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Morning Market Review for Aug. 10, 2020

Wheat falls on rising global supplies. (Comments are updated by 7:30 a.m. Central Time.)

Soybeans edge lower on rain in the Midwest and tensions with China

  • Corn up 1 cent
  • Soybeans down 1-2 cents, soyoil down $0.20, soybean meal up $0.1
  • Wheat down 1-3 cents

*Prices as of 6:55 am CDT.

Corn: Corn futures prices wobbled this morning on rising concerns of a large crop as favorable rains moved through the Corn Belt. Technical buying supported gains in the nearby contracts overnight as September futures rose $0.0175/bushel to $3.095. New crop December futures added $0.05/bushel to $3.2125.

Cash corn prices were mostly flat across the Corn Belt to end the week on Friday. Basis edged up $0.02/bushel to $0.12 above September futures at a Blair, Nebraska processing facility. An ethanol plant in Council Bluffs, Iowa narrowed basis $0.01/bushel to $0.16 below September futures. Cash sales were scarce.

Corn basis and change

Ahead of this week’s WASDE and Crop Production reports, preliminary yield estimates continue to project above average production forecasts. Average estimates for corn yields total 181.2 bushels per acre (bpa), which results in a 15.2 billion bushel corn crop, Farm Futures contributing analyst Bryce Knorr points out. Large supplies will hang in the balance of pandemic-era demand, which has struggled as ethanol and livestock production contracts. Demand may be the only hope for a pre-harvest price rally, Knorr writes in the latest Ag Marketing IQ column.

Rains across the Midwest last week brought slight relief to the Plains and Eastern Corn Belt though Iowa, the nation’s largest corn-producing state, saw an increase in drought severity according to the University of Nebraska Drought Monitor.

These conditions will likely be reflected in today’s weekly Crop Progress report. As of last week, 72% of U.S. corn was classified in good to excellent condition. Pollination was nearing an end in last week’s report, with 92% of nation-wide corn completing the silk stage. About 39% of corn had reached the dough stage as of August 2.

Speculators continued three straight weeks of bearish sentiments on corn, according to the latest CFTC data released last Friday. A $0.075/bushel decline in the nearby contract between July 29-August 4 led speculators to add 42,974 short contracts on the week, growing their net selling position to 172,820 – the widest short position in five weeks as concerns about the growing size of the 2020 crop weighs heavily on money mangers’ minds.

Soybeans: Rains in the Midwest today and increasing tensions between the U.S. and China weighed futures prices in the soy complex lower this morning. September futures prices shed $0.02/bushel in overnight trading to $8.6375 while new crop November futures ticked $0.015/bushel lower to $8.66. September soymeal futures were on track to post a $0.1/ton gain to $282.1.

Soyoil futures followed palm oil prices lower this morning on a 4.8% - 6.2% decline in monthly palm oil exports out of Malaysia since July. September soyoil futures traded $0.20/lb lower to $30.65 on the news.

Cash soybean prices were mostly steady across the Midwest on Friday. Basis widened $0.03/bushel to $0.33 below November futures prices at a Des Moines, Iowa processor on Friday, while a Savanna, Illinois river terminal narrowed basis $0.01/bushel to $0.03 over November futures. Falling futures prices chilled farmers’ interest in booking old crop sales.

Soybean Basis Change

Strong livestock and meat demand in China will likely fuel a buying spree of international soybeans in the fourth quarter of 2020 and the U.S. could be the primary beneficiary of renewed Chinese demand. Traders expect China to import an average of 293.9 million bushels of soybeans between October and December of this year as crush margins improve.

And the timing couldn’t be better – record Brazilian exportable supplies are quickly dwindling as the 2020 American crop comes online. Poultry production in China has surged this year as consumers sought a cheaper protein alternative amid rising pork prices. But with a rising poultry flock and a recovering hog herd, soybean demand from China will be strong for the foreseeable future.

And Chinese soy stockpiling to prevent pandemic-related shortages won’t hurt demand prospects either. "We're still quite open for November and December and can buy as many U.S. soybeans as we can digest as demand is very good," a trader associated with a major Chinese crush company said.

Last week’s rainfall across the Midwest will likely support soybean development conditions in today’s Crop Progress report. About 73% of U.S. soybeans were rated in good to excellent condition in last week’s report, up 1% from the previous week.

Blooming progress neared a close as of August 2, with 85% of soybeans blooming. Maturation progress remained consistent with five-year averages as 59% of soybeans setting pods as of last Sunday. Favorable growing conditions across the Midwest last week will help spur crop development progress along at a rapid pace in today’s report.

Money managers trimmed 14,486 long positions from their net buying position, narrowing their overall long position to 44,219 contracts for the week ending August 4. Favorable crop development amid dry conditions has increased the likelihood of an above average crop this year and a slight pullback in export demand from China over the reporting period also led traders to wax bearish on soy in last Friday’s report.

Speculators echoed the slightly bearish sentiment on soybean meal, adding 2,406 short positions on the week to widen their net seller position to 20,985 contracts. But growing international demand for soyoil led the hedge funds to add 11,863 long positions in Friday’s Commitment of Traders report, growing their net buyer position to 48,333 positions.


Wheat contracts price changes

Large global wheat stocks increased on rising production forecasts out of Russia overnight. A strengthening dollar on expected progress on a stimulus bill in Congress strengthened the dollar overnight as the ICE Dollar Index rose 0.21% to $93.605, underpinning weakness in the wheat complex this morning.

Spot basis bids for soft and hard red winter wheat were unchanged across the Midwest and Southern Plains on Friday. Farmer sales in the Southern Plains slowed to a halt after Kansas City futures prices set new contract lows on Friday.

Protein premiums for hard red winter cash wheat delivered to or through Kansas City by rail were mostly lower on Friday after rising protein estimates for the newly harvested crop bested last year’s protein levels, as shown below:

wheat protein content, basis range, change

Russia’s wheat yield prospects continue to rise on improving yield reports out of the country’s central growing region. Russian agricultural consultancy IKAR reported overnight a 55-million-bushel increase in the country’s 2020 wheat crop to 2.976 billion bushels. The crop is expected to follow the 2017/18 crop as the second-largest harvest on record. USDA estimates placed the crop at 2.811 billion bushels in the July WASDE report.

With soft red winter wheat harvest in the Midwest complete for the year, farmers in the Northern U.S. are scrambling to finish up hard red winter wheat harvest. Overall HRW harvest progress is likely to come in a little over 80% in today’s Crop Progress report as favorable harvest conditions in the North continue to fuel a rapid harvest pace.

Hot weather has favored increasing protein levels in Montana, Washington, and Oregon. Test weights are also projected to come in at above average levels from South Dakota to Idaho. Total winter wheat harvest was reported at 85% complete in last week’s Crop Progress report, 3% ahead of the five-year average.

Spring wheat conditions are expected to remain stable on favorable development weather after the August 2 Crop Progress report showed a 3% rating increase for spring wheat crops to 63% good to excellent.

A slow start to the growing season after spring rains has yet to derail soft white wheat harvest in the Northern U.S., with over 25% of the crop harvested as of last Friday. Today’s Crop Progress report will likely show a significant increase from last week’s 5% completion rating for spring wheat harvest after a week of hot and dry weather, which will also likely support above average protein levels and test weights.

A month into Ukraine’s marketing year and total grain exports are already nearly a third lower than the same time a year ago. Ukraine’s wheat exports in July came in at 69.1 million bushels after a dry summer scorched yield potential for the 2020 crop. Ukraine’s government has yet to release 2020/21 export projections after a record harvest and export season last year. Ukraine was the fourth largest wheat exporter in the 2019/20 marketing year.

Weather: Parched soils in the Eastern Corn Belt could see substantial rainfall today, according to NOAA's short-range forecast. NOAA’s 24-hour precipitation monitor estimates 1-2 inches of accumulation across Central Kansas to Western Ohio, helping to relieve dry growing conditions. More rain is expected in the Eastern Corn Belt tomorrow.

Financials: Coronavirus cases in the U.S. rose to 5,045,564 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center, surpassing the 5 million caseload mark over the weekend. The death toll increased to 162,938 deaths as of press time. New case rates fell last week, though 13 states reported a rise in infections.

Want to get a head start on the new marketing week? Catch up on some of our best articles from last week here. And for readers who want to dig a little deeper, here are several news stories from the ag business community last week that missed top headlines.

Farmers across the country are repurposing their pandemic-era N95 masks as harvest approaches to clean out grain bins. Indiana farmer Kyle Stackhouse is one such farmer and points out that it is more than a good workout – it can be potentially dangerous. With grain bin entrapments on the rise this summer, Stackhouse advises to clean bins in teams to supervise the shutoff and sweep, wear a mask, and even add earplugs to protect ears against loud echoes in the latest Between the Fencerows column.

U.S. stocks wavered overnight after China imposed sanctions against senators Ted Cruz and Marco Rubio, among others, in retaliation over comments about Hong Kong. President Trump signed an executive order over the weekend to extend a $300/week unemployment payment to jobless Americans in an effort to sidestep slow progress on a stimulus package in Congress.

However, his executive order is not expected to hold weight especially as Congress is likely to reach a deal on a stimulus package this week that would extend provisions through year end. S&P 500 futures inched up 1.7 points or 0.05% to $3,346.5 amid the contrasting market sentiments.

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