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Morning Market Review for July 13, 2020

Corn, soybeans ease on wet weekend weather. (Comments are updated by 7:30 a.m. Central Time.)

Improving growing conditions erode price gains

  • Corn down 7-8 cents
  • Soybeans down 7-9 cents, soyoil down $0.23, soybean meal down $3.2
  • Wheat down 1-3 cents

*Prices as of 6:55 am CDT.

Editor’s Note: Our “Feedback from the Field” series is live! Click here to share your crop reports with other growers around the country via a short survey with freshly updated questions this week! We will update the interactive Google map with results throughout the day. Our most recent analysis just went live – check it out here. Thank you!

Corn: September corn futures shed $0.0725/bushel to $3.30 this morning as a weekend of wet weather across the Corn Belt boosted growing conditions amid warm temperatures. New crop December futures fell $0.08/bushel to $3.3675.

Cash corn prices held mostly steady after USDA’s latest WASDE report released last Friday morning. Lower ethanol demand forecasts correlated with a Council Bluffs, Iowa ethanol plant lowering basis $0.02/bushel to $0.18 below September futures prices. Basis rose $0.08/bushel to $0.22 at a Columbus, Ohio rail terminal. New bookings of 2019/20 as well as 2020/21 cash sales continued Friday morning ahead of WASDE reports.

Corn basis and change

USDA releases its weekly Crop Progress report today. Last week’s reported corn conditions at 71% good to excellent came as a slight surprise to prices, as many expected ratings to take a hit after hot and dry weather. Another week of toasty temperatures threatened to disrupt pollination progress, but scattered showers provided a glimmer of hope for growing conditions.

“Two inches of rain on Thursday night was just what was needed to get through July,” a northern Iowa farmer shared with Farm Futures’ Feedback from the Field ongoing reader survey. But not everyone has fared as well. “We’ve only had 4.6 inches of rain total for 2020,” a western Kansas grower lamented. Heavy rains across top corn-growing areas in the Midwest over the weekend could provide downside price potential for both old and new crop futures.

Brazil’s second crop corn harvest was reported as 34.9% complete as of last Friday. Harvest progress slowed compared to the same time last year, when 49% of planted acreage had been completed. USDA expects Brazil’s safrinha crop boost 2019/20 Brazilian corn production to 4.0 billion bushels.

A massive corn and wheat export sale to China announced Friday morning was overshadowed by comments by President Trump that cast doubt on trade relations with China. China purchased 53.7 million bushels of corn – its second-largest U.S. corn purchase on record – and 11.7 million bushels of wheat via private exporters, but prices fell after President Trump announced that a Phase 2 trade deal with China was not likely in the cards.

“The relationship with China has been severely damaged,” the president commented outside Air Force One en route to a campaign fundraiser in Florida on Friday. Diplomatic relations between China and the U.S. have been strained amid the coronavirus pandemic, military competition in the Southern Sea, and reduced agricultural trade volumes between the world’s two largest economies.

Friday’s WASDE report found tighter global new crop ending stocks on reduced 2020/21 production estimates in the U.S. Domestic demand reductions for ethanol (50 million bushels) and livestock consumption (100 million bushels) widened 2019/20 ending stocks to 2.25 billion bushels, meaning that 16.5% of 2019 production will be leftover this fall as 2020 harvest begins.

Lower meat processing capacity expected in 2020/21 led USDA to slash new crop livestock demand by 200 million bushels, which offset the nearly 1-billion-bushel supply cut to 2020/21 corn production on 5 million fewer acres. As a result, 2020/21 U.S. corn ending stocks only tightened by 675 million bushels to 2.6 billion bushels from last month’s estimates. New crop carryout tightened by 16 days from June WASDE estimates to 66 days.

Soybeans: Soybean prices followed corn lower on favorable weekend weather across the Midwest. August soybean futures fell $0.07/bushel to $8.8025, thwarting last Friday’s chances of breaking $9/bushel. August soyoil futures dropped $0.23/lb while August soymeal futures prices showed early signs of erasing last week’s gains, falling $3.2/ton to $289.3.

Cash soybean prices edged $0.01/bushel lower to $0.01 above August futures on the Mississippi River at Davenport, Iowa on Friday. Basis was relatively unchanged elsewhere in the Midwest. Farmer sales slowed after comments from President Trump casting doubt on trade prospects with China caused a decline in futures prices.

Soybean Basis Change

Rain across the Midwest this weekend could help boost soybean conditions in today’s Crop Progress report. Soybeans, which have weathered scorching temperatures slightly better than corn in recent weeks, were rated as 71% good to excellent in last week’s report. “Beans are slowly growing. The 30-inch beans have yet to shade the rows. I have seen a few farmers out cultivating for weeds that the spray had little to no effect on,” a central Illinois farmer shared over the weekend in Farm Futures’ Feedback from the Field reader series.

Friday’s WASDE reports had few surprises for soybeans, despite a negative 46-million-bushel 2019/20 residual adjustment that did no favors to old crop prices trying to break above $9/bushel prior to the report release as domestic ending stocks for 2019/20 swelled to 620 million bushels.

Domestic soybean demand is continued to rise through the pandemic. 2019/20 crush demand ticked up another 15 million bushels to 2.155 billion bushels. The trend is expected to continue into 2020/21, as USDA increased new crop crush usage estimates up 15 million bushels as well to 2.16 billion bushels. 2020/21 will see the highest soybean usage rate in history on those adjustments. New crop carryout was adjusted slightly higher to 425 million bushels.

Stronger global crush demand tightened new crop worldwide ending stocks to 3.49 billion bushels. USDA increased global crush figures 68.3 million bushels higher to 11.6 billion bushels for 2020/21 as the world’s appetite for soy continues to rise.

Wheat:

Wheat contracts price changes

Wheat futures edged lower this morning after last Friday’s WASDE report continued to set record-highs for new crop ending wheat stocks. A falling dollar capped losses, as the ICE Dollar Index shed 0.14% in weekend trading to $96.480.

Cash soft red winter wheat bids rose $0.05/bushel to $0.05 over September futures prices at a Decatur, Indiana elevator on Friday despite rising harvest pressure. Cash offerings for hard red winter wheat held steady across the Southern Plains on Friday as harvest draws to a close on the Southern Plains. Cash sales are likely to slow in Kansas as harvest nears completion.

Protein premiums for hard red winter cash wheat delivered to or through Kansas City by rail were unchanged on Friday, as shown below:

wheat protein content, basis range, change

Winter wheat harvest progress will continue to rise in today’s Crop Progress report, as Kansas approached the end of harvest late last week. As of a week ago, 56% of the winter wheat harvest was complete. Rains in the northern U.S. will likely benefit improving conditions for the spring wheat crop, which was rated at 70% good to excellent last week.

Reduced wheat feed demand forecasts in the U.S. in 2019/20 and 2020/21 led to higher domestic wheat stocks, which offset upward price potential for reduced global yield estimates. The lowest planted wheat acreage in U.S. history sent 2020/21 production 188 million bushels lower to 1.7 billion bushels, tightening new crop carryout 236 million bushels from 2019/20 carryout to 808 million bushels.

USDA lowered production forecasts for the European Union, Russia, and the U.S. – the three largest wheat producers in the world. This led to 2020/21 ending stocks tightening by nearly 46 million bushels to 11.58 billion bushels. But even despite the lowered global yield estimates, ending global stocks remain at a record high as the world continues to be awash in wheat.

Russian agricultural consultancy IKAR reduced its 2020 wheat yield estimate 55 million bushels lower to 2.8 billion bushels. Preliminary yields coming from harvest reports in the southern, central, and Volga River regions in Russia have been lower than expected after a dry growing season reduced yield potential. USDA reduced their estimate on 2020 Russian production by a mere 20 million bushels to 3.01 billion bushels in Friday’s WASDE report. Russia is the world’s largest wheat exporter.

Weather: Temperatures are expected to dip into 80’s across much of the Corn Belt today with mostly clear skies, according to NOAA's short-range forecast. A rain system over the Northern Plains could shift into the Upper Mississippi River Valley by Tuesday.

Corn is not the only crop that needs hydration in this heat. Toasty temperatures increase the need for water consumption, especially for farmers, agronomists, veterinarians, and anyone else who will be working in the heat this summer. The CDC recommends drinking a cup (8 oz.) of water every 15-20 minutes if you are working in the heat. For more on the safest way to stay hydrated amid these balmy temperatures, check out the CDC's factsheet on heat stress and hydration before venturing out to work.

Financials: Coronavirus cases in the U.S. rose to 3,304,942 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. Cases rose by 186,774 since last Friday, confirming the rapid virus transmission in recent weeks as lockdown restrictions have been lifted. The death toll increased to 135,205 deaths as of press time.

Are you caught up on market news going into the first trading session of the week? Catch up on last week’s news with a few stories that missed headlines last week. Chris Barron and Duane Lowry also break down weather forecasts and what they mean for grain prices in the latest Ag View Pitch podcast.

It’s earnings season on Wall Street! U.S. stock futures ticked up this morning on hopes that earnings reports will provide better insights as to how the U.S. economy has been combatting the coronavirus pandemic. While second quarter earnings are expected to be dismal due to the pandemic, investors are increasingly optimistic for third quarter growth. S&P 500 futures rose 22.85 points or 0.72% to $3,201.25 on the sentiment.

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