Morning Market Review for Dec. 1, 2020

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October soy crush expected to hit record levels. (Comments are updated by 7:30 a.m. Central Time.)

Wheat rises on struggling Russian crop, despite a bumper harvest in Australia

  • Corn up 1-2 cents
  • Soybeans up 2-4 cents, soyoil up $0.45/lb, soymeal up $2.5/ton
  • Wheat up 1-3 cents

*Prices as of 6:50am CST.

Corn

Corn futures inched up this morning as December contracts entered into the delivery period. The corn complex followed strength in the soy and wheat complexes in overnight trading. December corn futures rose $0.025/bushel to $4.2225 while March 2021 corn futures added $0.015/bushel to $4.275.

After another wet planting and harvest season, Ohio is finally within sight of the finish line for the 2020 corn harvest season. According to yesterday’s weekly Crop Progress report, as of November 29, 92% of the Buckeye state’s corn crop was harvested, a 5% increase from the previous week despite more rain delays last week.

While little historical data is available to compare harvest progress in Ohio for this time of year, harvest progress for the week was 2% higher than the same time a year ago. That comparison accurately reflects the struggles endured by Ohio farmers this year as they battled a cool and soggy spring, drought conditions through the summer, a slow maturation phase, and rain delays amid harvest.

It wasn’t an exact repeat of horrific 2019 harvest conditions for Ohio corn growers, but coupled with pandemic conditions, it was yet another obstacle to a growing season that started off with more promise than the previous year.

Rallies in the corn market amid rising Chinese import demand for U.S. corn sent speculators re-buying corn for the week ending November 24. Managed money funds added 11,907 long positions to their portfolio on the week as futures soared to 16-month highs.

The funds raised their net buying position on corn to 287,599 contracts. It marked a two-week reversal that saw the funds relinquishing buying interest in corn.

Meanwhile, producer funds set a new record for the time of year for corn sales. For the week ending November 24, farmers trimmed 106,185 long positions to widen their net selling position on corn to 647,010 contracts.

Farmers have been on a steady 15-week selling tear of corn as prices rally and basis widens on growing domestic and foreign demand.

Soybeans

Soybeans inched up this morning following yesterday’s lower close on hopes for record-setting soy crush volumes expected to be announced today. January soybean futures rose $0.0325/bushel to $11.7175 on the optimism, while March futures also added $0.0375/bushel to $11.7325. December soyoil futures increased $0.45/lb to $38.33 while December soymeal futures were on pace to post a $2.5/ton gain to $395.60.

Political turmoil heightened overnight in Argentina, where an agro-export industry workers strike is expected to begin today. Oilseed workers and grains inspectors in one of the world’s top grain exporters will begin striking today for an indeterminate amount of time, leaving the fate of grain flows in limbo.

High inflation in the South American country has eroded worker wages in recent years, leaving workers dissatisfied with earning potential. Tensions have been running particularly high in recent months as workers continue to campaign for higher pay in the riskier coronavirus pandemic-era and as global grains prices soar.  

Farmers may be feeling anxiety as they look to price in 2021 soybean crops. But AgMarket.Net’s Matt Bennett offers a different perspective. Factoring in average yields, 2021 margins are currently higher than at any point in the past six or seven years. Even if it isn’t a record sale, Bennet points out that it still offers a lucrative risk management strategy for farmers looking to diversify their profit options in the latest Ag Marketing IQ column.

USDA will release monthly soybean crush data for October 2020. Trade estimates place today’s figure at 196.6 million bushels. If realized, the October crush will set a new record high for U.S. monthly soy crush volumes, eclipsing the previous record of 192.1 million bushels set in March 2020.

Trade estimates range between 195.0 million – 197.5 million bushels as usage rates sky rocket amid strong livestock and export demand. The National Oilseed Processors Association (NOPA) estimated its members, which comprise 95% of all soybeans processed in the U.S., crushed a record setting 185.2 million bushels in October, the highest monthly volume on record for the trade group.

Speculators continue to wait for renewed signs of Chinese demand as nearby futures contracts trade in oversold territory, based on technical indicators. The sentiment prevailed in last week’s Commitment of Traders report, released a day late by the CFTC due to the Thanksgiving holiday.

Managed money funds continue to abandon interest in soybeans, trimming 2,683 long positions from their portfolio as they shrunk their net selling position to 203,810 contracts for the week ending November 24.

Despite being the lowest net long position on soybeans in two months, the funds continued to set a record high buying position for the time of year over the course of the reporting week. China will likely need to step up new soybean purchases or export loading paces to reaffirm speculators’ faith in soybean prices, which flirted with four and a half year highs upon the opening bell yesterday morning.

However, the high prices showed signs of deterring Chinese demand last week. Negative crush margins led to increased chatter of small soybean processors in China cancelling U.S. soy purchases as Thanksgiving loomed.

The resultant pause in the market sent farmers backing off new cash sales as well, as producer funds added 9,378 long positions to their portfolio. The move shrunk growers’ net selling position to 376,384 contracts, it’s lowest level in three weeks.

 Wheat

Contract

Price Change*

Price*

Chicago SRW – December Futures

+$0.0025

$5.805

Kansas City HRW – December Futures

$0.00

$5.4575

Minneapolis HRS – December Futures

$0.00

$5.345

 

A weaker dollar and declining Russian wheat conditions overpowered forecasts of a bumper crop in Australia this morning, sending prices in the wheat complex mostly higher. The ICE Dollar Index traded 0.07% lower to $91.795 in overnight trading.

A Russian weather forecaster harkened risks to the Russian wheat crop overnight after reporting 22% of local winter grain crops to be in poor condition. "We see that the share of winter grain sowings in bad condition is the highest since 2013," Dmitry Rylko, head of Russian agriculture consultancy IKAR, told Reuters overnight.

Competing Russian agricultural consultancy Sovecon expects conditions will somewhat improve this week as warm temperatures and rain arrive in some afflicted areas. Despite a slight uptick in winter wheat acreage this year, Sovecon’s chief, Andrey Sizov, expects 9% of Russian winter grain plantings to be lost during the winter, up from the historical average of 5%. Russia will likely harvest between 2.91 billion – 3.04 billion bushels of wheat in 2021/22.

USDA released its last weekly Crop Progress report for the 2020 season yesterday. Rains in the Southern Plains last week helped boost winter wheat conditions, which have struggled in their young season amid drought conditions in the West.

Emergence rates steadily remained slightly above historical averages despite suffering amid dry weather conditions. As of Sunday, 92% of the nation’s prospective planted winter wheat crop had emerged, up 3% from the prior week and 1% ahead of the five-year average.

For the week ending November 29, winter wheat ratings rose 3% to 46% good to excellent. Ratings remained well below the 52% good to excellent rating of a year ago, when moderate dryness was beginning to take a toll on the young crop. Yesterday’s reading was a clear indication that yield damage may be more significant in 2021 than 2020 due to a higher extreme of dry weather.

Speculators increased their buying interest on Chicago soft red winter wheat and Kansas City hard red winter wheat for the week ending November 24. Interest declined on Minneapolis spring wheat for a fourth straight week, according to CFTC data released in the latest Commitment of Traders report.

Producer funds continued to widen their selling positions on all classes of wheat during the reporting week. Most notably, growers set a new weekly record for hard red winter wheat sales after trimming 10,354 long positions from their portfolio, widening their short position to 92,347 contracts – a new record for the time of year.

Australia will likely harvest its second-largest wheat crop on record this year, as abundant rains this year replenished soil moisture levels depleted by a three-year drought. The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) raised its 2020/21 national wheat estimate by over 10% to a staggering 1.15 billion bushels.

Economists expect the large crop to weight prices lower in the Land Down Under, especially after ongoing conflicts with key trade partner, China. But the rapid shift in fortune cannot be denied for Australian farmers. "It was a dust bowl this time last year in many areas; what wasn't dust caught fire," New South Wales Farmers Vice President Xavier Martin told Reuters yesterday. "Farmers are now going into their paddocks and finding higher yields than expected."

Weather

Snow will move out of the Eastern Corn Belt by early tomorrow morning, according to NOAA’s short-range forecasts. The Southern Plains will likely see a rain-snow mix by tomorrow afternoon, with scattered snow showers expected on the Central Plains around the same time. Accumulation in all areas will likely be light in the next 24 hours.

Financials 

Coronavirus cases in the U.S. rose by a staggering 160,383 since yesterday morning to 13,546,638 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. The death toll increased by 1,216 lives overnight to 268,103 deaths as of press time.  

Going from growing and harvest season into wintertime is a rapid swing that can be difficult for farmers to deal with. But Water Street Solution’s Darren Frye has a few helpful pointers to ease the transition. Frye advises taking a moment to reflect on the season before recalibrating goals and making a new to-do list for the coming months in the latest Finance First column.

Stock futures flirted with new record highs this morning despite yesterday’s losses on rising COVID-19 cases. Investors reaffirmed faith in looming vaccines overnight after Vice President Mike Pence announced that vaccines would likely be distributed by mid-December – earlier than previously expected.

Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin are expected to testify to Congress today on the state of the economic recovery in the U.S. Strong manufacturing data out of China overnight also sent the S&P 500 futures index rising 1.02% to $3,660.25.

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