Morning Market Review for Feb. 25, 2021

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Soybeans surge on rains in Brazil. (Comments are updated by 7:30 a.m. Central Time.)

Corn, wheat markets await fresh export data for signs of life from China

  • Old crop corn down 1-3 cents; new crop corn up 1 cent
  • Soybeans up 12-17 cents, soyoil up $0.97/lb, soymeal up $2.70/ton
  • Wheat down 1-2 cents

*Prices as of 6:50 am CST.

Corn

Old crop corn prices lost momentum this morning, down 1-4 cents after reevaluating planting progress in Brazil and increased acreage forecasts for China. Quiet demand from China following the Lunar New Year holiday was not supportive of price gains this morning.

New crop prices edged up on tight supply forecasts for the 2021/22 marketing year.

Rising demand and a refocused government policy making consumer food availability a top priority will drive Chinese corn farmers to increase acreage in 2021/22, according to China’s Ministry of Agriculture in an overnight statement. China expects to plant over 1.6 million more acres of corn this year relative to 2020.

Livestock demand for feed as China’s massive hog herd recovers from the African swine fever outbreak in 2018 has pressured Chinese corn prices to record highs in recent months. China has increasingly become a prominent global importer of corn to satiate growing livestock feed demand. But will the additional 1.6 million more acres of corn be enough? Time will tell.

South Africa’s corn crop is expected to rise 4% in 2020/21 as nearly 350,000 more acres were brought into production this year. The 2020/21 South African corn crop is forecast at 624.0 million bushels. Higher corn prices than the same time last year encouraged South African farmers to plant 6.8 million acres of corn this year. Favorable rains and growing conditions will likely make corn acreage a lucrative venture for South African corn farmers this year.

Corn export sales are likely to edge higher than the previous week in today’s export sales report. Market analysts estimate 2020/21 sales for the week ending February 18 between 19.7 million – 51.2 million bushels. 2021/22 corn export sales are forecast at 2.0 million – 11.8 million bushels.

Nearly 10 million bushels of old crop corn sales were announced as large daily flash sales during the February 12 -18 reporting period for the 2020/21 marketing year. Costa Rica (5.3M bu.) and Guatemala (4.6M bu.) were the buyers of record. Costa Rica also booked 2.4 million bushels of corn to be delivered during the 2021/22 marketing year.

Monday’s weekly Grains Inspection for Export report from USDA suggest corn export loading volumes could remain steady to slightly lower than the previous reporting week in today’s report. For the week ending February 18, corn volumes loaded out of U.S. export terminals dropped 3.3 million bushels to 48.5 million bushels.

Weekly ethanol production saw its lowest point since the darkest days of the pandemic during the week ending February 19, according to data released by the U.S. Energy Information Administration (EIA) yesterday. Weekly ethanol output tumbled nearly 28% lower from the previous reporting week to 27.6 million gallons/day after natural gas shortages across the country due to the recent cold snap sent ethanol profit margins into the red.

Production dropped at such a rapid rate that even lower demand from blenders and refiners was able to decrease weekly ethanol stocks to 957 million gallons – the lowest weekly reading for ethanol supplies in nearly three months.

Consumer fuel demand fell over 14% on the week to 302.7 million gallons/day on the week as most of the continental U.S. bore down at home to avoid venturing out into subzero temperatures. Gasoline prices sky rocketed around the country last week as refineries in the Gulf closed due to lower temperatures, also deterring gasoline demand as the economy continues to recover from the pandemic’s economic fallout.

Last week’s gasoline demand was the lowest since mid-May 2020, when pandemic lockdown restrictions were at their peak. But rising cash bids at ethanol plants across the Corn Belt suggest that next week’s report from the EIA could more accurately reflect pandemic recovery conditions as warmer temperatures free up consumer natural gas demand to be returned to processing plants.

Brazil has long used sugar to fuel its ethanol industry, but AgroBravo’s Julio Bravo foreshadows a looming shift in the latest South American Crop Watch column. Corn ethanol plants are being opening at a rapid rate in Brazil’s center west region to maximize the profit potential of Brazil’s corn producers. And with processing costs offering more profit potential for farmers than the export market, the Brazilian corn crop could become a hot commodity in the years to come.

Soybeans

Forecasts for significant rainfall in top soybean producing areas in Brazil will likely further stall harvest progress in the world’s top soybean producer. The news sent nearby soybean futures prices in Chicago up over 1% this morning. Gains were limited by a looming slowdown by Chinese soy crushers in the wake of high prices.

Chinese soymeal crushers are likely to start scaling back production as delayed shipments from Brazil force soybean prices higher and crushing margins lower. Soy shortages in China are expected to last until Brazilian soy shipment gain steam, likely by mid-April.

"Bean shipments from Brazil to southern China will be very limited in March. Supplies will be tight," a manager with a major crusher in southern China told Reuters overnight. "We originally planned to suspend operations for a couple of days but now we will have to extend that to two weeks as our cargo got delayed."

But the delays are not expected to be a severe as last year. About 202 million bushels of soybeans will arrive in China during March, up from 157 million bushels the same time a year ago. Livestock and poultry feeders learned from last year’s shortages and have been stockpiling soymeal supplies to combat the anticipated shortage.

New 2020/21 soybean exports sales expected in today’s weekly export report are likely to dip slightly from the previous week, with analysts projecting a range between 7.3 million – 29.4 million bushels. New crop soybean export sales are expected to top out at no more than 18.4 million bushels, up slightly from last week. No large daily flash export sales were announced by USDA during the February 12 – 18 reporting period.

Similar to corn, soybean export loading paces could fall in today’s report, based on data from Monday’s weekly Grains Inspection for Export report. The preliminary export data released on Monday saw soybean shipments fall 7.4 million bushels on the week to 26.5 million bushels.

Soybean acreage could see its largest ever planting in 2021 if USDA’s projections of 90 million acres are realized. But as Commstock’s Matthew Kruse points out, that may not be enough to alleviate tight supplies. La Niña weather conditions could play a role in keeping prevent plant acres high this year, which would reduce USDA’s acreage forecasts.

But farmers and market watchers alike need to consider that this year is the first time in years that farmers have several options for profitable crop options, Kruse emphasizes. Corn and soybeans both offer lucrative options for farmers, but spring wheat prices, cotton, and sorghum could also compete more strongly for soybean and corn acreage than in past years, Kruse analyzes in the latest Ag Marketing IQ column.           

Wheat

Wheat futures prices were largely mixed, though slightly lower this morning on a round of profit-taking after hitting a five-week high yesterday. The wheat market continues to wait on fresh news of Chinese purchases. The dollar weakened 0.46% overnight to $89.755, capping losses in the wheat complex.

Old crop wheat export sales are pegged at 9.2 million – 25.7 million bushels in today’s weekly export sales report. New crop wheat export sales are expected to range between 1.8 million – 5.5 million bushels. No large daily flash export sales were announced by USDA during the February 12 – 18 reporting period.

Wheat export loading volumes are also likely to fall in today’s data update from USDA. For the week ending February 18, USDA saw 3.5 million fewer wheat bushels weighed and inspected at U.S. export terminals, totaling 11.9 million bushels on the week.

Weather

Warmer temperatures and mostly clear skies are forecast for the Heartland today, according to NOAA’s short-range forecasts. Weather activity will be largely quiet across the Midwest and Plains this. Scattered snow showers are possible today in the Upper Great Lakes States, though accumulation is not expected to be significant.

A rain system developing in the Southern Plains could send a chance of wintry precipitation north into the Mississippi River Valley this weekend.

Financials

Coronavirus cases in the U.S. rose by 74,947 to 28,336,566 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. The death toll increased by 3,218 lives to 505,899 deaths as of press time.

How do you know if it is time to hire a marketing advisor? Farm Futures executive editor Mike Wilson interviews a handful of advisors to provide insights to help farmers determine when is the best time to involve a marketer on selling situations. Added perspective, increased revenue diversification, and a personalized plan are all benefits Wilson’s panel cite to adding a marketing advisor to your team.

On-farm revenue projections may be soaring, but that doesn’t mean farmers should be ignoring cost management strategies in 2021. Farm Futures’ senior editor Ben Potter offers farmers six tips for keeping expenses at conservative levels. Helpful cost-cutting techniques include trimming family living expenses, implementing cost-saving technology, and using on-farm labor for as many tasks as possible before hiring out help.

An analysis released from the Environmental Working Group, a non-profit protecting human health and the environment through consumer research and education, found that ad hoc government payments issued during the Trump administration to be largely skewed towards large agriculture producers. The analysis found 1% of farm aid recipients in 2019 hauled in 23% of government payments.

Average payments for these producers touting large acreages totaled $497,907. Payments from the Market Facilitation Program (MFP) were determined by academic studies to have been greater than market losses due to Trump’s trade war with China. In fact, the top 25 largest recipients of 2019 trade aid averaged $1.5 million in ad hoc payments per farm.

“This certainly adds to the questions about the way that program was designed,” said Jonathan Coppess, a University of Illinois professor who ran the federal agency that administers farm subsidies during the Obama administration. “Why all of a sudden did you see this big a shift?”

U.S. stock futures slipped slightly overnight as investors’ appetite for risk remains subdued compared to the past few months of trading. Investors continue to cycle out of tech stocks and into companies that are likely to benefit from the pandemic recovery. Oil and grain commodity prices are likely to continue rising with rising government bond yield rates. S&P 500 futures edged 0.30% lower to $3,911.00 while Dow futures added 0.02% to $31,921.00 on the sentiments.

Morning Ag Commodity Prices - 2/25/2021
Contract Units High Low Last Net Change % Change
MAR '21 CORN $ / BSH  5.605 5.5375 5.5525 -0.04 -0.72%
MAY '21 CORN $ / BSH  5.58 5.52 5.535 -0.035 -0.63%
JUL '21 CORN $ / BSH  5.48 5.435 5.4475 -0.025 -0.46%
SEP '21 CORN $ / BSH  4.98 4.95 4.9575 -0.0075 -0.15%
DEC '21 CORN $ / BSH  4.79 4.755 4.7725 0.005 0.10%
MAR '22 CORN $ / BSH  4.86 4.82 4.8425 0.0075 0.16%
MAY '22 CORN $ / BSH  4.8875 4.8575 4.8725 0.005 0.10%
MAR '21 SOYBEANS $ / BSH  14.43 14.225 14.385 0.1475 1.04%
MAY '21 SOYBEANS $ / BSH  14.4575 14.2375 14.4075 0.15 1.05%
JUL '21 SOYBEANS $ / BSH  14.3375 14.1075 14.28 0.16 1.13%
AUG '21 SOYBEANS $ / BSH  13.8975 13.6925 13.855 0.15 1.09%
SEP '21 SOYBEANS $ / BSH  13.025 12.8475 12.975 0.115 0.89%
NOV '21 SOYBEANS $ / BSH  12.5275 12.3675 12.4925 0.11 0.89%
JAN '22 SOYBEANS $ / BSH  12.435 12.28 12.4125 0.105 0.85%
MAR '22 SOYBEANS $ / BSH  12.0875 11.9425 12.085 0.12 1.00%
MAY '22 SOYBEANS $ / BSH  11.99 11.8475 11.9875 0.1125 0.95%
MAR '21 SOYBEAN OIL  $ / LB 52.13 50.97 52 0.86 1.68%
MAY '21 SOYBEAN OIL  $ / LB 50.95 49.8 50.81 0.78 1.56%
MAR '21 SOY MEAL $ / TON 432.6 428.4 430.5 2.2 0.51%
MAY '21 SOY MEAL $ / TON 431.5 427.2 429.6 2.3 0.54%
JUL '21 SOY MEAL $ / TON 428.5 423.6 427 3.2 0.76%
AUG '21 SOY MEAL $ / TON 416.6 412 415.6 3.5 0.85%
SEP '21 SOY MEAL $ / TON 403.7 399.6 402.9 3.4 0.85%
MAR '21 Chicago SRW $ / BSH  6.805 6.74 6.79 -0.0125 -0.18%
MAY '21 Chicago SRW $ / BSH  6.86 6.785 6.8475 -0.0075 -0.11%
JUL '21 Chicago SRW $ / BSH  6.7175 6.6525 6.7025 -0.0025 -0.04%
SEP '21 Chicago SRW $ / BSH  6.6625 6.605 6.65 -0.0075 -0.11%
DEC '21 Chicago SRW $ / BSH  6.6975 6.6425 6.685 -0.0125 -0.19%
MAR '21 Kansas City HRW $ / BSH  6.56 6.5075 6.555 -0.005 -0.08%
MAY '21 Kansas City HRW $ / BSH  6.62 6.5625 6.6125 -0.0175 -0.26%
JUL '21 Kansas City HRW $ / BSH  6.655 6.5975 6.645 -0.0175 -0.26%
SEP '21 Kansas City HRW $ / BSH  6.685 6.6375 6.6825 -0.0175 -0.26%
DEC '21 Kansas City HRW $ / BSH  6.75 6.6975 6.7475 -0.0125 -0.18%
MAR '21 MLPS Spring Wheat $ / BSH  6.48 6.4275 6.48 0.015 0.23%
MAY '21 MLPS Spring Wheat $ / BSH  6.5675 6.53 6.555 -0.02 -0.30%
JUL '21 MLPS Spring Wheat $ / BSH  6.6475 6.6 6.6325 -0.015 -0.23%
SEP '21 MLPS Spring Wheat $ / BSH  6.71 6.6725 6.71 -0.005 -0.07%
DEC '21 MLPS Spring Wheat $ / BSH  6.77 6.7425 6.7475 -0.035 -0.52%
MAR '21 ICE Dollar Index $ 90.145 89.685 89.75 -0.42 -0.47%
 AP '21 Light Crude $ / BBL  63.79 63.06 63.53 0.31 0.49%
 MA '21 Light Crude $ / BBL  63.56 62.84 63.31 0.31 0.49%
MAR '21 ULS Diesel $ /U GAL 1.9193 1.905 1.9118 0.0035 0.18%
APR '21 ULS Diesel $ /U GAL 1.913 1.8958 1.904 0.004 0.21%
MAR '21 Gasoline $ /U GAL 1.904 1.8936 1.8982 0.0026 0.14%
APR '21 Gasoline $ /U GAL 1.9876 1.9698 1.981 0.0033 0.17%
MAR '21 Feeder Cattle $ / CWT 0 #N/A 140.375 0 0.00%
APR '21 Feeder Cattle $ / CWT 0 #N/A 144.75 0 0.00%
 FE '21 Live Cattle $ / CWT 0 #N/A 116.575 0 0.00%
 AP '21 Live Cattle $ / CWT 0 #N/A 122.225 0 0.00%
APR '21 Live Hogs $ / CWT 0 #N/A 89.425 0 0.00%
MAY '21 Live Hogs $ / CWT 0 #N/A 91.55 0 0.00%
FEB '21 Class III Milk $ / CWT 15.65 #N/A 15.59 0 0.00%
MAR '21 Class III Milk $ / CWT 16.05 15.93 16.05 0.02 0.12%
APR '21 Class III Milk $ / CWT 16.62 #N/A 16.65 0 0.00%
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