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Morning Market Review for April 12, 2021

scyther5/Thinkstock Markets-122316-scyther5-ThinkstockPhotos-2000
Wheat tumbles on Russian forecasts, precipitation in the Northern Plains. (Comments are updated by 7:30 a.m. Central Time.)

Plus: a review of Friday’s WASDE report

  • Corn up 1-2 cents
  • Soybeans down 8-9 cent, soyoil down $0.77/lb, soymeal mixed
  • Wheat down 3-9 cents

*Prices as of 6:50 am CDT.

Corn

Chicago futures flirted with eight-year highs this morning, rising $0.01-$0.03/bushel on demand recovery and tightening supplies. A weaker dollar and higher energy prices also underpinned gains in the corn complex this morning.

USDA releases its updated Crop Progress report today. Expect a bit of an uneven week of progress reports for the early season data. Rain showers in the Upper Midwest last week and through the weekend slowed planting paces. But where the rain cleared quickly, harvest paces sky rocketed.

With the report only being the second of the crop year, it will be hard to make many concrete assumptions from this week’s report. Spring wheat planting progress in the Northern Plains remains heavily watched as parched soils raise yield concerns. But at the very least, this week’s report will provide more insights to whether or not more corn and/or soybean acres will be planted in 2021.

Eye-popping export volumes over the past month did not go unnoticed by USDA in Friday’s monthly World Agricultural Supply and Demand Estimates (WASDE) report. U.S. corn exports were raised 75 million bushels to 2.675 billion bushels – a new record high – in Friday’s report to reflect surging livestock demand from Southeast Asian countries, led primarily by China.

Marketing year-to-date corn shipments to the next five largest U.S. buyers after China (Mexico, Japan, Columbia, South Korea, and Taiwan) are up nearly 25% from the same period in 2019/20. Southeast Asian countries are driving the largest increases, especially South Korea (290% increase), Japan (31%), and Taiwan (188%).

U.S. Annual Corn Exports

A year after the ethanol industry collapsed amid pandemic-driven lockdowns, new signs of recovery indicate the sector is ready to return to pre-pandemic output levels. As Total Farm Marketing’s Naomi Blohm points out in a recent Ag Marketing IQ column, “Corn used in last week’s production was estimated to be near 98.5 million bushels, ahead of the 96 million bushels needed each week to keep corn use for ethanol in line with the USDA projection of 4.95 billion bushels.”

Plus, a pair of Heartland-based ADM ethanol plants idled at the height of the pandemic are likely to restart production in the next week. USDA confirmed a bullish recovery, raising 2020/21 corn usage rates for ethanol 25 million bushels to 4.975 billion bushels.

The extra demand from end users could work in Midwestern farmers’ favor this year. For farmers still determining last-minute crop rotations, the added demand increases the value of price offerings processors are willing to pay to source corn. An ethanol recovery could sway some acres away from soybeans in areas of the Corn Belt close to these plants.

USDA also increased corn’s feed and residual usage estimate by 50 million bushels to 5.7 billion bushels for 2020/21. But this revision is not exactly straight forward. USDA-NASS found an extra 27 million bushels of corn had been used between September 1, 2020 and December 1, 2020 in last week’s Quarterly Grain Stocks report.

Part of Friday’s 50-million-bushel addition is accounted for by that 27-million-bushel Quarterly Stocks revision, but it also includes an uptick for livestock consumption. Pasture conditions in the U.S. West and Plains, where over 40% of U.S. cattle production is sourced, continue to decline amid drought conditions in the region, forcing farmers to shell out money for high-priced corn in their rations. Meat demand continues to rise, especially with grilling season on the horizon, so expect livestock producers to remain more reliant on purchasing feed for the short run.

USDA cut 20 million bushels from 2020/21 Argentine corn production to 1.850 billion bushels as drought continues to degrade crop conditions due to La Niña weather patterns. The smaller production estimate from the world’s third largest corn exporter, rising global feed demand, and cuts to U.S. stocks sent global stocks 150 million bushels lower to 11.175 billion bushels.

South American- U.S. Corn Production Growth

Soybeans

Soybean prices fell $0.06-$0.09/bushel this morning on improving prospects for the South American crop. Soymeal prices inched higher as three processing plants in Iowa reopened after maintenance shutdowns idled production in the region.

USDA largely left U.S. soybean stocks unchanged in Friday’s report, though some balance sheet adjustments were made to reflect revisions to December 1, 2020 soybean stocks and extra Chinese export demand during Brazil’s shipping delays.

Some of the first signs of demand rationing were suggested after USDA shaved 10 million bushels from 2020/21 crushing estimates. The current marketing year’s crush volume remains at a record high of 2.19 billion bushels. But tightening margins for livestock and poultry feeders, as well as lingering uncertainty in the supply chain amid the pandemic recovery, could reduce feed demand going forward. The push for biodiesel remains hot, though dwindling stocks could limit the sector’s short-term growth.

Favorable crop conditions in Brazil’s Rio Grande do Sul and better than anticipated harvest data from Mato Grosso led USDA to raise its estimates on Brazil’s 2020/21 soybean crop by 74 million bushels to 4.997 billion bushels – a new record high for Brazilian soybean production.

Brazil’s export forecast also rose 37 million bushels to 3.160 billion bushels for the 2020/21 shipping season, which is likely to ease pressure on U.S. supplies later this summer. Old crop soybean futures traded $0.05-$0.08/bushel lower at last glance on the news.

U.S.-South America Annual Soybean Production

Chinese soy crush estimates were also cut by USDA to the tune of 73 million bushels. The new 2020/21 Chinese crush volume of 3.527 billion bushels reflects ongoing availability issues with Brazilian soybean exports, which were delayed after excessive rains slowed harvest paces. High soy prices and scarce supplies have led many Chinese crush facilities to idle until the Brazilian crop arrives on Chinese shores.

The delays could favor the recovering Chinese hog herd, which has been suffering from outbreaks of African swine fever (ASF) and other winter diseases due in large part to faulty vaccines. The herd was expected to return to pre-ASF volumes by June of this year. But the resurgent virus is likely to dampen recovery paces, which could ease pressure on Chinese soy processors especially as wheat is increasingly added to rations.

Wheat

Forecasts for a larger Russian crop weighed heavily on the wheat market this morning. Russian agricultural consultancy Sovecon raised its forecast on the 2021/22 Russian wheat crop nearly 2% higher than previous estimates to 2.964 billion bushels as weather conditions continue to support a bumper crop in the region.

A weaker dollar helped cap losses. Precipitation forecast in the Northern Plains in the coming days sent Minneapolis futures down $0.08-$0.09/bushel.

Wheat acres in the U.S. jumped up in 2021, largely due to a heavy increase in winter wheat acres planted last fall. But what does that mean for U.S. wheat prices? The lower spring wheat acreage has spurred a sizeable rally for Minneapolis spring wheat futures over the past week as the contract rose nearly 10%. I break down the fundamentals of the bullish wheat market in the latest Wheat Outlook.

USDA reduced both import projections and feed and residual targets for U.S. wheat in Friday’s report, widening wheat stocks by 15 million bushels to 851 million bushels. The feed and residual adjustment is largely a function of December 1, 2020 quarterly grain stocks revisions, which were made after off-farm and commercial storage facilities submitted late reports to NASS.

Wheat prices saw another bullish run after USDA released updated data. Going into the report, the expectation of high new crop supplies largely capped pre-report gains, especially as forecasts favor bumper winter wheat crops in the European Union, Ukraine, and Russia this summer.

But a 135-million-bushel increase to global feed consumption, coupled with a 53-million-bushel increase in global food usage, sent global 2020/21 wheat stocks down 208 million bushels to 10.857 billion bushels. Supplies are likely to remain adequate through the 2021/22 shipping season despite the tightened beginning stocks estimate.

Global Feed Wheat Usage

Increased Chinese demand for wheat, which is a cheaper feed alternative for livestock producers, also paved the way for futures price gains for the wheat complex this morning. China’s 2020/21 ending wheat stocks are expected to fall for the first time since 2012/13 on increased 2020/21 feed demand, which USDA grew by 184 million bushels in Friday’s report to 1.470 billion bushels.

In the short run, the U.S. will likely be a primary global source for wheat, especially as Chinese demand soars and Russia’s steep wheat export tax limits international grain flows.

Weather

The drought-plagued Northern Plains will see some moisture relief this week, according to NOAA’s short-range forecasts. Rain and snow will move across the Dakotas and into the Northern Great Lakes region over the next couple days.    

But will it be enough to replenish soil moisture levels? NOAA estimates peg 24-hour moisture in the region at half an inch. But more precipitation could be on the way. A winter storm system building in the Central Rockies will begin to push east early Wednesday morning and could provide a boost to soil moisture levels in the parched Plains.

Financials

Coronavirus cases in the U.S. rose to 31,198,055 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. The death toll increased to 562,066 deaths as of press time.

Stock futures drifted lower this morning, with the S&P 500 backing down off Friday’s record high close. Profit-taking appeared to be the name of the game in overnight trading as investors eagerly await fresh economic data this week. Energy prices moved higher as markets anticipate global supply and demand forecasts to be released from OPEC tomorrow. S&P 500 futures traded 0.13% lower to $4,114.25 at last glance.

Morning Ag Commodity Prices - 4/12/2021
Contract Units High Low Last Net Change % Change
MAY '21 CORN $ / BSH  5.86 5.7725 5.79 0.0175 0.30%
JUL '21 CORN $ / BSH  5.7125 5.63 5.645 0.0175 0.31%
SEP '21 CORN $ / BSH  5.1575 5.105 5.12 0.0125 0.24%
DEC '21 CORN $ / BSH  5.0175 4.965 4.985 0.02 0.40%
MAR '22 CORN $ / BSH  5.085 5.04 5.0625 0.0275 0.55%
MAY '22 CORN $ / BSH  5.1175 5.0875 5.095 0.015 0.30%
JUL '22 CORN $ / BSH  5.1325 5.0975 5.12 0.0225 0.44%
MAY '21 SOYBEANS $ / BSH  14.0725 13.9225 13.96 -0.07 -0.50%
JUL '21 SOYBEANS $ / BSH  14.0175 13.865 13.9 -0.0825 -0.59%
AUG '21 SOYBEANS $ / BSH  13.6575 13.5175 13.535 -0.085 -0.62%
SEP '21 SOYBEANS $ / BSH  12.95 12.8225 12.8325 -0.09 -0.70%
NOV '21 SOYBEANS $ / BSH  12.6775 12.5475 12.565 -0.0675 -0.53%
JAN '22 SOYBEANS $ / BSH  12.66 12.535 12.55 -0.07 -0.55%
MAR '22 SOYBEANS $ / BSH  12.3625 12.27 12.2775 -0.0725 -0.59%
MAY '22 SOYBEANS $ / BSH  12.2925 12.2225 12.2225 -0.0725 -0.59%
JUL '22 SOYBEANS $ / BSH  12.2775 12.22 12.225 -0.0675 -0.55%
MAY '21 SOYBEAN OIL  $ / LB 52.8 52 52.11 -0.74 -1.40%
JUL '21 SOYBEAN OIL  $ / LB 50.9 50.03 50.13 -0.8 -1.57%
MAY '21 SOY MEAL $ / TON 403.4 400.6 401.9 0.7 0.17%
JUL '21 SOY MEAL $ / TON 407.8 405 406.2 0.7 0.17%
AUG '21 SOY MEAL $ / TON 404 402 403 0.8 0.20%
SEP '21 SOY MEAL $ / TON 398.9 396.9 397.7 0.5 0.13%
OCT '21 SOY MEAL $ / TON 393.4 391.2 392.5 0.9 0.23%
MAY '21 Chicago SRW $ / BSH  6.39 6.3 6.3325 -0.055 -0.86%
JUL '21 Chicago SRW $ / BSH  6.4025 6.3125 6.355 -0.05 -0.78%
SEP '21 Chicago SRW $ / BSH  6.405 6.32 6.365 -0.05 -0.78%
DEC '21 Chicago SRW $ / BSH  6.45 6.37 6.415 -0.045 -0.70%
MAR '22 Chicago SRW $ / BSH  6.485 6.4075 6.4175 -0.0775 -1.19%
MAY '21 Kansas City HRW $ / BSH  5.885 5.7925 5.845 -0.02 -0.34%
JUL '21 Kansas City HRW $ / BSH  5.96 5.87 5.925 -0.0175 -0.29%
SEP '21 Kansas City HRW $ / BSH  6.02 5.9425 5.9925 -0.015 -0.25%
DEC '21 Kansas City HRW $ / BSH  6.11 6.04 6.09 -0.015 -0.25%
MAR '22 Kansas City HRW $ / BSH  6.18 6.145 6.18 -0.0175 -0.28%
MAY '21 MLPS Spring Wheat $ / BSH  6.54 6.42 6.455 -0.085 -1.30%
JUL '21 MLPS Spring Wheat $ / BSH  6.61 6.5 6.5275 -0.085 -1.29%
SEP '21 MLPS Spring Wheat $ / BSH  6.675 6.5675 6.595 -0.08 -1.20%
DEC '21 MLPS Spring Wheat $ / BSH  6.75 6.665 6.665 -0.0925 -1.37%
MAR '22 MLPS Spring Wheat $ / BSH  6.8 6.8 6.8 -0.0175 -0.26%
JUN '21 ICE Dollar Index $ 92.335 92.02 92.06 -0.1 -0.11%
 MA '21 Light Crude $ / BBL  60.18 58.73 60.06 0.74 1.30%
 JU '21 Light Crude $ / BBL  60.2 58.77 60.11 0.76 1.26%
MAY '21 ULS Diesel $ /U GAL 1.8353 1.7877 1.8335 0.0259 1.43%
JUN '21 ULS Diesel $ /U GAL 1.8363 1.7902 1.8341 0.0241 1.33%
MAY '21 Gasoline $ /U GAL 1.983 1.9435 1.9781 0.016 0.82%
JUN '21 Gasoline $ /U GAL 1.9824 1.944 1.9786 0.0153 0.78%
APR '21 Feeder Cattle $ / CWT 0 #N/A 144.75 0 0.00%
MAY '21 Feeder Cattle $ / CWT 0 #N/A 149.625 0 0.00%
 AP '21 Live Cattle $ / CWT 0 #N/A 123.425 0 0.00%
 JU '21 Live Cattle $ / CWT 0 #N/A 122.575 0 0.00%
APR '21 Live Hogs $ / CWT 0 #N/A 103.475 0 0.00%
MAY '21 Live Hogs $ / CWT 0 #N/A 106.375 0 0.00%
APR '21 Class III Milk $ / CWT 17.6 #N/A 17.68 0 0.00%
MAY '21 Class III Milk $ / CWT 19.25 #N/A 19.38 0 0.00%
JUN '21 Class III Milk $ / CWT 19.13 #N/A 19.45 0 0.00%
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