Morning Market Review for Jan. 21, 2021

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Buyers return to the grains complex. (Comments are updated by 7:30 a.m. Central Time.)

Grains push higher this morning on tight supplies, stimulus optimism

  • Corn up 5-8 cents
  • Soybeans up 7-15 cents, soyoil up $0.48/lb, soymeal up $3.3/ton
  • Wheat up 3-9 cents

*Prices as of 7:00 am CST.

Editor’s Note: Good morning! Over the past couple weeks, I’ve noticed a lot of varying price activity between old (2020) and new (2021) crop futures, largely for corn and soybeans. With many farmers looking at hedging 2021 bushels in these tight markets, I thought it might be useful to provide more detailed pricing information in the morning Farm Futures reports.

Going forward, you will find a comprehensive price list at the end of each morning report instead of within the report’s text. I want my readers to have the best information available to make both short- and long-term marketing decisions.

Agree? Disagree? Want to talk about markets, triathlon training, or food? Drop me an email with your thoughts!

Corn

Corn futures traded higher this morning after several days of losses brought buyers back into the fold. Prices remain supported by tight U.S. stocks, high export demand led primarily by China, and hope for a new round of stimulus under the Biden administration. Rapid Argentine farmer sales provided a cap on the morning’s gains.

Following the concern of more government meddling in the grains export arena, Argentine farmers have ramped up corn export sales in the lead up to the 2020/21 corn harvest, set to kick off next month. Farmers have stalled sales in recent weeks to protest the Argentine government’s limited corn export sales and even an outright ban on corn exports for two months to stabilize rising consumer food prices within the country.

As more uncertainty surrounding the Argentine governments plans for corn exports mounts, farmers are hedging their bets on high current corn prices and booking export sales for as much volume as they can. Argentina is the world’s third largest exporter of corn.

The U.S. Energy Information Administration (EIA) releases updated ethanol production information today. Basis offerings at ethanol plants across the Heartland trended about $0.055/bushel lower yesterday as plants sought to maintain profitable processing margins.

Rapid farmer sales across the Midwest last week suggested output could see an uptick in today’s report. But amid seven-and-a-half-year price highs in the Chicago futures market, today’s report will indicate whether high prices will help or hurt ethanol production in the coming weeks.

Last week’s report saw a bounce-back in fuel demand after a lackluster holiday travel season. Fuel demand rose 1.2% from the previous week’s seven-month low to 316.3 million gallons/day as life returned to normal after New Year’s. But despite the positive demand shift, weekly fuel consumption remained 16% lower than pre-pandemic levels.

Ethanol stocks continued to rise amid depressed fuel demand, with the January 8 inventory gaining 1.8% on the week to 995.1 million gallons – the highest ethanol stocks volume since early May 2020. But some relief could be on the horizon for swelling ethanol supplies as refiner demand for the fuel additive rose 4% on the week to 31.4 million gallons/day.

Corn prices took a hit yesterday after the https://www.farmprogress.com/regulatory/epa-approves-three-rfs-waivers-final-hours EPA announced it would grant three small refinery exemptions, limiting the volume of biofuels added to domestic gasoline. The waivers, which total 260 million gallons of ethanol, will result in 96.3 million bushels of corn across the country that would not be purchased by ethanol producers. That is the equivalent to about 0.1% of all 2020 U.S. corn production.

Soybeans

Soybean futures prices recovered this morning after three days of losses. Gains are underpinned by dwindling domestic supplies and heavy Chinese export demand but limited as the Brazilian soybean harvest ramps up.

An outbreak of African swine fever has reemerged in China’s southern Guangdong province, according to the Chinese Ministry of Agriculture and Rural Affairs. The outbreak killed 214 pigs on a 1,015-head farm. The ministry reported that illegal transportation caused the outbreak.

It is the first case of the deadly disease reported in China in three months, when a shipment of hogs in China’s central Sichuan province tested positive for the disease. It is also the first time since last June that an outbreak has been reported on a physical farm in China. China’s hog herd recovered 31% annually in 2020, raising hog inventories to 406.5 million head by the end of 2020.

The nearby March 2021 soybean futures contract on the Chicago Board of Trade has dropped $0.65/bushel since last Thursday as rains in South America relieve stress about the condition of the Brazilian soybean crops early in the harvest season.

Could this be a market correction? Commstock’s Matthew Kruse points out that recent corrections have been relatively minor since last August and given tight grain supplies, the bottom will not likely drop out of the market anytime soon. Plus, weather concerns could provide an additional level of price support, Kruse reflects in the latest Ag Marketing IQ column.

In the January 2021 Farm Futures survey, farmers reportedly sold an average of 55.9% of their 2020 crop by late November 2020, up from 44.2% a year ago. But new crop sales continue to lag behind last year’s paces as inverted futures price offerings provide little incentive to hedge sales relative to current prices.

Farmers would be wise to keep an eye on these spreads over the next couple months. If South American crops have minimal drought damage, the inversion could reverse, and farmers could face a scenario where basis narrows and carry incentive is reestablished in the market. High 2021 U.S. corn acreage would also have the potential to invert soybean futures prices and create more carry in the market.

Wheat

Wheat prices also gleaned support on optimism for a Biden stimulus plan. Tight global supplies also underpinned gains in the wheat complex, in addition to a weakening dollar. The ICE Dollar Index traded 0.32% lower overnight to $90.175.

Tunisia issued a tender for 9.5 million bushels of soft wheat, barely, and durum wheat overnight. Amid the backdrop of high global commodity prices, the subsequent rise in consumer food prices could be an indicator of civil unrest in African nations the coming months. Countries reliant on grain and rice imports to satisfy consumer food demand are the most vulnerable to rising food prices.

Argentine farmers have their 2020/21 wheat crop 41% sold, slightly behind the last 5 years, according to Tarso Veloso with the AgResource company in a webinar hosted by the CME Group yesterday. Drought in Brazil will likely lead to a crop shortfall, leaving the country more dependent than usual on Argentine wheat shipments.

But Argentina’s ongoing drought has been slightly more severe than that of its top wheat buyer, Brazil’s. This will likely increase pressure on available international wheat stocks, namely those of the U.S. But it is a positive sign for demand for U.S. wheat growers, especially as the Argentine crop hits the market in the coming months.

Weather

A chance of snow is possible today in Northern Wisconsin and Michigan while rain continues to fall in Texas and the Southeast today, according to NOAA’s short-range forecasts. Snowfall totals in the Upper Peninsula will be relatively light and could be minimized by warm temperatures. Temperatures are expected to remain unseasonably warm today with highs in the 30’s and 40’s in the Northern Plains.

Financials

Coronavirus cases in the U.S. rose by 184,655 to 24,438,938 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. The death toll increased by a staggering 4,385 lives to 406,162 deaths as of press time.

A new presidential administration took office yesterday. What does a Biden Administration mean for U.S. agricultural policy? Farm Futures’ policy editor takes a deep dive into the speculation surrounding the incoming administration’s stances on issues that could impact farmers in the first edition of a multi-part series. Fakta digs into potential labor issues to kick start the series.

U.S. stock futures inched up further into record territory this morning on favorable stock earnings reports from a broad array of companies, including Netflix and Proctor & Gamble. Optimism over another round of economic stimulus from the newly appointed Biden administration also contributed to the morning’s gains.

However, the gains were limited by the rapid surge of COVID-19 cases across the country. S&P 500 futures traded 0.23% higher this morning on the sentiment to $3,854.00.

Fun Fact: Exactly 40 years ago from yesterday, the Iranian Hostage Crisis ended with the release of 52 American citizens and diplomats who had been held in captivity for 444 days. It’s a day that holds a special place in my family’s heart and serves as a timeless reminder of the privilege bestowed upon us to be a part of this democracy. I hope it reminds you of the same privilege as well. Have a wonderful day! - JKH

Morning Ag Commodity Prices - 1/21/2021
Contract Units High Low Last Net Change % Change
MAR '21 CORN $ / BSH  5.315 5.1925 5.3025 0.0825 1.58%
MAY '21 CORN $ / BSH  5.3325 5.215 5.32 0.08 1.53%
JUL '21 CORN $ / BSH  5.2825 5.1625 5.27 0.0775 1.49%
SEP '21 CORN $ / BSH  4.7775 4.6875 4.7675 0.05 1.06%
DEC '21 CORN $ / BSH  4.54 4.46 4.5325 0.0425 0.95%
MAR '22 CORN $ / BSH  4.6025 4.525 4.595 0.0425 0.93%
MAY '22 CORN $ / BSH  4.62 4.575 4.62 0.03 0.65%
MAR '21 SOYBEANS $ / BSH  13.87 13.655 13.855 0.16 1.17%
MAY '21 SOYBEANS $ / BSH  13.8475 13.635 13.8225 0.15 1.10%
JUL '21 SOYBEANS $ / BSH  13.6725 13.4775 13.655 0.1375 1.02%
AUG '21 SOYBEANS $ / BSH  13.23 13.1025 13.23 0.1175 0.90%
SEP '21 SOYBEANS $ / BSH  12.3 12.2 12.3 0.09 0.74%
NOV '21 SOYBEANS $ / BSH  11.7975 11.6625 11.795 0.0775 0.66%
JAN '22 SOYBEANS $ / BSH  11.725 11.605 11.725 0.0725 0.62%
MAR '22 SOYBEANS $ / BSH  11.4 11.2825 11.4 0.0625 0.55%
MAY '22 SOYBEANS $ / BSH  11.25 11.18 11.2475 0.03 0.27%
MAR '21 SOYBEAN OIL  $ / LB 43.11 42.32 43.04 0.5 1.18%
MAY '21 SOYBEAN OIL  $ / LB 42.49 41.72 42.43 0.51 1.22%
MAR '21 SOY MEAL $ / TON 446.7 441.2 445.6 3.2 0.72%
MAY '21 SOY MEAL $ / TON 442.5 437.5 441.8 3.4 0.78%
JUL '21 SOY MEAL $ / TON 438.4 433.4 437.7 3.3 0.76%
AUG '21 SOY MEAL $ / TON 424.9 420.6 424.6 3.3 0.78%
SEP '21 SOY MEAL $ / TON 406.5 #N/A 406.2 2.3 0.57%
MAR '21 Chicago SRW $ / BSH  6.7475 6.6575 6.7325 0.055 0.82%
MAY '21 Chicago SRW $ / BSH  6.745 6.665 6.7325 0.0525 0.79%
JUL '21 Chicago SRW $ / BSH  6.56 6.4825 6.555 0.05 0.77%
SEP '21 Chicago SRW $ / BSH  6.5525 6.4825 6.55 0.0475 0.73%
DEC '21 Chicago SRW $ / BSH  6.5975 6.53 6.595 0.045 0.69%
MAR '21 Kansas City HRW $ / BSH  6.465 6.36 6.4525 0.0825 1.30%
MAY '21 Kansas City HRW $ / BSH  6.49 6.39 6.4825 0.08 1.25%
JUL '21 Kansas City HRW $ / BSH  6.475 6.385 6.4725 0.08 1.25%
SEP '21 Kansas City HRW $ / BSH  6.4975 6.425 6.49 0.07 1.09%
DEC '21 Kansas City HRW $ / BSH  6.5425 6.4825 6.5425 0.06 0.93%
MAR '21 MLPS Spring Wheat $ / BSH  6.44 6.345 6.4 0.025 0.39%
MAY '21 MLPS Spring Wheat $ / BSH  6.525 6.435 6.505 0.045 0.70%
JUL '21 MLPS Spring Wheat $ / BSH  6.5575 6.4875 6.54 0.0375 0.58%
SEP '21 MLPS Spring Wheat $ / BSH  6.57 6.5075 6.5675 0.045 0.69%
DEC '21 MLPS Spring Wheat $ / BSH  6.55 6.55 6.55 0 0.00%
MAR '21 ICE Dollar Index $ 90.405 90.125 90.185 -0.284 -0.31%
 MA '21 Light Crude $ / BBL  53.24 52.75 52.99 -0.32 -0.60%
 AP '21 Light Crude $ / BBL  53.12 52.64 52.86 -0.34 -0.64%
FEB '21 ULS Diesel $ /U GAL 1.5959 1.5835 1.592 -0.0084 -0.52%
MAR '21 ULS Diesel $ /U GAL 1.5994 1.5858 1.5942 -0.0083 -0.52%
FEB '21 Gasoline $ /U GAL 1.5426 1.5302 1.5372 -0.0067 -0.43%
MAR '21 Gasoline $ /U GAL 1.5416 1.5297 1.5368 -0.0069 -0.45%
JAN '21 Feeder Cattle $ / CWT 0 #N/A 135.3 0 0.00%
MAR '21 Feeder Cattle $ / CWT 0 #N/A 137.525 0 0.00%
 FE '21 Live Cattle $ / CWT 0 #N/A 113.35 0 0.00%
 AP '21 Live Cattle $ / CWT 0 #N/A 118.875 0 0.00%
FEB '21 Live Hogs $ / CWT 0 #N/A 68.425 0 0.00%
APR '21 Live Hogs $ / CWT 0 #N/A 73.075 0 0.00%
JAN '21 Class III Milk $ / CWT 16.15 #N/A 16.18 0 0.00%
FEB '21 Class III Milk $ / CWT 17.2 17.2 17.2 0.07 0.41%
MAR '21 Class III Milk $ / CWT 17.65 17.65 17.65 -0.13 -0.73%
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