Morning Market Review for Jan. 28, 2021

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Corn rises on export demand. (Comments are updated by 7:30 a.m. Central Time.)

A rising dollar caps gains on grain prices in early morning trading

  • Corn up 3-6 cents
  • Soybeans up 6-10 cents, soyoil up $0.50/lb, soymeal up $2.7/ton
  • Wheat down 1 cent

*Prices as of 6:50 am CST.

USDA’s deputy chief economist, Cynthia Nickerson, told the Paris Grain Day conference overnight USDA expects to see higher corn and soybean acreage planted in 2021 based off current market pricing. "Since the price of both soy and corn are higher, the price signals are really to plant more of both, and that's what we expect to see - expansion of both into 2021," Nickerson stated.

Farm Futures’ January 2021 survey questioned farmers about planting intentions for the 2021 season. Will farmers truly expand acreage as USDA suggests? Stay tuned. Those results will be released next Friday at 7 am CST.

Corn

Corn futures prices wobbled in overnight trading due to profit taking and higher South African corn acreage projections, though prices were trading over 1% higher this morning as export demand increased and on tight U.S. supplies. A rising dollar capped the morning’s gains as the ICE dollar index added 0.10% overnight to $90.735.

USDA releases updated weekly corn export sales data this morning. Market analysts predict an uptick in sales after global buyers went on a U.S. corn purchasing spree. For the reporting week of January 15 – 21, nearly 26.6 million bushels of old crop corn were ordered by Israel (3.9MBu), Mexico (4.3MBu), Japan (5.0MBu), and an unknown buyer (13.2MBu) according to private exporter data reported to USDA.

Trade analysts predict today’s old crop corn export sales to range between 35.4 million – 63.0 million bushels. 2021/22 corn export sales could reach as high as 3.9 million bushels. Concerns about dwindling supplies and falling futures prices amid a market correction encouraged international interest in corn through the week ending January 21.

Corn export loading paces could also rise in today’s report. Monday’s Grains Export Inspections report from USDA found U.S. corn shipments to international buyers increased by 18.8 million bushels last week to 54.8 million bushels for the week ending January 21.

Weekly ethanol production data released from the U.S. Energy Information Administration (EIA) yesterday saw a slight downturn in output. For the week ending January 22, the EIA reported a 1.3% decrease in ethanol output, falling to 39.2 million gallons/day. It was the lowest weekly production volume for U.S. ethanol plants in the last three months.

Falling fuel demand was partly to blame. Over the reporting week, gasoline demand dropped 3.4% to 329.0 million gallons/day, reversing last week’s fuel demand increase. Fuel demand has largely remained sideways since last fall, ranging between 8% and 23% lower than pre-pandemic demand.

But there were a couple signs of hope in yesterday’s ethanol numbers. Ethanol stocks declined for the third straight week, indicating blending rates are keeping up with fuel demand fluctuations. Ethanol demanded by blenders and refiners also inched up last week, nearly 1% higher to 33.0 million gallons/day – the highest volume in the past four weeks.

Soybeans

Soybean futures added less than 1% in gains this morning on tight supplies and delays to the Brazilian soybean harvest. Supply shortfalls are becoming a very real concern for soybean processors, who are likely to begin limiting production later this spring.

A pair of 2020/21 soybean orders from Mexico (6.0MBu) and China (5.0MBu) combined with 16.5Mbu in new crop export sales to China (4.9Mbu) and an unknown buyer (11.7Mbu) will play a large factor into rising soybean export sale paces in today’s weekly export sales report from USDA.

The sales led market analysts to project weekly old crop soybean export sales to range between 29.4 million – 51.4 million bushels for the January 15 – 21 reporting week. New crop sales are predicted between 20.2 million – 66.8 million bushels.

Soybean export loading paces could cool in today’s report. Monday’s Grains Export Inspections report from USDA saw soybean shipments drop 13% on the week to 72.7 million bushels. The fall is somewhat surprising, considering competing Brazilian soybean supplies have not yet hit the export market. It could suggest some price resistance from buyers as market players begin to ration demand.

The Chinese hog herd is rapidly recovering after over 60% of the herd was wiped out due to the African Swine Fever (ASF) outbreak, which began in August 2018. The Chinese government expected the herd to return to pre-ASF volumes in the first half of 2021, though a recent outbreak on a farm in Southern China could derail the progress.

Regardless, the growing herd is quickly eating through U.S. soybeans shipped to China, which also benefits the Phase 1 trade commitments between the two countries. And now more than ever, that is critical for a positive trade relationship between the world’s largest economies, as well as for the long-term price stability of soybeans.

“We are seeing quickly deteriorating relationships,” Wendong Zhang, an Iowa State University ag economist and Chinese native, says. “There’s a growing concern that, from the Chinese business perspective, we are anticipating a bumpy relationship over the next decade.”

Wheat

Wheat prices are mixed to slightly lower this morning on a stronger dollar and uncertainty about Chinese demand. Concerns about Argentine wheat supplies could limit the morning’s losses.

The world’s seventh largest wheat supplier is examining ways to reduce rising food price inflation and is specifically focused on domestic wheat supplies. Argentina already angered farmers by proposing a corn export ban to limit rising domestic food costs earlier this year, and farmers are not likely to have much tolerance for a similar policy on wheat.

The country’s export companies’ chamber, CEC, will meet with the government in the coming days to possibly slow export loading paces or even cap exports, despite harsh farmer criticism of the latter. A top wheat buying group in Brazil expects Argentine wheat exports to total 404.1 million bushels during the 2020/21 marketing year, while Argentine government projections place the total 36.7 million bushels lower at 367.4 million bushels.

"We are concerned that there may be some kind of unofficial deal between the government and traders to reduce wheat and corn exports," Santiago del Solar, a grower in the province of Buenos Aires, told Reuters. "We need transparency in the grain markets. We need to know what is going on in order to invest and produce."

Export sale orders for 2020/21 wheat are expected to remain relatively unchanged in today’s export sales report from USDA. Market analysts peg old crop wheat export sales at 9.2 million – 22.0 million bushels. New crop wheat export sales could rise to 3.9 million bushels.

Nigeria booked a large daily flash export sale of wheat during the January 15 – 21 reporting period. The African country ordered 5.1 million bushels of hard red winter wheat to be delivered in the 2021/22 marketing year. No other daily flash wheat sales were reported during the reporting period.

Wheat export loading paces will likely see a boost in today’s report. Monday’s Grains Export Inspections report from USDA saw an 8.9-million-bushel increase in weekly wheat shipments to 12.2 million bushels. Wheat export volumes typically start trending higher in the last weeks of January, so it would not be surprising if today’s report reflected an upswing in wheat exports.

Weather

After two back to back winter storms this week, skies in the Heartland are forecast to be mostly clear today and tomorrow, according to NOAA’s short-range forecasts. A winter storm system developing in the Northern Rockies will move east into the Plains by Saturday afternoon.

Financials

Coronavirus cases in the U.S. rose by 154,396 to 25,599,637 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. The death toll increased by 3,964 lives to 429,214 deaths as of press time.

Next Tuesday, former Secretary of Agriculture Tom Vilsack will sit for the Senate confirmation hearing to be reinstated as Secretary of Agriculture in the Biden administration. Vilsack, who was President Barack Obama’s agriculture secretary for the full two terms, is expected to be confirmed swiftly on February 2.

Vilsack has indicated upon taking the helm at USDA, he will quickly turn his attention to “his commitment to rebuild our rural communities, empower farmers to help tackle the climate crisis and address systemic racism at USDA that has persisted for too long,” according to Senator Debbie Stabenow, leader of the Senate Agriculture Committee.

Rising commodity prices and record government payments have helped pave the way for increasing machinery demand. The January 2021 Farm Futures survey found that 16% of respondents were in the market for a new tractor – significantly higher than other capital purchases.

Machinery demand is on the rise. Recent data from the Association of Equipment Manufacturing found November 2020 100-plus-horsepower tractor sales to increase 24.2% compared to the year prior. Demand for smaller power tractors especially is increasing.

But supplies aren’t exactly matching up with farmers’ needs. The pandemic disrupted production and supply chains last spring for many large manufacturers. Machinery production has adjusted to the new buying trends in the meantime, though pandemic-related supply disruptions are at the forefront of everyone’s mind.

Equipment dealers have managed to provide ample supplies, but the recent demand push will likely leave inventory levels at variable amounts across the Heartland. With more online purchases are being made to avoid in person contact, it is not yet clear if these new buying patterns will have a permanent impact on the industry.

Land rents are arguably one of the most frustrating financial aspects of farming to navigate for younger producers. In the latest This Business of Farming column, Farm Futures executive editor Mike Wilson points to Hedging Works: Myth or Reality?, a book by economist Keith Rogers which argues that executing a sound marketing plan increases farmers’ abilities to negotiate fair cash rents.

Knowing the difference between cost of production and cash flow expenditures that aren’t direct operating costs is key to negotiating better rent prices, Rogers states. “So, tenant over estimates costs and under estimates profit that should be shared with landlord as fair rent, based on the contribution of the land. It’s hard to reach an agreement when starting from that point.”

U.S. stock futures wobbled this morning after yesterday’s selloff. Trading battles between day traders and hedge funds have caused significant market turbulence in recent days, especially as companies release fourth quarter earnings results this week. S&P 500 futures traded 0.04% lower to $3,742.75 at last glance while Dow futures rose 0.15% to $30,236.

 

Morning Ag Commodity Prices - 1/28/2021
Contract Units High Low Last Net Change % Change
MAR '21 CORN $ / BSH  5.42 5.29 5.4175 0.0775 1.45%
MAY '21 CORN $ / BSH  5.43 5.3 5.43 0.0775 1.45%
JUL '21 CORN $ / BSH  5.355 5.23 5.3525 0.0725 1.37%
SEP '21 CORN $ / BSH  4.725 4.6425 4.7225 0.0375 0.80%
DEC '21 CORN $ / BSH  4.465 4.38 4.46 0.035 0.79%
MAR '22 CORN $ / BSH  4.5125 4.4375 4.51 0.03 0.67%
MAY '22 CORN $ / BSH  4.535 #N/A 4.505 0 0.00%
MAR '21 SOYBEANS $ / BSH  13.8925 13.655 13.8825 0.135 0.98%
MAY '21 SOYBEANS $ / BSH  13.875 13.64 13.8675 0.135 0.98%
JUL '21 SOYBEANS $ / BSH  13.675 13.45 13.6725 0.1275 0.94%
AUG '21 SOYBEANS $ / BSH  13.155 12.96 13.1525 0.1075 0.82%
SEP '21 SOYBEANS $ / BSH  12.135 11.975 12.1225 0.0775 0.64%
NOV '21 SOYBEANS $ / BSH  11.595 11.4125 11.595 0.1025 0.89%
JAN '22 SOYBEANS $ / BSH  11.51 11.355 11.485 0.065 0.57%
MAR '22 SOYBEANS $ / BSH  11.195 11.0825 11.195 0.06 0.54%
MAY '22 SOYBEANS $ / BSH  11.0875 10.9675 11.0875 0.045 0.41%
MAR '21 SOYBEAN OIL  $ / LB 45.29 44.01 45.27 0.75 1.68%
MAY '21 SOYBEAN OIL  $ / LB 44.34 43.22 44.32 0.63 1.44%
MAR '21 SOY MEAL $ / TON 440.7 433.3 440.4 3.8 0.87%
MAY '21 SOY MEAL $ / TON 437.5 430.3 437.3 3.6 0.83%
JUL '21 SOY MEAL $ / TON 432.2 425.7 432.1 3.1 0.72%
AUG '21 SOY MEAL $ / TON 416.7 410.8 416.7 3 0.73%
SEP '21 SOY MEAL $ / TON 395 391.2 395 1.5 0.38%
MAR '21 Chicago SRW $ / BSH  6.5775 6.435 6.575 -0.0075 -0.11%
MAY '21 Chicago SRW $ / BSH  6.5775 6.445 6.5775 0 0.00%
JUL '21 Chicago SRW $ / BSH  6.4175 6.3025 6.4175 0.0125 0.20%
SEP '21 Chicago SRW $ / BSH  6.4 6.3025 6.395 0.01 0.16%
DEC '21 Chicago SRW $ / BSH  6.44 6.3325 6.44 0.02 0.31%
MAR '21 Kansas City HRW $ / BSH  6.3675 6.24 6.3675 0 0.00%
MAY '21 Kansas City HRW $ / BSH  6.3925 6.275 6.39 -0.005 -0.08%
JUL '21 Kansas City HRW $ / BSH  6.36 6.245 6.36 0.0025 0.04%
SEP '21 Kansas City HRW $ / BSH  6.3575 6.27 6.3525 -0.01 -0.16%
DEC '21 Kansas City HRW $ / BSH  6.4075 6.35 6.4075 0.0075 0.12%
MAR '21 MLPS Spring Wheat $ / BSH  6.325 6.23 6.315 -0.0125 -0.20%
MAY '21 MLPS Spring Wheat $ / BSH  6.41 6.3225 6.4025 -0.0125 -0.19%
JUL '21 MLPS Spring Wheat $ / BSH  6.455 6.37 6.455 -0.015 -0.23%
SEP '21 MLPS Spring Wheat $ / BSH  6.51 6.445 6.445 -0.065 -1.00%
DEC '21 MLPS Spring Wheat $ / BSH  6.55 6.52 6.52 -0.0325 -0.50%
MAR '21 ICE Dollar Index $ 90.855 90.62 90.74 0.1 0.11%
 MA '21 Light Crude $ / BBL  52.86 52.22 52.67 -0.18 -0.34%
 AP '21 Light Crude $ / BBL  52.73 52.12 52.56 -0.17 -0.32%
FEB '21 ULS Diesel $ /U GAL 1.6083 1.5945 1.6064 -0.0025 -0.16%
MAR '21 ULS Diesel $ /U GAL 1.6076 1.5921 1.6052 -0.0024 -0.15%
FEB '21 Gasoline $ /U GAL 1.5769 1.5634 1.575 -0.0021 -0.13%
MAR '21 Gasoline $ /U GAL 1.571 1.5567 1.5681 -0.0035 -0.22%
JAN '21 Feeder Cattle $ / CWT 0 #N/A 135.625 0 0.00%
MAR '21 Feeder Cattle $ / CWT 0 #N/A 140.075 0 0.00%
 FE '21 Live Cattle $ / CWT 0 #N/A 116.45 0 0.00%
 AP '21 Live Cattle $ / CWT 0 #N/A 122.625 0 0.00%
FEB '21 Live Hogs $ / CWT 0 #N/A 70.575 0 0.00%
APR '21 Live Hogs $ / CWT 0 #N/A 76.3 0 0.00%
JAN '21 Class III Milk $ / CWT 16.12 #N/A 16.14 0 0.00%
FEB '21 Class III Milk $ / CWT 15.73 15.69 15.69 0.17 1.10%
MAR '21 Class III Milk $ / CWT 16.8 16.8 16.8 0.15 0.90%
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