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Morning Market Review for Jan. 22, 2021

scyther5/Thinkstock Markets-122316-scyther5-ThinkstockPhotos-2000
Grains tumble on a round of profit-taking. (Comments are updated by 7:30 a.m. Central Time.)

South American rains, stronger dollar, pandemic concerns push grain prices lower

  • Corn down 7-8 cents
  • Soybeans down 23-28 cents, soyoil down $0.34/lb, soymeal down $7.5/ton
  • Wheat down 11-14 cents

*Prices as of 6:50 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

Despite a large daily flash export sale announced by USDA yesterday, corn prices struggled this morning, falling 1.2% - 1.3% on a fresh round of profit taking and rains in South America. Renewed coronavirus concerns ate away at the energy sector, also prompting weakness in the corn complex.

Due to the Martin Luther King, Jr. Day and Inauguration Day holidays this week, the Energy Information Administration’s weekly petroleum inventory status report will be released today. Yesterday’s newsletter incorrectly stated the report would be released yesterday. The preview is reprinted below.

Basis offerings at ethanol plants across the Heartland trended about $0.055/bushel lower on Wednesday 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.

USDA releases updated weekly export sales figures this morning for the January 8 – 14 reporting period. Market analysts expect today’s figure for 2020/21 corn export sales to range between 23.6 million – 47.2 million bushels. Estimates are slightly lower than last week’s report, though will likely increase next week due in large part to large daily flash sales from Mexico, Israel, Japan, and China over the past week.

For the week ending January 14, USDA reported one large daily flash sale via private exporters. Columbia ordered 4.3 million bushels of corn during the reporting period, set for delivery between now and September 1.

Preliminary corn export shipment data released on Monday in USDA’s Grain Export Inspections report hints to lower corn shipments over the week ending January 14. Monday’s report found a 33% weekly drop in corn export loading paces, down to 34.5 million bushels.

Markets will not likely be shocked if corn export loading paces drop off as suggested. High corn prices are likely to price many buyers out of the market as the feedstuff’s value soars. Marketing year-to-date corn shipments remain nearly 22% higher than the same period a year ago on strong Chinese demand.

USDA also releases updated Cattle on Feed data today. Average January 1, 2021 cattle on feed inventories are expected at 11.8 million head, down 0.6% from a year ago. Market analysts expect the final figure to total between 11.7 million – 11.9 million head.

Placement rates are expected to dip 3% on average to 1.7 million head for the month of December, with an expected range between 1.6 million – 1.8 million head. Drought in the West and high corn prices are expected to slow placements during December 2020 and will likely reduce demand estimates for corn going forward.

Slaughter rates are expected to increase in December as quarantined Americans splurged on beef during the holidays. Trade estimates place today’s figure between 1.8 million – 1.9 million head. The average trade guess hovers around 1.86 million head, which is still 6% higher than December 2019 marketings

Despite lower prices over the past few days, Total Farm Marketing’s Naomi Blohm assures readers the corn rally is far from over. Why? The 2020/21 ending stocks-to-use ratio has shrunk down to 10.6% over the past several months – it is the eight tightest ending stocks ratio on record for the U.S.

A recent analysis in my E-corn-omics column finds that on top of tight supplies, corn usage is on track to challenge record highs if ethanol can mount a recovery in 2021. Corn usage during June and September 2020 was the second highest on record over the past 27 years. Unseasonably high basis levels for the second straight harvest season support rapid usage rates.

USDA has more than doubled projections on Chinese corn imports past four months, adding another 39.4 million bushels to the forecast last week for a total of 689.0 million bushels of corn imported into China during the 2020/21 marketing year

The increase came amid higher production estimates from China in 2020/21, which paints an increasingly desperate picture for Chinese livestock feeders searching for cheap sources of feed. And that bodes very well for U.S. corn growers, as evidenced by the current rally.

Blohm points out that USDA will release 2021 acreage estimates at its annual Outlook Forum in February, providing markets with an educated guess of how the 2021 season may shake out. Between now and planting season, corn “price will likely waiver, correct, trade sideways, possibly have a seasonal price correction lower in March and April,” Blohm forecasts in the latest Ag Marketing IQ column.

Soybeans 

Soybean futures tumbled over 2% lower this morning as rains in Brazil and Argentina reduced concerns about a potential crop shortfall in South America. Harvest progress continues to ramp up in Brazil, the world’s largest soybean producer and exporter.

Planting in Argentina was also aided by recent rains. More moisture is needed in South America to fully restore soil moisture conditions, so today’s price downturn could be short-lived if dry La Niña weather patterns prevail over the coming weeks in South America.

The recent outbreak of African swine fever found on a farm in China’s Guangdong province is believed to have been spread by illicit vaccines, according to industry sources. Two new strains of the virus have been found at the southern China farm where 214 pigs of a 1,015-head farm owned by New Hope Liuhe, China’s fourth-largest commercial hog producer, have died.

Several other farms in the area that fatten out the hogs by contract have also reported cases of the devastating virus, which at its peak decimated over half of China’s hog population. Prior to the reemergence of the virus on this farm, China had high hopes of returning to pre-2018 African swine fever hog inventories this quarter.

Trade estimates peg today’s weekly U.S. soybean export sales projection at 27.6 million – 55.1 million bushels. That range is significantly elevated from last week, due in large part to a flurry of new large soybean export sales booked over the January 8 – 15 reporting period.

During that time, USDA reported via private exporters that new 2020/21 soybean export orders were booked for China and an unknown buyer, totaling 26.9 million bushels on the week. China also ordered 2.5 million bushels of soybeans to be delivered during the 2021/22 marketing year.

Soybean loading paces likely lifted from the previous week, if Monday’s Grains Export Inspection report is any indicator. For the week ending January 14, loading paces grew 11% to 75.6 million bushels of soybeans shipped out of U.S. export terminals.

Tarso Veloso with the AgResource company points out that the Brazilian soybean harvest is about a month away from entering export channels. Chinese demand for U.S. soybeans remains higher than the same time last year, but on average has slowed 15% in the past 4 weeks from post-harvest highs last fall.

This means that U.S. soy exporters will need to maximize loading paces over the next four weeks to ensure farmers can capture as much profit as possible before the Brazilian crop takes over international soy supply channels for the next eight months.

Wheat

Buyer resistance at current price levels reported in the Asian markets overnight helped contribute to losses in the wheat complex this morning. Profit-taking also did the complex no favors, with many traders believing the current futures values to be somewhat overpriced. A stronger dollar also contributed to the morning’s losses as the ICE Dollar Index rose 0.11% to $90.225.

Russia’s leading agricultural consultancy, Sovecon, raised its projections for the 2021/22 Russian wheat crop by 1% after heavy snowfall in January improved dormancy conditions for the crop. Sovecon now estimates the Russian new crop of wheat will total just shy of 2.9 billion bushels. If realized, it will be Russia’s third largest crop on record

Old crop wheat export sales are likely to come in between 9.2 million – 22.0 million bushels in today’s weekly wheat export sales report. 2021/22 export sales could reach as high as 1.8 million bushels for the January 8 – 15 reporting period. USDA did not report any large daily flash export sales of wheat during the reporting week.

Wheat export volumes will likely be relatively unchanged to slightly lower compared to last week, based on Monday’s Grains Export Inspection report. For the week ending January 15, wheat volumes weighed for export inspection totaled 10.2 million bushels, falling nearly 2% from the previous week.

A decline isn’t surprising – wheat exports typically trend on a lower volume between late October and late January. Plus, the recent rally in the wheat market due to constricted Black Sea supplies could be pricing some buyers completely out of the market.

Weather 

Cooler temperatures will chill the Upper Midwest today, according to NOAA’s short-range forecasts. But skies will largely remain clear of any additional weather for at least a day.

A winter storm system will creep into parts of the Northern Plains and Upper Midwest tomorrow and Sunday. Weekend showers are likely in the Southern Plains. Cumulative precipitation over the next 24 hours is likely to be light.

Drought continues to blister the West and intensified in the Northern Plains last week as well. For the week ending January 19, total land mass in the U.S. impacted by dry and/or drought conditions rose by nearly 3% to 63.46%.

U.S. Drought Monitor

Nearly 95% of the High Plains are in some sort of abnormally to severe dry condition, according to the University of Nebraska’s weekly data release. And despite recent snows in the Midwest, scattered areas of dryness remain from last summer’s late season drought.

With markets laser-focused on South American weather, it seems like the U.S. weather story can be easily ignored. But that’s not the case. Planting season is less than two months away and in many key grain growing areas, the current soil conditions are nowhere near conducive to healthy crops in the spring or even substantial yields next summer.

Winter wheat conditions are already struggling in the Northern Plains. And amid high corn prices and abysmal pasture conditions, cattle feeders in the Plains – where 40% of U.S. cattle is raised – may seek to liquidate herds to save costs.

The weather forecasts will continue to have substantial impacts to grain prices this year, both in terms of cattle consumption and production potential. As recent rallies in South America have been supported by drought conditions exacerbated by La Niña weather patterns, similar weather shifts in the U.S. will also impact global grains prices in the year to come.

Financials

Coronavirus cases in the U.S. rose by 194,077 to 24,633,015 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. The death toll increased by a staggering 4,216 lives to 410,378 deaths as of press time.

In the second installment of a multi-part series examining the new Biden administration’s speculated approach to farm policy, Farm Futures policy editor Jacqui Fatka takes a look at Biden’s plans for trade.

Many policy watchers expect Biden to take a more collaborative approach to global free trade agreements in comparison to his predecessor. Biden is also likely to reengage on entering the Trans-Pacific Trade partnership, which could provide invaluable access to up-and-coming Southeast Asian economies.

U.S. stock futures appeared to be taking a moment of pause this morning after setting new highs in recent days amid strong earnings results. Rising global COVID-19 cases and concerns about restrictions sent the energy complex lower this morning. Existing home sales are expected to fall for a second straight month after home sale data is released today for December 2020. The overarching sentiments sent S&P 500 futures off its record high set yesterday, down 0.84% to $3,813.75.

Morning Ag Commodity Prices - 1/22/2021
Contract Units High Low Last Net Change % Change
MAR '21 CORN $ / BSH  5.2275 5.145 5.18 -0.0625 -1.19%
MAY '21 CORN $ / BSH  5.2475 5.1625 5.1975 -0.065 -1.24%
JUL '21 CORN $ / BSH  5.2075 5.1225 5.1575 -0.065 -1.24%
SEP '21 CORN $ / BSH  4.71 4.64 4.665 -0.0625 -1.32%
DEC '21 CORN $ / BSH  4.4775 4.41 4.4225 -0.065 -1.45%
MAR '22 CORN $ / BSH  4.535 4.475 4.4875 -0.065 -1.43%
MAY '22 CORN $ / BSH  4.565 4.515 4.5175 -0.07 -1.53%
MAR '21 SOYBEANS $ / BSH  13.67 13.395 13.445 -0.2575 -1.88%
MAY '21 SOYBEANS $ / BSH  13.6575 13.3875 13.4325 -0.255 -1.86%
JUL '21 SOYBEANS $ / BSH  13.515 13.215 13.27 -0.275 -2.03%
AUG '21 SOYBEANS $ / BSH  13.0475 12.77 12.83 -0.275 -2.10%
SEP '21 SOYBEANS $ / BSH  12.1025 11.8625 11.91 -0.2725 -2.24%
NOV '21 SOYBEANS $ / BSH  11.65 11.3675 11.4325 -0.2525 -2.16%
JAN '22 SOYBEANS $ / BSH  11.5825 11.3325 11.3775 -0.2375 -2.04%
MAR '22 SOYBEANS $ / BSH  11.27 11.035 11.07 -0.2375 -2.10%
MAY '22 SOYBEANS $ / BSH  11.11 11.025 11.03 -0.17 -1.52%
MAR '21 SOYBEAN OIL  $ / LB 43.46 42.65 43.04 -0.39 -0.90%
MAY '21 SOYBEAN OIL  $ / LB 42.7 41.99 42.24 -0.51 -1.19%
MAR '21 SOY MEAL $ / TON 437.6 428.8 431.6 -6.6 -1.51%
MAY '21 SOY MEAL $ / TON 434.8 425.8 427.8 -7.5 -1.72%
JUL '21 SOY MEAL $ / TON 431.2 422.4 424 -7.9 -1.83%
AUG '21 SOY MEAL $ / TON 417.5 409.7 411.3 -7.7 -1.84%
SEP '21 SOY MEAL $ / TON 399 391.9 392.2 -8.3 -2.07%
MAR '21 Chicago SRW $ / BSH  6.59 6.4325 6.4775 -0.13 -1.97%
MAY '21 Chicago SRW $ / BSH  6.6025 6.4475 6.49 -0.1325 -2.00%
JUL '21 Chicago SRW $ / BSH  6.455 6.32 6.345 -0.1325 -2.05%
SEP '21 Chicago SRW $ / BSH  6.46 6.33 6.3425 -0.14 -2.16%
DEC '21 Chicago SRW $ / BSH  6.515 6.38 6.3925 -0.145 -2.22%
MAR '21 Kansas City HRW $ / BSH  6.3425 6.2175 6.25 -0.1075 -1.69%
MAY '21 Kansas City HRW $ / BSH  6.3775 6.2525 6.285 -0.105 -1.64%
JUL '21 Kansas City HRW $ / BSH  6.37 6.2475 6.2825 -0.1025 -1.61%
SEP '21 Kansas City HRW $ / BSH  6.3875 6.28 6.31 -0.1 -1.56%
DEC '21 Kansas City HRW $ / BSH  6.4375 6.34 6.3575 -0.1075 -1.66%
MAR '21 MLPS Spring Wheat $ / BSH  6.345 6.22 6.22 -0.1325 -2.09%
MAY '21 MLPS Spring Wheat $ / BSH  6.4325 6.3075 6.3075 -0.135 -2.10%
JUL '21 MLPS Spring Wheat $ / BSH  6.4825 6.3625 6.3625 -0.13 -2.00%
SEP '21 MLPS Spring Wheat $ / BSH  6.51 6.4 6.4 -0.1275 -1.95%
DEC '21 MLPS Spring Wheat $ / BSH  6.4775 6.45 6.45 -0.125 -1.90%
MAR '21 ICE Dollar Index $ 90.275 90.05 90.23 0.103 0.11%
 MA '21 Light Crude $ / BBL  53.16 51.6 51.71 -1.42 -2.67%
 AP '21 Light Crude $ / BBL  53.08 51.54 51.65 -1.4 -2.64%
FEB '21 ULS Diesel $ /U GAL 1.6014 1.5592 1.5601 -0.0405 -2.53%
MAR '21 ULS Diesel $ /U GAL 1.6033 1.5609 1.5627 -0.0397 -2.48%
FEB '21 Gasoline $ /U GAL 1.5515 1.5097 1.5119 -0.036 -2.33%
MAR '21 Gasoline $ /U GAL 1.55 1.5079 1.5108 -0.0364 -2.35%
JAN '21 Feeder Cattle $ / CWT 0 #N/A 135.875 0 0.00%
MAR '21 Feeder Cattle $ / CWT 0 #N/A 139.15 0 0.00%
 FE '21 Live Cattle $ / CWT 0 #N/A 114.1 0 0.00%
 AP '21 Live Cattle $ / CWT 0 #N/A 119.95 0 0.00%
FEB '21 Live Hogs $ / CWT 0 #N/A 68.1 0 0.00%
APR '21 Live Hogs $ / CWT 0 #N/A 73.9 0 0.00%
JAN '21 Class III Milk $ / CWT 16.16 #N/A 16.15 0 0.00%
FEB '21 Class III Milk $ / CWT 16.49 16.4 16.47 0.01 0.06%
MAR '21 Class III Milk $ / CWT 17.4 17.3 17.3 -0.03 -0.17%
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