Morning Market Review for Jan. 25, 2021

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Grains’ price bleeding slows after Friday’s bloodbath. (Comments are updated by 7:30 a.m. Central Time.)

Managed money continues its selloff this morning, with losses capped on tight supply concerns

  • Corn down 2-3 cents
  • Soybeans down 1-5 cents, soyoil down $0.07/lb, soymeal mixed
  • Wheat mixed

*Prices as of 6:50 am CST.

Corn 

Despite a bevy of bullish news for the corn market last Friday, futures prices still closed down the limit on increased projections for South American crops. Futures prices struggled to recover from Friday’s selloff this morning as managed money interest in the corn market cooled, though losses are significantly less than those of a few days ago.

Corn exports should begin to pick up seasonal strength over the next couple weeks, a factor which capped the morning’s losses ahead of this morning’s weekly Grains Export Inspections report from USDA.

Cattle on feed numbers released by USDA last Friday were higher than expected across all categories, signaling bullish livestock prospects – which bodes favorably for corn usage.

Total cattle on feed inventories as of January 1 fell 0.6% from last month to just shy of 12.0 million head. Despite the drop, cattle supplies set a new record high January 1 inventory, surpassing the highest trade estimate of 11.89 million head.

December 2020 placements came in at 1.84 million head, the highest December placement rate on record and nearly 4% higher than the highest trade projection. December 2020 marketings were within the expected range at 1.85 million head, up 74,000 head from the month prior.

Rising cattle prices helped to offset the recent uptick in corn prices. But it bodes well for feeders, who will likely send smaller animals to slaughter, which tend to be easier to process. Placements are down from last month, which is typical for the time of year. It will likely benefit cattle producers later this fall when lower supplies amid high demand could turn into a profitable endeavor.

Speculators were already losing interest in corn contracts before last Friday’s sell off, according to Commitment of Trader data released by the CFTC Friday afternoon. For the week ending January 19, managed money funds trimmed 43,602 long positions – the largest single week movement away from corn contracts by speculators since March 2018.

The funds shrunk their record net buying position on Chicago corn futures and options to 349,495 contracts. Friday’s selloff suggests the recent historic high positions hedge fund managers have held on corn in recent months may begin to take on a more muted tone going forward.

Meanwhile, commercial firms backed off their historic short positions on corn, as profit-taking eroded prices, deterring what had previously been rapid farmer sales. During the reporting period, new cash sales from farmers had been so heavy that some buyers were forced to limit delivery hours as commercial storage filled up.

But falling prices could continue to slow new farmer sales in the week to come. For the January 13 – 19 reporting week, commercial firms and producer funds added 46,280 long positions to their portfolio, shrinking the historic net selling position on corn to 763,958 contracts. While there was a bit of a pullback by farmer funds in this week’s report, it’s worth noting the final net volume was still the second-highest selling position on record.

Weekly ethanol data released last Friday – a couple days behind schedule due to last week’s government-observed holidays – saw a couple glimmers of hope for the ethanol industry in the pandemic era.

For the week ending January 15, ethanol production in the U.S. edged up slightly from the previous week, by 0.4% to 39.7 million gallons/day. Inflated ethanol stocks fell 0.3% to 992.4 million gallons, the first time in 9 weeks weekly inventories have declined, signaling increased ethanol usage.

Indeed, ethanol blending at refineries picked up 4% on the week after gasoline demand soared nearly 8% higher. At 340.7 million gallon/day of gasoline demanded by consumers for the week ending January 15, fuel demand sought to climb back to last fall’s pandemic era-highs.

Soybeans

Even with new large export sales announced last week and a stronger than expected weekly export report for soybeans, soybean futures still shed over 4% on Friday. The selloff continued this morning, though at much smaller paces as speculators continue to pull back from large long positions on the oilseed. Harvest progress in Brazil continues to loom in the back of traders’ minds amid rising production forecasts after a burst of good weather.

Updated analyst estimates released on Friday point to a 4.857-bilion bushel soybean crop to be harvested in Brazil in the coming weeks. The previous forecast, issued a month ago, was slightly lower, at 4.842 billion bushels. Brazil produced 4.593 billion bushels of soybeans a year ago.

Early reports from Mato Grosso indicate a slight reduction in yields, but stable acreage estimates, which increased from a year ago, will likely support a record-high volume of soybeans harvested in Brazil this year. Analysts expect Brazilian crops to recover in time for harvest after plentiful rains in December and January helped boost growing conditions.

Speculators also shied away from soybeans for a third straight week in last Friday’s Commitment of Traders report as bullish gains from USDA’s January reports were eroded by improving crop conditions in Brazil.

For the week ending January 19, managed money funds trimmed 14,357 long positions to shrink the net buying position on soybeans to 151,898 contracts – the lowest net long on soybeans held by the funds since late August 2020. Similarly, the funds also shrunk net long positions on soybean oil and soybean meal as the price of underlying nearby soybean futures fell $0.4775/bushel during the reporting period.

Producer funds and commercial firms also pulled back on their net selling position on soybeans. Producers added 16,753 long positions on the week, raising their net short on soybeans to 633,241 contracts – the tightest selling position held by commercial firms and producers since mid-September 2020.

Friday’s steep market correction rattled growers across the country. But have we hit the bottom? AgMarket.Net’s Matt Bennett thinks it’s too early to tell. But even with the March 2021 soybean contract at $13/bushel, prices are still profitable and new crop prices are the highest levels in several years for late January.

“We can’t lose sight of how good prices are, just because the market has sold sharply off the highs,” Bennett cautions in the latest Ag Marketing IQ column. Supplies will remain tight for the rest of the marketing year, suggesting that high prices could bounce back sooner rather than later.           

Wheat

Wheat futures fared slightly better than corn and soybean counterparts this morning, though still trading with mixed results at last glance. Chicago and Kansas City wheat traded slightly lower on a rising dollar while improving export prospects due to Russia’s wheat export tax lent strength to spring wheat gains in Minneapolis this morning.

Contrary to corn and soybeans, speculators found more buying interest in the wheat complex last week as Russia increased a wheat export tax and drought conditions in the U.S. Plains intensified. For the week ending January 19, managed money funds grew their net buying positions on Chicago soft red winter wheat, Kansas City hard red winter wheat, and Minneapolis spring wheat by 21%, 6%, and 13%, respectively.

Producer fund and commercial firm sales for the three wheat varieties also increased during the reporting period, as the uncertainty surrounding Russian and Argentina’s crops sent wheat prices rallying around the globe.

Commercial firms set a new record short position for the time of year on Kansas City HRW wheat futures an options for the week ending January 19. Producer funds notched an all-time record high selling position on Minneapolis spring wheat for the reporting week, besting the previous high set in May 2014.

Weather 

A winter storm system will span across Kansas and Nebraska through the Central East Coast today, leaving behind a trail of snow, ice, and rain along the way, according to NOAA’s short-range forecasts. Snow accumulation will range between 3-12 inches from Colorado to Michigan between this morning and tomorrow night.

Ice and rain will line the southern edge of the current storm. Another winter storm will trail the first, though accumulation is expected to be lighter. The forecasts benefits dry winter wheat growing conditions in the Southern and Central Plains as low soil moisture continues to plague farmers in that region.

Financials 

Coronavirus cases in the U.S. rose to 25,128,278 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. The death toll increased to 419,225 deaths as of press time.

Happy Monday! Here’s a round-up of the top stories in agriculture last week. Highlights include a multi-part series on the impacts of the new Biden administration to agricultural policy, the granting of three biofuel blending waivers for refiners, and disruptions to the chocolate supply chain.

Senate confirmations are underway for President Biden’s cabinet picks. It could take longer than usual for Biden’s choice for Secretary of Agriculture, Tom Vilsack, to be confirmed, given the looming impeachment trial for former President Trump and legislation for a proposed stimulus bill.

How long could that last? Prior to outgoing Secretary Sonny Perdue’s nomination, on average ag secretaries were confirmed about five days after the incoming president’s inauguration. Secretary Perdue’s confirmation was not finalized until 96 days after President Trump’s inauguration.

But ag lobbying groups are eager to see Vilsack, who served two full terms as President Obama’s Secretary of Agriculture, confirmed as quickly as possible. In a letter submitted to the Senate Committee on Agriculture, Nutrition, and Forestry, ag and food groups applauded Vilsack’s understanding of “USDA’s mission the advancement of U.S. food and agriculture for the benefit of all in the U.S. and countless consumers beyond our shores.”

China has overtaken the U.S. as the top destination for foreign investments, according to reports released over the weekend. U.S. stock markets wobbled this morning as traders digested the news. Tech stocks are on pace to post gains this morning, pulling up the S&P 500 index by 0.20% to $3,841.75. Dow futures traded lower on rising COVID-19 cases and increasing concern about economic disparities caused by the pandemic. At last glance, the Dow traded 0.20% lower to $30,846.

Morning Ag Commodity Prices - 1/25/2021
Contract Units High Low Last Net Change % Change
MAR '21 CORN $ / BSH  5.0525 4.925 4.97 -0.035 -0.70%
MAY '21 CORN $ / BSH  5.0725 4.945 4.995 -0.035 -0.70%
JUL '21 CORN $ / BSH  5.03 4.9 4.955 -0.0325 -0.65%
SEP '21 CORN $ / BSH  4.56 4.445 4.485 -0.03 -0.66%
DEC '21 CORN $ / BSH  4.3525 4.235 4.2825 -0.02 -0.46%
MAR '22 CORN $ / BSH  4.4225 4.3125 4.3575 -0.0175 -0.40%
MAY '22 CORN $ / BSH  4.45 4.39 4.4 -0.0125 -0.28%
MAR '21 SOYBEANS $ / BSH  13.2275 12.98 13.075 -0.0425 -0.32%
MAY '21 SOYBEANS $ / BSH  13.2175 12.97 13.065 -0.0525 -0.40%
JUL '21 SOYBEANS $ / BSH  13.08 12.8225 12.935 -0.05 -0.39%
AUG '21 SOYBEANS $ / BSH  12.6025 12.38 12.4725 -0.0675 -0.54%
SEP '21 SOYBEANS $ / BSH  11.665 11.475 11.555 -0.055 -0.47%
NOV '21 SOYBEANS $ / BSH  11.19 10.97 11.055 -0.065 -0.58%
JAN '22 SOYBEANS $ / BSH  11.1275 10.9275 11.02 -0.0475 -0.43%
MAR '22 SOYBEANS $ / BSH  10.87 10.69 10.7625 -0.0525 -0.49%
MAY '22 SOYBEANS $ / BSH  10.75 10.67 10.6875 -0.0425 -0.40%
MAR '21 SOYBEAN OIL  $ / LB 42.47 41.92 42.12 -0.15 -0.35%
MAY '21 SOYBEAN OIL  $ / LB 41.81 41.13 41.39 -0.16 -0.39%
MAR '21 SOY MEAL $ / TON 426 417.6 420.6 -1 -0.24%
MAY '21 SOY MEAL $ / TON 421.9 413.4 416.6 -1.3 -0.31%
JUL '21 SOY MEAL $ / TON 417.3 408.9 412.3 -1.7 -0.41%
AUG '21 SOY MEAL $ / TON 402.2 395.5 397.9 -1.4 -0.35%
SEP '21 SOY MEAL $ / TON 383.2 376.8 382.5 1.9 0.50%
MAR '21 Chicago SRW $ / BSH  6.395 6.2425 6.345 0 0.00%
MAY '21 Chicago SRW $ / BSH  6.405 6.26 6.355 -0.005 -0.08%
JUL '21 Chicago SRW $ / BSH  6.2625 6.1525 6.215 -0.025 -0.40%
SEP '21 Chicago SRW $ / BSH  6.275 6.165 6.235 -0.015 -0.24%
DEC '21 Chicago SRW $ / BSH  6.3275 6.23 6.3 -0.005 -0.08%
MAR '21 Kansas City HRW $ / BSH  6.2 6.055 6.11 -0.0225 -0.37%
MAY '21 Kansas City HRW $ / BSH  6.2375 6.095 6.165 -0.005 -0.08%
JUL '21 Kansas City HRW $ / BSH  6.2325 6.0925 6.1475 -0.02 -0.32%
SEP '21 Kansas City HRW $ / BSH  6.255 6.135 6.175 -0.02 -0.32%
DEC '21 Kansas City HRW $ / BSH  6.315 6.195 6.2675 0.0125 0.20%
MAR '21 MLPS Spring Wheat $ / BSH  6.1725 6.05 6.1425 0.0175 0.29%
MAY '21 MLPS Spring Wheat $ / BSH  6.25 6.15 6.23 0.015 0.24%
JUL '21 MLPS Spring Wheat $ / BSH  6.29 6.21 6.29 0.0175 0.28%
SEP '21 MLPS Spring Wheat $ / BSH  6.3475 6.26 6.335 0.0175 0.28%
DEC '21 MLPS Spring Wheat $ / BSH  6.3925 6.34 6.34 -0.0325 -0.51%
MAR '21 ICE Dollar Index $ 90.34 90.075 90.29 0.078 0.09%
 MA '21 Light Crude $ / BBL  52.88 52.04 52.36 0.09 0.17%
 AP '21 Light Crude $ / BBL  52.79 51.98 52.25 0.06 0.11%
FEB '21 ULS Diesel $ /U GAL 1.5911 1.571 1.58 0.004 0.25%
MAR '21 ULS Diesel $ /U GAL 1.5932 1.5727 1.5824 0.0042 0.27%
FEB '21 Gasoline $ /U GAL 1.5725 1.5409 1.5577 0.009 0.58%
MAR '21 Gasoline $ /U GAL 1.5696 1.5379 1.5553 0.0103 0.67%
JAN '21 Feeder Cattle $ / CWT 0 #N/A 137.25 0 0.00%
MAR '21 Feeder Cattle $ / CWT 0 #N/A 144.15 0 0.00%
 FE '21 Live Cattle $ / CWT 0 #N/A 116.725 0 0.00%
 AP '21 Live Cattle $ / CWT 0 #N/A 122.525 0 0.00%
FEB '21 Live Hogs $ / CWT 0 #N/A 69.925 0 0.00%
APR '21 Live Hogs $ / CWT 0 #N/A 76.15 0 0.00%
JAN '21 Class III Milk $ / CWT 16.16 #N/A 16.16 0 0.00%
FEB '21 Class III Milk $ / CWT 16.58 16.51 16.51 0.05 0.30%
MAR '21 Class III Milk $ / CWT 17.53 #N/A 17.54 0 0.00%
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