Morning Market Review for April 14, 2021

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Dry soils boost corn gains. (Comments are updated by 7:30 a.m. Central Time.)

Wheat rallies on dry weather in U.S. Northern Plains, Europe

  • Corn up 5-9 cents
  • Soybeans up 6-9 cents, soyoil up $0.27/lb, soymeal up $1.50/ton
  • Wheat up 7-9 cents

*Prices as of 6:50 am CDT.

Editor’s Note: Our 2021 Feedback from the Field series is now live! Farmers can see how crop conditions are progressing across the United States. Want to share crop conditions from your corner of the world? Click here for the survey link. As soon as responses come in, they will be added to Farm Futures’ Google MyMap at this link. We can’t wait to hear from you!

Corn

Corn prices are on track for a 1%-1.5% gain this morning as dry weather concerns suggest 2021 production could be stunted by depleted soil moisture levels. Chinese demand and rising Brazilian corn ethanol production also supported the corn complex’s overnight gains.

Ethanol production will seek a fourth straight week of gains in today’s weekly Petroleum Inventory Status report from the U.S. Energy Information Administration. Production continues to remain about 3%-11% lower than pre-pandemic levels even as more Americans become vaccinated and begin to venture further out from home.

If ethanol inventories are any indicator, production has room to go higher in today’s report. Ethanol inventories fell to 867.0 million gallons last week, the lowest level since November 2020. It marked the third straight week of declining ethanol stocks and reflected an 11% decline in the country’s ethanol supply since the start of the 2021 calendar year. The trend suggests that refiner demand for ethanol continues to outpace production, setting ethanol producers up in a comfortable position in the event that the economic recovery process stalls.

But even amid rising ethanol production levels, consumer gasoline demand and resulting ethanol demand from blenders continues to be choppy in the weekly data updates from the EIA. Weekly consumer gasoline demand fell 1% last week to 368.8 million gallons/day.

Consumption remains 2% - 9% lower than pre-pandemic levels. It remains uncertain how quickly U.S. drivers will return to pre-pandemic levels of gasoline consumption as new COVID-19 variants continue to wreak havoc on the country and millions of Americans await vaccination.

Meanwhile in Brazil, ethanol production from corn has jumped 58% higher over the past year as dozens of new corn ethanol plants were brought online. Brazilian ethanol industry group Unica estimates that ethanol output in the South American country over the next year could rise another 25%.

Ethanol production in Brazil has remained profitable over the past year, even as coronavirus-related restrictions continue to plague the country. Ethanol will remain a competitive buyer of corn in Brazil over the next year, even as global supplies continue to tighten amid staggering feed demand from China.

Sugarcane has traditionally been the feedstock of choice for Brazilian ethanol production, but the steady acreage expansion in recent years has supported higher corn output, providing ethanol producers with another economical input for ethanol production.

At first glance, it may not be clear to see but this shift will undoubtedly have ramifications for U.S. farmers. Brazil traditionally harvests two corn crops in its growing season, though some areas can also support three crops in a year. The first of which tends to be used exclusively for domestic consumption. The second crop, or safrinha, is primarily designated for the export market.

As usage rates soar while the new corn ethanol plants come online, Brazil may grow increasingly reliant on the safrinha crop for domestic supplies rather than export sales. Brazil is the world’s second largest exporter of corn, following the U.S. If Brazilian exportable supplies shrink, global buyers are likely to turn to the U.S. for additional bushels.

At 2.675 billion bushels, U.S. 2020/21 exports are already on track to set a new record high. Growing domestic usage in Brazil could set 2021/22 U.S. export paces even higher if the Brazilian corn ethanol industry continues to expand at such a rapid pace.

Markets were not impressed with the latest update on U.S. corn planting paces from USDA on Monday, sending futures prices higher in yesterday’s trading session. And in a year of shrinking stocks, planting paces are incredibly important, Farm Futures contributing analyst Bryce Knorr writes.

“A slow start to planting would raise questions about whether farmers will be able to increase acreage beyond the intentions USDA published at the end of March,” Knorr explains. “And the pace of seeding could also become important when traders start to make early guesses about yields, especially for corn.”

Knorr points out the direct relationship between timeliness of crop plantings and yield potential, noting that the quicker the corn crop is planted, the greater yield potential it has. In the latest Ag Marketing IQ column, Knorr analyzes the relationship between Crop Progress readings and yield prospects, noting that while the readings are not always an accurate predictor of eventual USDA yield report, they can get uncannily close.

Soybeans  

Soybean prices followed those of corn higher overnight as the complex rose $0.06-$0.09/bushel prior to the opening bell. Planting concerns and domestic crush demand underpinned support for the overnight gains.

Wheat

The wheat complex rallied $0.07-$0.09/bushel higher this morning as declining crop conditions due to dryness in the U.S. and European Union decreased yield potential on the 2021 crop currently emerging from dormancy. A weaker dollar also supported the morning’s gains. A dry spell is forecast in Europe in the coming weeks while dry soil conditions in the U.S. Northern Plains continues to limit global yield potential.

France’s government farm agency, FranceAgriMer, raised estimates on anemic exports slightly overnight, though the boost likely made little difference to futures prices in the U.S. wheat complex overnight. FranceAgriMer now estimates 277.4 million bushels of soft wheat will be shipped to countries outside the EU in 2020/21, a 1% increase from previous estimates.

But expect total French export loading paces to remain muted relative to 2019/20’s record of 497.5 million bushels. A lackluster harvest last summer after a turbulent growing season left wheat production in the European Union at an eight-year low. The EU is the second largest exporter of wheat in the world.

Weather

Rains are expected to blanket the Southern Plains, Southeast, and East Coast today, according to NOAA’s short-range forecasts. Snow continues to shift over the Great Lakes States and just east of the Central Rockies. Total accumulation is expected to be light, though the cool and wet weather will likely delay any spring fieldwork in the affected areas.

Skies in the Midwest will likely remain clear, though the snow system currently developing in the Central Rockies is likely to shift east into the Plains later this week.

Financials

Coronavirus cases in the U.S. rose by 77,971 to 31,346,923 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. The death toll increased by 841 lives to 563,449 deaths as of press time.

“There’s no question that technology has helped bring about huge gains in productivity and efficiency in agriculture over the past couple hundreds of years,” Water Street Solutions’ Darren Frye writes. But how do farmers decide between different technology offerings? Frye recommends evaluating and quantifying a technology’s efficiency gains, return on investment, and ease of implementing under existing operations before purchasing in the latest Finance First column.

Consumer-price index data released yesterday pointed to rising prices in March. But markets are struggling to determine if the higher prices, due in large part to temporary factors as the economy attempts to reopen following the pandemic, are indicative of increasing inflationary pressures in the market.

Data released from the Labor Department yesterday saw the consumer-price index rise 2.6% in the year ending March 2021 and a 0.6% monthly increase between February and March 2021. It marked the largest increase in the index since August 2018.

“One of the major things we’re seeing that marks a big change from recent years is that really for the first time in a decade you have a wide range of businesses with pricing power right now,” Sarah House, senior economist at Wells Fargo Securities, told the Wall Street Journal yesterday. “After a year of closures, people are eager to get out and spend, and they have the means to do it,” she said. “We see a real awakening of the service economy in these numbers.”

Will this cause the Federal Reserve to increase interest rates? The central bank has indicated that inflation will now be the primary economic measure of economic recovery. The Fed is expecting temporary increases to inflation rates as the economy recovers from the fallout due to the pandemic. But officials remain steadfast in their policy to keep interest rates unchanged while the economy recovers.

 

Morning Ag Commodity Prices - 4/14/2021
Contract Units High Low Last Net Change % Change
MAY '21 CORN $ / BSH  5.885 5.7875 5.885 0.085 1.47%
JUL '21 CORN $ / BSH  5.745 5.65 5.745 0.08 1.41%
SEP '21 CORN $ / BSH  5.2425 5.17 5.24 0.0625 1.21%
DEC '21 CORN $ / BSH  5.1025 5.04 5.095 0.0525 1.04%
MAR '22 CORN $ / BSH  5.17 5.11 5.165 0.0525 1.03%
MAY '22 CORN $ / BSH  5.2125 5.1525 5.2075 0.0525 1.02%
JUL '22 CORN $ / BSH  5.225 5.17 5.22 0.0525 1.02%
MAY '21 SOYBEANS $ / BSH  14.0175 13.8925 13.9825 0.0875 0.63%
JUL '21 SOYBEANS $ / BSH  13.9475 13.8275 13.92 0.0725 0.52%
AUG '21 SOYBEANS $ / BSH  13.5875 13.47 13.5625 0.07 0.52%
SEP '21 SOYBEANS $ / BSH  12.91 12.82 12.9025 0.0675 0.53%
NOV '21 SOYBEANS $ / BSH  12.61 12.4925 12.5925 0.08 0.64%
JAN '22 SOYBEANS $ / BSH  12.6 12.4925 12.585 0.075 0.60%
MAR '22 SOYBEANS $ / BSH  12.36 12.26 12.3425 0.0725 0.59%
MAY '22 SOYBEANS $ / BSH  12.305 12.2225 12.3 0.075 0.61%
JUL '22 SOYBEANS $ / BSH  12.295 12.2025 12.29 0.07 0.57%
MAY '21 SOYBEAN OIL  $ / LB 53.63 52.99 53.35 0.32 0.60%
JUL '21 SOYBEAN OIL  $ / LB 51.65 51 51.38 0.23 0.45%
MAY '21 SOY MEAL $ / TON 398.1 394.4 396.6 1.6 0.41%
JUL '21 SOY MEAL $ / TON 403.1 399.4 401.6 1.6 0.40%
AUG '21 SOY MEAL $ / TON 400.6 397 399.7 2.2 0.55%
SEP '21 SOY MEAL $ / TON 396.8 393 396 2.9 0.74%
OCT '21 SOY MEAL $ / TON 392.6 388.2 391.8 3.6 0.93%
MAY '21 Chicago SRW $ / BSH  6.3975 6.3075 6.395 0.0975 1.55%
JUL '21 Chicago SRW $ / BSH  6.43 6.3425 6.425 0.09 1.42%
SEP '21 Chicago SRW $ / BSH  6.4425 6.3525 6.4425 0.0925 1.46%
DEC '21 Chicago SRW $ / BSH  6.495 6.4125 6.485 0.085 1.33%
MAR '22 Chicago SRW $ / BSH  6.525 6.4625 6.525 0.085 1.32%
MAY '21 Kansas City HRW $ / BSH  5.9375 5.84 5.9325 0.085 1.45%
JUL '21 Kansas City HRW $ / BSH  6.0175 5.9275 6.0125 0.085 1.43%
SEP '21 Kansas City HRW $ / BSH  6.0825 5.995 6.0675 0.0775 1.29%
DEC '21 Kansas City HRW $ / BSH  6.1675 6.085 6.1675 0.0825 1.36%
MAR '22 Kansas City HRW $ / BSH  6.24 6.175 6.24 0.065 1.05%
MAY '21 MLPS Spring Wheat $ / BSH  6.5775 6.4875 6.565 0.075 1.16%
JUL '21 MLPS Spring Wheat $ / BSH  6.6475 6.545 6.6425 0.0825 1.26%
SEP '21 MLPS Spring Wheat $ / BSH  6.7 6.6075 6.6875 0.0725 1.10%
DEC '21 MLPS Spring Wheat $ / BSH  6.7525 6.7 6.7525 0.05 0.75%
MAR '22 MLPS Spring Wheat $ / BSH  6.8 6.8 6.8 0.0325 0.48%
JUN '21 ICE Dollar Index $ 91.815 91.65 91.77 -0.074 -0.08%
 MA '21 Light Crude $ / BBL  61.31 60.38 61.25 1.07 1.78%
 JU '21 Light Crude $ / BBL  61.37 60.43 61.3 1.06 1.76%
MAY '21 ULS Diesel $ /U GAL 1.8507 1.8205 1.8479 0.0334 1.84%
JUN '21 ULS Diesel $ /U GAL 1.8524 1.8249 1.85 0.0329 1.81%
MAY '21 Gasoline $ /U GAL 1.992 1.9702 1.9847 0.009 0.46%
JUN '21 Gasoline $ /U GAL 1.9958 1.9766 1.9911 0.0114 0.58%
APR '21 Feeder Cattle $ / CWT 0 #N/A 142.45 0 0.00%
MAY '21 Feeder Cattle $ / CWT 0 #N/A 147.325 0 0.00%
 AP '21 Live Cattle $ / CWT 0 #N/A 122.4 0 0.00%
 JU '21 Live Cattle $ / CWT 0 #N/A 120.925 0 0.00%
APR '21 Live Hogs $ / CWT 0 #N/A 103.4 0 0.00%
MAY '21 Live Hogs $ / CWT 0 #N/A 104.925 0 0.00%
APR '21 Class III Milk $ / CWT 17.58 #N/A 17.6 0 0.00%
MAY '21 Class III Milk $ / CWT 19.47 19.46 19.46 0 0.00%
JUN '21 Class III Milk $ / CWT 19.46 #N/A 19.59 0 0.00%
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