Morning Market Review for April 16, 2021

scyther5/Thinkstock Markets-122316-scyther5-ThinkstockPhotos-2000
Corn claws back gains overnight. (Comments are updated by 7:30 a.m. Central Time.)

The complex is still hitting technical resistance at $6/bushel as weather threatens supply forecasts

  • Corn up 2-4 cents
  • Soybeans up 4-11 cents, soyoil up $0.63/lb, soymeal up $1.60/ton
  • Wheat up 1-4 cents

*Prices as of 7:00 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

After yesterday’s lackluster export data sent May 2021 corn futures in Chicago running from $6/bushel, the complex clawed back some of its gains overnight on cool weather concerns as planting season reaches its height, though is likely still hitting technical resistance at the $6/bushel benchmark.

Concerns about reduced acreage also loomed high in traders’ minds, sending futures prices $0.02-$0.03/bushel higher this morning as farmers continued rapidly booking cash sales at the current levels.

Corn yields in Argentina are looking slightly better than expected after the crop battled drought conditions for much of the growing season. Early harvest reports led the Buenos Aires Grains Exchange to raise its estimate on 2020/21 corn production by 36.7 million bushels to 1.69 billion bushels.

USDA’s current estimate for the 2020/21 Argentine corn crop was lowered slightly in last week’s WASDE report to 1.85 billion bushels. Argentina is the world’s third largest exporter of corn.

May 2021 corn contracts on the Chicago Board of Trade briefly topped $6/bushel yesterday, matching July 2013 prices and fueled by 2020/21 U.S. corn stocks sinking to their sixth tightest position on record and concerns about the size of the 2021/22 crop.

Total Farm Marketing’s Naomi Blohm notes that corn is likely to face technical resistance at the $6/bushel benchmark. “It will take additional fresh, friendly news to justify a price move higher than $6 in the short term,” Blohm explains. “With a likely swift planting pace this spring, trade may see a short-term price correction in the coming weeks, as there will be little additional bullish news to trade on.”

How far could prices fall? Blohm points to the $5.55/bushel range as the lowest point corn futures could fall in the near future. “The $5.55 area is important for two reasons,” Blohm analyzes in the latest Ag Marketing IQ column.

“One it is the bottom on the up-trending channel on daily charts, and the other is that the 40- and 50-day moving averages are in that area.” Blohm recommends watching weather forecasts and the cash market from the tractor cab while planting in the coming weeks. “Simple corrections like this along the way are healthy for bull markets.”

Soybeans 

Soybean futures prices notched a $0.04-$0.09/bushel gain overnight, following corn’s gains on planting delays and reduced acreage outlooks. It is still early to be as concerned about soybean planting progress, however.

"There have been some concerns over the U.S. weather, but it is too early to get worried as planting has just started," a Singapore-based trader told Reuters overnight.

In the absence of delayed Brazilian soybean shipments, many soybean crush facilities in China slowed production in recent weeks as soybean prices soared. Feed mills switched to cheaper wheat feed alternatives as corn prices soared and soymeal availability became scarce.

And now there’s reason to believe that the increase in feed wheat could be a more permanent shift in ration formulations. "In the end, it all comes down to prices. If corn prices remain high, and it is profitable to use wheat, we will keep using wheat," a manager with a Chinese poultry producer told Reuters.

The competition from wheat puts more pressure on the soy complex, especially as China awaits more soybean cargoes from Brazil. It is estimated that China also lost 20% of its hog herd in the north this winter after faulty vaccines and other winter diseases reignited the resurgence of African swine fever.

Crush margins remain heavily red for Chinese processors under current price levels, though will likely see a decline as more Brazilian soybean shipments arrive. Traders estimate China will import 257.2 million bushels of soybeans this month, with 367.4 million bushels expected to arrive in both May and June.

"Crushers will be under a lot of pressure in the coming months. Much depends on whether demand would catch up," Xie Huilan, an analyst with consultancy Cofeed, told Reuters overnight.

The National Oilseed Producers’ Association (NOPA) released its March 2021 crush estimates yesterday. After a lackluster February report, market watchers were eager for signals of a return to strong crush rates in March. NOPA members process around 95% of soybeans earmarked for crushing in the U.S.

But NOPA’s March 2021 estimate came in lower than analysts were expecting, signaling a possible industry slowdown as futures prices match June 2014 highs. NOPA’s March 2021 figure registered at 178.0 million bushels, just shy of the 179.2-million-bushel trade estimate.

The March volume was 15% higher than the February 2021 crush of 155.2 million bushels, which suffered in large part to natural gas price spikes in mid-February, while much of the country battled sub-zero temperatures. But the March 2021 crush remained 2% lower than the previous March high of 181.4 million bushels, set a year ago.

While the total U.S. crush number for March 2021 will be released on May 1, the data from NOPA suggests that soybean crushers may finally be finding some buying resistance to soybeans priced above $14/bushel as supplies dwindle to historically tight levels. Could this be the first sign of demand rationing for the soybean sector? Stay tuned to find out!

Wheat

Wheat continued its upward rally overnight, rising $0.01-$0.04/bushel. Updated crop condition reports in France have not yet quantified the frost damage to the soft winter wheat crop following frost damage, with more cooler temperatures on the way for the European Union’s top wheat producer. Rains in the Southern Plains today will have a good chance to soak in over the weekend as cooler temperatures are also forecast for the region. Markets will be keeping a sharp eye on any reports of frost damage – in both France and the U.S. Plains – in the days to come.

France’s farm office, FranceAgriMer, gave an update overnight about winter wheat conditions in the midst of a harsh cold snap. For the week ending April 12, 86% of soft wheat crops were reported in good to excellent condition, down a mere 1% from the week prior despite the recent frost damage.

Overnight temperatures have consistently dropped below freezing in France over the past week and the cool and dry weather is expected to linger in the region for the next couple weeks. It’s likely the full extent of the crop damage will not be realized for several more weeks.

With markets atwitter about $6/bushel corn, it is easy for the recent wheat rally to get lost in the mix. Farm Futures senior editor Ben Potter and I take a look at what is fueling the wheat rally this week in the latest Midweek Markets podcast. Spoiler alert – it’s not $6/bushel corn!

Weather

Snow in the Central Rockies will quickly turn to rain over the Central Plains by this evening, according to NOAA’s short-range forecasts. The system is likely to push more snow up into the Dakotas this afternoon, while the storm system’s southern edge will blanket the Southern Plains with rain.

The rains are expected to move eastward into the Central and Southern Mississippi River Valley by tomorrow, which will likely slow corn planting progress in the area, especially as temperatures remain below average.

Updated drought monitor data from the University of Nebraska released yesterday saw dry and drought conditions ease slightly across the U.S., falling nearly 2% on the week to 62.55% for the week ending April 13. Rains in the High Plains and Midwest offset increasing dryness in the Northeast and West.


041621USDroughtMonitor.jpg​​​​​Around 37% of areas with cattle inventory in the U.S. are experiencing drought as pasture conditions continue to deteriorate. Of greater concern – 47% of alfalfa hay acreage is located in regions experiencing drought conditions.

This could cause significant problems for cattle producers in the near future, especially if hay quality or tonnage suffers later on this spring. The reduction in access to quality hay could increase feed costs for producers and limit availability. Cattle prices may be profitable now but keep an eye on those hay prices. If prices do not move in accordance to feed prices, cattle producers may begin a new liquidation cycle.

Financials

Coronavirus cases in the U.S. rose by 74,207 to 31,496,435 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. The death toll increased by 888 lives to 565,293 deaths as of press time.

For individuals with diversified retirement holdings, a land purchase could be a lucrative option to add value to a retirement portfolio. Mike Downey, an associate at Farm Financial Strategies, points out that farmers can tap into funds from an Individual Retirement Account (IRA) to purchase farmland.

But, as Downey explains, the rules for using IRA’s to purchase farmland are a little more complicated upon further inspection. In the latest More Than Dirt column, Downey coaches farmers on prohibited IRA transactions and tax considerations to be navigated while transferring an IRA into a land asset.

U.S. farmers are likely to receive 45% less government aid in 2021 compared to 2020. Bankers are keeping a sharp eye on this, AgriAuthority’s Ashley Arrington points out. On the heels of record-setting government payouts, farmers will need to easily break out different revenue sources to show bankers accurate and timely cash flow needs.

“Let’s take a look at the income statement,” Arrington hypothesizes. “$1M of revenue - $700k of expenses - $175k of debt = $125k excess cash. All looks good right? They made money! BUT look back at the composition of income -- $200k was government payments. If you take the payments out, the new excess cash figure is negative $75k.”

Breaking out different types of farm income can make conversations with your banker more productive, Arrington explains in the latest NextGen Business Insights column. It can also identify operating issues needing to be addressed that otherwise would have been ignored if lumping all revenues into the same category.

Farm Futures will be hosting its Farm Futures Summit in Coralville, Iowa on June 16-17. Sessions will highlight the latest risk management strategies, best practices, market outlooks, and more. Top speakers include former U.S. trade ambassador Gregg Doud, who will offer insights on negotiating the Phase One trade agreement with China, and Dick Wittman, who will provide farmers guidance on the best ways to manage a family farming operation. Check out the website for registration and more information.

The S&P 500 index notched another record high close in yesterday’s trading session and the gains continued into the overnight trade. Yesterday’s high marked the 22nd all-time closing high of 2021 for the index. Strong early results from top banking firms fueled the rally, combined with optimism about economy recovery paces. Notably, U.S. government bond yields have dropped in recent days, subduing some – but not all – investor concern about inflation rates. The S&P 500 traded 0.13% higher to $4,167.75 at last glance.

Morning Ag Commodity Prices - 4/16/2021
Contract Units High Low Last Net Change % Change
MAY '21 CORN $ / BSH  5.945 5.885 5.945 0.045 0.76%
JUL '21 CORN $ / BSH  5.8125 5.755 5.8125 0.045 0.78%
SEP '21 CORN $ / BSH  5.335 5.29 5.335 0.03 0.57%
DEC '21 CORN $ / BSH  5.1575 5.11 5.1575 0.035 0.68%
MAR '22 CORN $ / BSH  5.225 5.18 5.225 0.0325 0.63%
MAY '22 CORN $ / BSH  5.2625 5.2225 5.26 0.0275 0.53%
JUL '22 CORN $ / BSH  5.2825 5.24 5.2775 0.025 0.48%
MAY '21 SOYBEANS $ / BSH  14.3 14.18 14.295 0.1125 0.79%
JUL '21 SOYBEANS $ / BSH  14.2225 14.105 14.2175 0.1075 0.76%
AUG '21 SOYBEANS $ / BSH  13.83 13.7125 13.83 0.105 0.77%
SEP '21 SOYBEANS $ / BSH  13.12 13.025 13.12 0.0875 0.67%
NOV '21 SOYBEANS $ / BSH  12.76 12.6675 12.76 0.07 0.55%
JAN '22 SOYBEANS $ / BSH  12.7425 12.6675 12.7425 0.06 0.47%
MAR '22 SOYBEANS $ / BSH  12.48 12.415 12.48 0.05 0.40%
MAY '22 SOYBEANS $ / BSH  12.4075 12.355 12.4075 0.0425 0.34%
JUL '22 SOYBEANS $ / BSH  12.39 12.3875 12.3875 0.0325 0.26%
MAY '21 SOYBEAN OIL  $ / LB 55.58 54.86 55.48 0.59 1.07%
JUL '21 SOYBEAN OIL  $ / LB 53.56 52.78 53.49 0.62 1.17%
MAY '21 SOY MEAL $ / TON 404.2 400 403.4 1.5 0.37%
JUL '21 SOY MEAL $ / TON 408.6 404.6 407.7 1.2 0.30%
AUG '21 SOY MEAL $ / TON 404.7 400 404.4 1.3 0.32%
SEP '21 SOY MEAL $ / TON 399.3 395.9 398.9 0.9 0.23%
OCT '21 SOY MEAL $ / TON 393.3 391 392.8 0.3 0.08%
MAY '21 Chicago SRW $ / BSH  6.59 6.485 6.58 0.0425 0.65%
JUL '21 Chicago SRW $ / BSH  6.6 6.495 6.5925 0.0375 0.57%
SEP '21 Chicago SRW $ / BSH  6.6125 6.5125 6.6025 0.0325 0.49%
DEC '21 Chicago SRW $ / BSH  6.65 6.56 6.6475 0.03 0.45%
MAR '22 Chicago SRW $ / BSH  6.6875 6.6 6.6825 0.0225 0.34%
MAY '21 Kansas City HRW $ / BSH  6.1075 6.01 6.105 0.0275 0.45%
JUL '21 Kansas City HRW $ / BSH  6.18 6.085 6.175 0.0225 0.37%
SEP '21 Kansas City HRW $ / BSH  6.2275 6.14 6.22 0.015 0.24%
DEC '21 Kansas City HRW $ / BSH  6.305 6.2175 6.305 0.02 0.32%
MAR '22 Kansas City HRW $ / BSH  6.345 6.325 6.33 -0.025 -0.39%
MAY '21 MLPS Spring Wheat $ / BSH  6.66 6.595 6.6525 0.02 0.30%
JUL '21 MLPS Spring Wheat $ / BSH  6.7325 6.6675 6.7275 0.015 0.22%
SEP '21 MLPS Spring Wheat $ / BSH  6.7925 6.735 6.785 0.02 0.30%
DEC '21 MLPS Spring Wheat $ / BSH  6.8625 6.8025 6.8625 0.0325 0.48%
MAR '22 MLPS Spring Wheat $ / BSH  6.8725 6.865 6.8725 0 0.00%
JUN '21 ICE Dollar Index $ 91.81 91.49 91.515 -0.103 -0.11%
 MA '21 Light Crude $ / BBL  63.88 63.24 63.45 -0.01 -0.02%
 JU '21 Light Crude $ / BBL  63.94 63.3 63.53 0.02 0.03%
MAY '21 ULS Diesel $ /U GAL 1.9093 1.8928 1.9004 0.0015 0.08%
JUN '21 ULS Diesel $ /U GAL 1.9109 1.8934 1.9021 0.0017 0.09%
MAY '21 Gasoline $ /U GAL 2.0622 2.0475 2.0504 -0.0014 -0.07%
JUN '21 Gasoline $ /U GAL 2.0627 2.0486 2.052 -0.0006 -0.03%
APR '21 Feeder Cattle $ / CWT 0 #N/A 140.05 0 0.00%
MAY '21 Feeder Cattle $ / CWT 0 #N/A 144.425 0 0.00%
 AP '21 Live Cattle $ / CWT 0 #N/A 121.6 0 0.00%
 JU '21 Live Cattle $ / CWT 0 #N/A 119.65 0 0.00%
MAY '21 Live Hogs $ / CWT 0 #N/A 103.575 0 0.00%
JUN '21 Live Hogs $ / CWT 0 #N/A 104.7 0 0.00%
APR '21 Class III Milk $ / CWT 17.56 #N/A 17.56 0 0.00%
MAY '21 Class III Milk $ / CWT 18.62 18.62 18.62 0.12 0.65%
JUN '21 Class III Milk $ / CWT 18.8 18.7 18.8 0.22 1.18%
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