Missed some market news this week? Check out the latest marketing news from Jacquie Holland, Ben Potter and our Ag Marketing IQ writers.
Ag Marketing IQ
Strong demand and tighter supplies gave life to the rallies this year. And to keep going, both markets likely will need more bullish news, especially from big USDA reports, including monthly World Agricultural Supply and Demand Estimates, quarterly grain stocks and prospective plantings. The size of the 2020 crop rallies was matched only three times in the past 15 years – in the 2006-2007, 2007-2008, and 2010-2011 marketing years. The history of those markets provides.an indication of both magnitude of the achievement and the hurdles bulls face in keeping the upward pattern intact.
Grain marketing is challenging. It’s the part of running a farming operation that many producers have come to greatly dislike. This is why so many look for someone who seems to know what the markets are going to do, to tell them when to sell their grain. Unfortunately, when it comes to the markets, there are no crystal balls, tarot cards or reading of tea leaves –nothing that can predict when things will become volatile and move prices dramatically in one direction or the other.
While grain market fundamentals remain supportive in the bigger picture, the recent rally appears to be running out of steam. Corn futures even signaled a topping sign on daily charts back on February 9th, after the USDA report released that day was viewed as “not bullish enough,” sending prices lower at end of day. Soybean futures are also signaling a pause on the bullish trend, and have been trading in a sideways trading pattern for nearly two months.
USDA Chief Economist Seth Meyer opened USDA's 97th Annual Agricultural Outlook Forum with an economic and foreign trade outlook for the agriculture industry, highlighting the opportunities and challenges facing the farm and food community for the year to come. The top headline from the opening session was USDA’s 2021 acreage estimations. At this time, USDA forecasts U.S. farmers will plant 92 million acres of corn in 2021 and 90 million acres of soybeans – the largest ever combined acreage for both crops.
Spring is a critical time for grain farmers. But what needs to happen this spring and summer to ensure a profitable harvest this fall? Here's a quick look: Dry conditions this winter beleaguered winter cereal crops, particularly in the Plains. Fuel and fertilizer expenses will see the largest cost increases in 2021, up 7% and 6%, respectively, from 2020, according to ERS’ February 2021 forecast. USDA’s Economic Research Service (ERS) forecasts an 8% annual decrease in 2021 net farm income due in large part to rising production costs and reduced government payments.
Corn found its way to the upper end of trade estimates but still faced a moderate week-over-week decline in the latest weekly grain export inspections report. Wheat also trended lower from the prior week. Soybeans were the most disappointing, dropping to less than half of the prior week’s volume and falling below the entire range of analyst estimates.
USDA’s export report, covering the week through February 11, didn’t have a lot of bullish data to digest after it was released Friday morning. Old crop corn sales sagged 67% below the prior four-week average, with old crop soybean sales down 53% over the same period. Wheat was also 33% below last week’s tally and 18% below the prior four-week average.
USDA’s forecasts for tight 2021/22 ending corn stocks was not met with a lot of enthusiasm by corn prices this morning. Prices rose by about a penny in the early morning trade as traders digested the early morning stocks estimate release from USDA and moved on from yesterday’s projection of 92 million acres of corn to be planted in 2021. Soybean prices were more receptive than those of corn to another year of tight supplies and increasing demand for the oilseed. New crop soybean futures posted larger gains than the nearby months on the prospect of only a 25-million-bushel increase to 2021/22 ending stocks from USDA.
Grain prices were mixed again on Friday, with soybeans emerging as the session’s biggest winner after USDA announced it still expects historically tight supplies in 2021/22, which prompted some technical buying. But corn prices crumbled on a round of technical selling and profit-taking, and volatile winter wheat contracts returned to the red after amassing major gains on Thursday. Spring wheat contracts moved moderately higher.