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Morning Market Review for Aug. 13, 2020

Commodities rise on short covering following WASDE report yesterday. (Comments are updated by 7:30 a.m. Central Time.)

FSA releases updated prevent plant acreage

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  • Corn up 5-6 cents
  • Soybeans up 8-9 cents, soyoil down $0.04, soybean meal up $4
  • Chicago wheat down 1 cent, Kansas City & Minneapolis wheat up 1-3 cents

*Prices as of 6:45 am CDT.

Editor’s Note: Check out our Feedback from the Field interactive map to see how your crops stack up against other farms around the country. Want to participate in our reader-sourced map? Click here to share your crop reports with other growers around the country via a short survey. Check out our latest weekly analysis of crop conditions and grower responses here. Thank you!

Corn: Traders continued to take advantage of bargain buying and damage to corn crops in Iowa earlier this week, snapping up corn at low prices this morning. But it led September futures $0.0525/bushel higher to $3.1975 and new crop December futures $0.0525/bushel higher to $3.325, despite WASDE forecasts yesterday indicating a record-large corn crop.

Cash corn prices rose on the Mississippi River as export demand at the U.S. Gulf strengthened, echoing WASDE sentiments for rising corn export demand in the last days of the 2019/20 marketing year and continuing through 2020/21. Basis widened $0.02/bushel to $0.14 below September futures prices at a Council Bluffs, Iowa ethanol plant. Cash sales were slow yesterday despite rising corn futures.

Corn basis and change

Markets finally got an inkling of where the mysterious 5 million acres of corn that disappeared from March 2020 Acreage estimates ended up. Farm Service Agency (FSA) data released yesterday afternoon found 5.374 million acres of corn acres went into prevent plant acreage this year.

North Dakota claimed the largest acreage with 1.747 million acres after cold and wet conditions this spring prevented farmers from finishing the 2019 harvest, let alone making any reasonable progress on 2020 planting. South Dakota followed with 897,773 acres. A water-logged spring season in Mississippi and Arkansas led to over half a million acres in each state redirected into prevent plant acreage.

As 2020 prevent plant acreage for corn dropped by over 6 million acres from 2019’s historic high of 11.433 million acres, the stage was inevitably set this spring for a return to normal acreage levels as well as trendline yields as weather conditions improved across the country (except in North Dakota, obviously). Improved planting conditions led to FAS reporting 81.122 million acres of corn planted across the U.S. this year, down from 85.871 million acres in 2019.

The U.S. will likely produce the largest corn crop on record after the USDA projected record-breaking yields for corn in yesterday’s August 2020 WASDE report. Corn yields are expected to rise 14.4 bushels per acre (bpa) to 181.8 bpa in the 2020 crop year. The record high yield surpassed the previous high of 176.6 bpa set in 2017.

The record-setting yields will pave the way for historically high corn output this fall. At 15.278 billion bushels, 2020 corn production will likely surpass the 2016 high of 15.148 billion bushels. Corn demand revived in yesterday’s WASDE report, thanks to stronger export and new crop livestock demand.

Weekly ethanol production declined for the second week in a row, according to weekly data released by the U.S. Energy Information Administration today. For the week ending August 7, national ethanol production fell 1.4% to 38.6 million gallons/day.

Several signals in this morning’s report from the EIA indicated that corn consumption for ethanol may be plateauing. Production capacity further constricted as ethanol stocks falling 3% on the week to 829.5 million gallons – the lowest stock level since late November 2015.

The week also marked the third consecutive week EIA reported ethanol imports. This week’s total of 1 million gallons/day of ethanol shipments loaded into U.S. ports brings the three-week total of ethanol imports to 2.6 million gallons/day. While this may not be a substantial amount, it could be indicative of rising production costs relative to foreign biofuel producers.

However, ethanol demand from refineries for blending inched up 2% on the week to 36.2 million gallons/day, following a 11-million-gallon/day increase in gasoline demand to 373.1 million gallons/day – the highest level since early March 2020.

Could uncharacteristic price increases following today’s report be a sign to book sales? Possibly, Commstock’s Matthew Kruse writes. Check out the latest Ag Marketing IQ column for Kruse’s take on how to take advantage of seasonal price fluctuations.

Soybeans: The nations’ second-largest soybean harvest on record as reported yesterday did little to suppress rising prices as demand forecasts for the new crop year, as well as demand from end users, increased. September soybean futures rose $0.08/bushel to $8.885 in overnight trade while new crop November futures added $0.085/bushel to $8.915. September soyoil futures eased $0.04/lb to $31.52 while September soymeal futures sky rocketed $4/ton higher to $286.2 this morning on rising livestock demand.

Strong processing demand, as indicated in yesterday’s WASDE reports, led cash soybean prices higher across the Midwest yesterday. Steady export demand at the Gulf strengthened basis slightly on the Mississippi River, while international demand eased on Lake Erie. Farmer sales were scarce yesterday as growers awaited WASDE results.

Soybean Basis Change

Soymeal cash bids were mostly flat, though futures low prices had incentivized many buyers to lock in pricing earlier this week. Cash sales were quiet yesterday as growers, middlemen, and end users anticipated possible WASDE outcomes.

Acreage estimates for soybeans this year came in much lower than analysts expected, especially considering high soybean prices this summer. So where did they go? FSA revealed some answers yesterday after dropping the first edit of 2020 acreage data. U.S. growers planted 75.906 million acres of soybeans this year, up slightly from 74.005 million acres a year ago but significantly lower than the 2018 acreage of 86.954 million soybean acres. About 1.223 million acres went into prevent plant acreage this spring, dropping by 3.238 million acres from 4.461 million acres a year ago.

Again, poor planting conditions in North Dakota (I swear I’m not picking on you, ND readers – here are the stats to prove it.) led to 510,981 soybean acres in the Roughrider state being moved out of production and into prevent plant acreage. South Dakota followed with 296,425 acres.

Soybean yields for 2020 rose 3.5 bpa over trendline forecasts to 53.3 bpa in yesterday’s WASDE report, besting the 2016 yield record of 51.9 bpa set in 2016. USDA’s forecast exceeded market expectations, the highest of which was 53.0 bpa. Soybeans will likely notch the second largest volume in history with USDA projecting 4.425 billion bushels of soybeans to be produced in the 2020/21 marketing year. The previous high was set in 2018 for soybeans (4.428B bushels).

New crop soybean usage forecasts heated up as well. Strengthening crush demand in 2019/20 as well as new crop demand for exports, crush volumes, and residual adjustments helped offset significant increases to ending stocks following projections for a bumper crop in 2020.

Private exporters reported two flash soybean sales yesterday, supporting WASDE’s export forecast increases. About 4.4 million bushels were purchases for 2020/21 delivery by China while an unknown buyer earmarked 9.5 million bushels to be delivered in the 2020/21 marketing year.

Damage to storage facilities in Monday’s wind storm could spell out long term problems as farmers scramble to find storage for their crops this fall. Temporary storage is an option, Farm Futures contributing analyst Bryce Knorr writes, but basis may revert back to harvest lows this fall on reduced national storage capacity as farmers hold on to 2019/20 bushels going into the 2020/21 marketing year.

Are there some areas that could be spared? Possibly, Knorr counters in his latest Ag Marketing IQ column. Recovering pork and poultry production could boost cash prices with increased demand in the Eastern Corn Belt this fall.

Wheat:

Wheat contracts price changes

Rising production forecasts out of Russia took a toll on Chicago soft red winter wheat futures this morning. But reduced hard red winter wheat yields and lower spring wheat acreage boosted futures prices in Kansas City and Minneapolis. A weakening dollar contributed to gains as the ICE Dollar Index fell 0.31% overnight to $93.115.

Cash wheat prices for soft and hard red winter varieties were mostly flat across the Midwest and Southern Plains. Cash sales were scarce yesterday as farmers awaited news of widening supplies.

Protein premiums for hard red winter cash wheat delivered to or through Kansas City by rail rose for wheat containing protein levels between 13.0% -13.6% yesterday, as shown below:

wheat protein content, basis range, change

Prevent plant acres for wheat dropped 1.025 million acres from 2019 to 1.195 million acres this year. But it likely made little difference in farmers’ growing aversion to wheat amid depressed futures prices. Farmers still planted the lowest wheat acreage in the U.S. on record in 2020.

Spring wheat acreage took the largest hit, though favorable growing conditions this summer will likely allow yields to somewhat offset the acreage decline. North Dakota (295,507 acres), Missouri (151,477 acres), and Texas (121,180 acres) reported the largest prevent plant acreage in the country so far this year.

Despite historically low wheat acreage planted this year – FSA data indicates 44.075 million acres of wheat were sown this year, down from 46.302 million acres a year ago – the 2020/21 wheat crop was forecasted 14 million bushels higher than last month’s WASDE to 1.838 billion bushels yesterday on strong projections for spring wheat.

After a historically large drop in second quarter wheat milling in the U.S. this year, USDA cut human food consumption demand for wheat by 4 million bushels to 960 million bushels. But after a strong start to the 2020/21 export season and a falling dollar, export forecasts rose 25 million bushels to 975 million bushels, which helped tighten domestic wheat stocks to 926 million bushels, or just slightly more that 50% of 2020 projected wheat production.

World wheat stocks ballooned to new highs after yesterday’s WASDE estimates were released. Rising forecasts for 2020/21 Russian wheat production offset an anticipated decline in Argentine wheat acreage. Meanwhile, slow global import demand due to the pandemic sent 2019/20 world wheat ending stocks rising to 11.055 billion bushels and 2020/21 ending stock volumes to 11.567 billion bushels – the top two largest ending wheat stockpiles on record.

Weather: Hot temperatures across the Midwest today will exacerbate heat stress conditions in crops across the country, according to NOAA's short-range forecast. Scattered showers in the Northern Plains through the night could provide relief to heat stressed crops in those areas. Precipitation is also likely in the Southeastern Corn Belt with at least an inch or two expected in both areas over the next 24 hours.

Financials: Coronavirus cases in the U.S. rose by 55,869 cases yesterday to 5,197,748 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. The death toll increased by 1,493 lives to 166,038 deaths as of press time.

Amid tightening agricultural stocks and looming food supply shortages, China is hopeful that the U.S. will be open to trade negotiations in this weekend’s virtual trade talks. Specifically, China desires that the U.S. ease its restrictions on Chinese communication companies, including TikTok and WeChat. China also hopes that the U.S. will relax export control measures that would make purchasing U.S. goods at Phase 1 targets more feasible. Top government officials from both parties will meet virtually over the weekend to commence the trade talks.

U.S. stock futures are not confident in looming jobless claims data this morning, backing off of yesterday’s highs in overnight trading. Traders are hopeful that claims dropped marginally to 1.1 million last week, though slow recovery in unemployment figures continues to concern Wall Street. S&P 500 futures were down 4.85 points or 0.14% to $3,365.50.

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