Missed some market news this week? Here's what Jacquie Holland, Ben Potter and our Ag Marketing IQ bloggers have been writing about.
USDA fed corn bulls in the June 2021 World Agricultural Supply and Demand Estimates (WASDE) report released Thursday morning. The World Agricultural Outlook Board (WOAB) slashed 2020/21 corn ending stocks by 150 million bushels – about 100 million more than analysts were expecting – on rising export and ethanol demand. A reduced corn crop from Brazil also lent bullish strength to the corn complex while wheat futures were mixed following higher estimates for the 2021 winter wheat crop in the U.S.
Ag Marketing IQ
When situations get complicated, we can concentrate on what needs to be done by focusing on the fundamentals. Producers have two fundamental risks that need to be taken into consideration for the product they are selling. The first risk is if the market goes down. In most cases this is the growers’ largest risk as lower prices will typically lead to lower profitability, loss in position on balance sheet, and weaker cash flow. The second risk to the grower is if the market goes higher after pricing the product. This lost opportunity to capture higher prices can lead to missed profitability. We think about what our balance sheet and cash flow could have looked like if we captured those higher prices.
USDA releases two reports in June feed a grain market hungry for news. The first, World Agricultural Supply and Demand out June 10, should be only an appetizer to the main course: quarterly Grain Stocks and Acreage data due June 30. While the June 10 report should be a snoozer for corn and soybeans, the June 30 data dump could be anything but. Quarterly inventory updates typically produce a surprise or two. This time they will provide clues about how much rationing may be needed to stretch supplies until harvest.
Have you noticed the extremes in the grain markets this week? Jim McCormick takes a look at the extremes not only in the markets but in the weather as well. Multiple factors that have come together to bring us this volatility. One factor is the daily trading ranges which were expanded a few weeks ago. The soybean daily limit move range is $1.00 higher or lower from the previous day's settlement, a $5000 per contract cash move in one direction or $10,000 range high to low. Corn daily limit move range is $.60 higher or lower from the previous day's settlement, a $3000 per contract cash move in one direction or $6,000 range high to low.
Ben Potter and Jacqueline Holland talk about how the fields went frost to heat wave in two short weeks. They look at the impacts so far on this year’s crops.
With planting progress nearly complete for the major U.S. row crops this season, USDA’s crop progress reports have begun to shift focus to quality ratings, and those ratings were on the move this past week. Corn quality eroded four points lower, and spring wheat ratings took a five-point tumble, while winter wheat ratings firmed two points higher for the week ending June 6. USDA also offered an initial glimpse into soybean quality ratings, which were three points below the average trade guess.
Declining ratings in the Upper Midwest and Plains paved the way for higher prices this morning. Corn crops in North Dakota and South Dakota were only rated as 42% and 46% good to excellent, respectively, in yesterday’s report contributing to the weekly decline. Feedback from the Field respondents across the country overwhelmingly agreed that corn conditions are fair, at worst. Soybeans crops in the Upper Midwest have struggled over the past couple weeks as extreme weather events – including frost, wind, and drought – take a toll on yields. Feedback from the Field respondents chronicled the damage over the past week, with most farmers reporting fair conditions for the 2021 soybean crop.
Peak export season for soybeans is long past, but that doesn’t mean that bullish prospects are off the table for U.S. soybean growers.
USDA expects 2021/22 soybean exports to shrink by 205 million bushels (9%) compared to last year to 2.08 billion bushels. Similar to corn, the size of the 2021 soybean crop is expected to prop up soy export volumes this year as the 2021 crop remains unlikely to meet demand potential in the new marketing year.
China will undisputedly be the top destination for U.S. soybean exports next year. Chinese buyers have already accounted for 56% of expected 2020/21 U.S. soybean export volumes, currently forecast by USDA to reach 2.28 billion bushels by August 31 of this year. Check out more details from Jacqueline Holland in the E-Corn-omics column this week.
USDA’s latest set of grain export inspection data, covering the week through June 3, held a mixed bag of numbers for traders to digest. Corn totals slid nearly 30% lower from a week ago, while soybeans and wheat captured moderate week-over-week gains. Grain prices were little changed immediately following today’s report, with the focus remaining largely on weather forecasts for now.