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Morning Market Review for Jan. 15, 2021

scyther5/Thinkstock Markets-122316-scyther5-ThinkstockPhotos-2000
Wheat rallies on Russian export tax. (Comments are updated by 7:30 a.m. Central Time.)

Corn, soybean futures trade mixed to slightly lower

  • Corn down 1 cent
  • Soybeans down 3-7 cents, soyoil down $0.55/lb, soymeal up $2/ton
  • Wheat up 9-16 cents

*Prices as of 6:55am CST.

Happy Friday! Markets will be closed on Monday in observance of the Martin Luther King, Jr. Day holiday. The morning report will not be sent out on Monday and will resume on Tuesday. Enjoy the long weekend!

Corn

Nearby corn futures contracts traded lower this morning, while prices for the 2021 crop posted gains. A round of profit-taking and a wet weekend forecast in Argentina took the tops off recent nearby contract highs, though losses were limited by strong export sales reported in yesterday’s USDA report, which also helped pull up 2021/20 crop year prices. March futures shed $0.005/bushel to $5.3375 as May futures lost $0.0075/bushel to $5.37.

Farmers continue to rapidly sell corn and soybeans, even as buyers slash cash offerings to offset high futures prices. Although, weak gains relative to the last week in yesterday’s futures markets may have slowed farmer sales as producers await signs of a renewed price rally.

The trend will undoubtedly have bullish impacts for both speculators and commercial firms in today’s Commitment of Traders report. Managed money funds could test new highs for long positions on corn contracts while bulking up net buying positions on other key commodities. Meanwhile, amid high cash sale volumes, producer short positions could also continue into record high territory.

Argentine corn and soybean crops are benefitting from more rainfall this week, according to a report from the Buenos Aires Grains Exchange. The added rainfall reduces the chances for a crop shortfall after a dry La Niña weather pattern battered South American crops this winter and sent global grain prices sky rocketing.

The rainfall will continue through the weekend, though drought damage is inescapable at this point for the Argentine crop. "The rains have helped but more moisture is needed on a regular basis over a wider area. It is still not clear if that will happen," Gustavo Lopez of the local AgriTrend consultancy told Reuters yesterday.

As the Trump administration prepares to leave the White House, it is likely to do so without taking any further action on biofuel blending waivers. The Environmental Protection Agency (EPA) will propose a deadline extension for refineries to submit compliance with biofuel blending regulation.

However, the Trump EPA’s actions on granting further exemptions for biofuel blending are limited in its final days. Refiners have pushed the exemptions, citing excessive costs incurred during the blending process. The long term forecast for farmers is more favorable as a biofuels-friendly Biden administration takes office.

Times are good for farmers in the Heartland, Farm Futures editor Mike Wilson points out. In the latest This Business of Farming column, Wilson examines the way farmers can be led astray by a bull market. Market speculation, inflated family living expenses, over leveraging, and making decisions on tax minimization are just a few ways farmers can encounter future hardships during times of high prices.

“Can you avoid that?” Wilson inquires readers. “Of course. It just takes discipline.”

Soybeans

Rains in Argentina and profit-taking offset potential gains in the soybean complex this morning, despite rumors of confirmed Chinese soybean purchases and a looming Brazilian truck workers strike. Losses were capped by tight U.S. soybean supplies.

March soybean futures fell $0.07/bushel to $14.235 while May futures dropped $0.0725/bushel to $14.205. March soyoil futures traded $0.55/lb lower to $42.56 and March soymeal futures prices dropped $2/ton to $462.90.

The National Oilseed Producers’ Association (NOPA) releases updated monthly crush figures this morning. Market analysts anticipate today’s volume for the December 2020 crush will register between 182.0 million – 188.5 million bushels with an average analyst guess of 185.175 million bushels.

If that estimate is realized, the December 2020 NOPA crush would very narrowly be the second highest monthly crush volume on record, bested only by the October 2020 estimate of 185.2 million bushels. But if the volume comes in on the high end of analyst expectations, December 2020 could set a new all-time high crush record.

NOPA’s estimate today will undoubtedly be the highest December reading on record. Even at the lower end of analyst projections, the December 2020 crush will also likely jump up from the November 2020 crush of 181.0 million bushels.

NOPA members crush 95% of U.S. soybeans sold to processors.

Wheat

Contract

Price Change*

Price*

Chicago SRW – March Futures

+$0.14

$6.84

Kansas City HRW – March Futures

+$0.1575

$6.5225

Minneapolis HRS – March Futures

+$0.09

$6.495

 

A strengthening dollar could not offset massive gains in the wheat market this morning, as news of an increased Russian wheat export tax increased prospects for other international providers of wheat for the second half of the 2020/21 marketing year.

Russia will raise its proposed wheat export tax above previously proposed levels, sending wheat futures prices in the U.S. and Paris soaring this morning. According to Russia’s economy minister, Russia will raise the export tax to a staggering $1.65/bushel, up from previous estimates of around $0.826/bushel, in an effort to reduce high domestic food prices. The new tax will be effective from March 1 to June 30.

Weather 

A winter storm system will linger over the Upper Midwest and Northern Plains for the next few days, according to NOAA’s short-range forecasts. Snowfall totals in the region will range between two and five inches in most areas through the end of the weekend. Temperatures are expected to drop into the 30’s today and as far as into the 20’s tomorrow, though bitter cold will largely be avoided in the region through the weekend.

Dry weather continues to plague the Northern Plains and Western U.S., potentially limiting the yield potential of U.S. winter wheat crops. Nearly 62% of U.S. land is estimated to be in some form of dry or drought condition as of Tuesday, down fractionally from the previous week.

Jan. 14, 2021 U.S. Drought Monitor

But persistent and severe drought in the High Plains and West could potentially impact cattle feeding decisions, especially if enough moisture is not received to support planting intentions this spring. That could have devastating impacts to the corn market as well, as livestock demand has helped buoy recent rallies in the future market despite depressed ethanol production due to the pandemic.

Financials

Coronavirus cases in the U.S. rose to 23,314,663 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. The death toll increased by 3,921 lives from yesterday to 388,705 deaths as of press time.

U.S. milk production continues to set new monthly high milk production volumes after the industry recovered from the pandemic. A USDA government purchases program, the Farmers-to-Families Food Box program, helped stimulate cheese production, supporting Class III milk prices.

In fact, U.S. cheddar production through November 2020 averaged nearly 3% year-over-year growth from the prior year, Total Farm Marketing’s Naomi Blohm points out. A weaker dollar and recovering Chinese hog herd (whey is used in many Chinese dairy rations) also helped spur annual U.S. dairy exports through November 2020 11% higher than in 2019.

Export demand and USDA’s cheese buying program will be critical to sustaining Class III futures prices at their current levels, especially amid record-setting production. Blohm cautions dairy farmers to keep an eye on the program, as well as production and storage volumes in the latest Ag Marketing IQ column.

Low input prices, especially relative to current futures price rallies, are offering farmers a profitable outlook for 2021. But farmers don’t buy inputs like they used to. Farm Futures executive editor Mike Wilson explores the new ways ag e-commerce is helping to improve on-farm efficiencies.

Independent companies can provide a platform for farmers to place orders, which are supplied by a local retailer. Ag input manufactures can also directly sell to farmers and collect a commission via an online platform, similar to FBN. An omni-channel approach allows traditional retailers to offer online sales coupled with additional features, like precision ag and business management tools.

Especially in light of the pandemic, farmers are flocking to these new purchasing methods, leaving retailers scrambling to keep up with the competition. And in a world of increasing mergers and fewer input suppliers, farmers need all the competition they can get.

The incoming Biden administration released a stimulus plan yesterday, causing some concern in the market about future earnings potential. U.S. stock futures traded lower this morning, worried by the prospect of higher taxes due to the new stimulus proposal. Yesterday’s weekly jobs report found the largest weekly gain in unemployment claims since the pandemic’s onset last March.

Data on U.S. retail sales and consumer sentiment index could provide opportunities for stock market gains this morning. But in the meantime, S&P 500 futures traded 0.30% lower to $3,780.00 ahead of the opening bell.

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