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Morning Market Review for Aug. 7, 2020

Soybeans tumble on large crop forecasts and U.S.-Chinese relations. (Comments are updated by 7:30 a.m. Central Time.)

Wheat inches up on technical buying.

  • Corn down 1 cent
  • Soybeans down 2 cents, soyoil down $0.24, soybean meal up $0.3
  • Wheat up 1 cent

*Prices as of 6:55 am CDT.

Corn: Corn futures traded slightly lower this morning on favorable weather forecasts for crop development. September futures shed $0.005/bushel to $3.1075 in overnight trade. New crop December futures also dropped $0.005/bushel lower to $3.2325.

Cash corn prices were mostly flat across the Corn Belt yesterday. Basis was mixed on the Mississippi River, falling at the Savanna, Illinois terminal while rising at a Davenport, Iowa facility. Cash sales were scarce as futures prices attempted to claw back gains after Tuesday’s price declines.

Corn basis and change

Corn futures have fallen $0.3525/bushel in the last month despite lower corn acreage. But reduced livestock and ethanol demand have increased ending stock volumes and dragged futures prices lower as a result. Is there any price upside currently? The chances don’t look good, Total Farm Marketing’s Naomi Blohm writes. Prices tend to trend lower during August as yield estimates roll in. A weaker dollar could help, but keep a defensive mindset for your marketing plan, she advises in the latest Ag Marketing IQ column.

Soybeans: Rising chances for a large soybean crop this fall and deepening diplomatic tensions between the U.S. and China weighed heavily on the soy complex this morning. September soybean futures lost $0.025/bushel to $8.7225 while new crop November futures were on pace to give up $0.0225/bushel to $8.7575. September soyoil futures traded $0.24/lb lower to $30.98 while September soymeal futures rose $0.3/ton to $283.5.

Cash soybean prices narrowed at two processing facilities in the Midwest yesterday. Easing barge prices increased river terminals’ appetite for soybeans along the Mississippi River. But new cash sales were few and far between as futures prices fell for the third straight session.

Soybean Basis Change

China’s appetite for soy is showing no signs of being satiated after importing 410.0 million bushels of soybeans during July 2020. The monthly total beat out the former July high of 317.1 million bushels despite a 39.3-million-bushel monthly decline in soy imports from June 2020’s all-time monthly import high.

And where are all those soybeans coming from? With a record-setting crop and weak currency, Brazil has been the main benefactor of insatiable Chinese soy demand due to China’s expanding livestock industry. Brazilian soy exports to China for the current year to date rose 17.7% from the previous year to a staggering 2.025 billion bushels with few signs of slowing down. Brazilian soybean export forecasts peg the 2021 exportable stockpile at 2.939 billion bushels.

Soymeal stockpiles in China, which notched record lows in March, appear to be swelled past capacity after China’s Brazilian soybean buying spree this year. But with China’s livestock and meat industry facing increasing demand, soy stocks are expected to be depleted in rapid fashion, meaning that strong Chinese soy demand for international soybeans may be here to stay.

Wheat:

Wheat contracts price changes

After a week of losses, wheat prices rose this morning on a round of technical buying. And heavy world stocks and improving global production forecasts will likely continue to add downward price pressure to the wheat complex. A strengthening dollar capped gains as the ICE Dollar Index strengthened 0.45% to $93.190.

Spot basis bids for soft red winter wheat were unchanged across the Midwest yesterday. Basis offerings for hard red winter wheat narrowed $0.10/bushel to $1.40 over September Kansas City futures prices yesterday at a Texas rail facility loading into the Gulf. Farmer sales in the Southern Plains were slow as Kansas City futures slipped to contract lows.

Protein premiums for hard red winter cash wheat delivered to or through Kansas City by rail rose $0.02/bushel for wheat containing 11% protein yesterday, as shown below:

wheat protein content, basis range, change

French soft wheat farmers are rapidly approaching the end of their 2020 harvest season. According to local farm office FranceAgriMer, 99% of the country’s soft wheat crop had been harvest as of August 3 on a faster-than-average combining pace. A wet planting season and dry growing conditions have reduced yield prospects in France, with hot and dry conditions stressing corn plants as well.

The French government announced this morning an expansion for farmer support amid worsening drought conditions, with more details expected in coming days. France is the largest wheat-producing country in the European Union, which is the largest wheat-producing bloc in the world.

Weather: Toasty temperatures across the Plains will kickstart the weekend, according to NOAA's short-range forecast. Chances of rain are possible along the Mississippi River this weekend. Iowa is expected to receive a half inch of accumulation in the next 24 hours, which will likely provide little relief to the nation’s top corn-producing state.

Financials: Coronavirus cases in the U.S. rose to 4,883,657 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. At the current rate, the U.S. caseload will likely surpass the 5-million-case mark before this weekend is over. The death toll increased to 160,104 deaths as of press time.

Amid depressed commodity prices and anemic demand during the pandemic, farmers – and their bankers – should take comfort in stable land prices. USDA released annual estimates on farmland values across the U.S. yesterday and found cropland and pasture values to be relatively unchanged from 2019.

Average cropland was valued at $4,100 per acre for the second straight year. Annual cropland values slipped 1.8% in the Northern Plains, 0.6% in Lake States, and 0.2% across Corn Belt States. Rising land values in the Southern Plains and Mountain States offset moderated prices across the Midwest. Pasture prices averaged at $1.400 – unchanged from the year prior.

While average prices remained constant over the year, farmers and financiers need keep an eye on local land values and credit conditions amid increasing economic uncertainty. Irrigated cropland rents fell $4/acre from 2019 to $216/acre in 2020. While this is good news for cash-strapped farmers, falling cash rents could be a precursor to declining land prices. This data decline could be enough to make lenders nervous, but you can get ahead of it. A quick, proactive call to check in with your lender can go miles into reassuring bankers amid turbulent economic times.

Election season is just around the corner and early polls show Joe Biden gaining strength in rural America in a stark reversal of voter sentiment compared to the 2016 election. After dominating the rural vote in 2016, President Donald Trump is losing ground with the farm community as more voters believe he is putting his re-election before voters’ needs, with his anti-biofuels and trade policies specifically harming his chances for gaining the rural vote in the November election, according to a recent Focus on Rural America poll.

Meanwhile Biden has been gaining traction in farm country with his plans to reward farmers for investing in practices that reduce carbon emissions, Farm Futures policy expert Jacqui Fatka writes in the latest DC Dialogue column. Biden’s expansion of the Conservation Stewardship Program would also help farmers to diversify revenue streams and his rhetoric on stabilizing trade with China would bring stability to volatile agricultural commodity prices.

The recent poll echoes lobbying sentiments on Capitol Hill as well as in rural America. The National Corn Growers Association (NCGA) and Renewable Fuels Association (RFA) have already met with the Biden camp about furthering a pro-ethanol agenda. Cash-strapped biofuel trade groups have also announced a reduction in lobbying spending on the Hill as the pandemic preoccupies their lobbyists.

U.S. stocks fell after President Trump’s executive order yesterday to ban usage of Chinese apps TikTok and WeChat further eroded diplomatic relations between the U.S. and China. The executive order also called for Chinese companies trading on U.S. stock exchanges to abandon their listings. S&P 500 futures dropped 13.8 points or 0.41% to $3,330.50 on the sentiment, as well as stalled Congressional progress on a new pandemic stimulus package.

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