this spring, old crop stocks rose on reduced ethanol demand. 

Advanced Marketing Class

I bet you get irritated by people like me who say, “you need a marketing plan.” You don’t want to write a plan because it feels, well, constraining. Price targets and key dates written in the dead of winter can look foreign after a spring spent in coronavirus lockdown. You are thinking, “Stuff happens and I don’t want to be stuck with ideas written months ago!” Your problem is not the marketing plan. What you need is a disciplined but flexible way to adapt your plan to a changing environment.

Podcast

Here’s a bit of trivia for you – it’s been 164 days (and counting) since July soybean futures closed above $9 per bushel. But prices have inched tantalizingly close to that benchmark earlier this week, spurred by optimism over recent China purchases and a lot of hot, dry weather in the forecasts. What will it take for prices to clear the $9 hurdle? That’s one of the many topics we approached in the latest Midweek Markets podcast.

Exports

USDA’s latest batch of grain export sales data, covering the week through July 2, held a decisive mix of numbers. Corn saw strong totals for both old crop and new crop sales last week. Soybeans also saw strong old crop sales, with a relatively disappointing haul of new crop sales. Wheat sales were relatively muted, falling moderately below last year’s pace a month into the 2020/21 marketing year.

Recaps

Corn futures prices held steady in overnight trade ahead of this morning’s reports. Hot and dry forecasts underpinned marginal gains ahead of the opening bell. The soy complex is on track to post gains this morning on a steamy weekend weather forecast. August soybean futures rose $0.015/bushel to $8.98, flirting with the pivotal $9/bushel benchmark. Wheat futures backed off two-month highs in anticipation of world stock reports this morning. Regardless, Chicago futures remain on track to post a 6.5% weekly gain on reduced production estimates from major wheat producers around the world.

Traders shrugged off a massive corn sale to China this morning, focusing instead on improving weather forecasts and a generally unhelpful set of supply and demand data from USDA’s July World Agricultural Supply and Demand Estimates (WASDE) report. The result was a round of technical selling that kicked prices nearly 3% lower. Soybeans followed suit, losing around 1%. Wheat was decidedly mixed, meantime, with Chicago SRW contracts jumping nearly 3% higher while Kansas City HRW contracts slumped around 0.5% lower.

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