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Morning Market Review for July 23, 2021

scyther5/Thinkstock Markets-122316-scyther5-ThinkstockPhotos-2000
Corn edges lower ahead of USDA cattle data. (Comments are updated by 7:30 a.m. Central Time.)

A quiet overnight trading session results in thin trading ranges for grains

  • Corn down 1-2 cents
  • Soybeans down 6-10 cents, soymeal down $3.90/ton, soyoil up $0.64/lb
  • Wheat up 2-5 cents

*Prices as of 6:50 am CDT.

Happy Friday!  How are your crops surviving the heat? Click here to take our ongoing Feedback from the Field survey on 2021 crop conditions. Our Google Map, updated daily, provides all past responses for farm readers. Check out our latest Feedback from the Field analysis to see the most recent farmer comments from around the country.

Corn

China sold 323K bushels of imported GMO corn from Ukraine at a state-sponsored auction overnight. There was less competition for the sale than in previous weeks’ auctions, suggesting that Chinese corn demand could be weakening as its freshly harvested wheat supplies enter the supply chain.

Chicago futures edged $0.02-$0.03/bushel lower this morning as a result. Concerns about U.S. livestock feed demand also played into the morning’s losses.

USDA releases updated Cattle on Feed data this afternoon. The country’s cattle inventory, which started the year out on a high note on steady consumer demand amid the pandemic, is likely going to begin to shrink as pastures in the West and Upper Midwest are rendered unfit for cattle due to drought conditions and sky-high grain prices put the squeeze on cattle producers’ profit margins.

Market analysts expect June 2021 feedlot placements to drop a staggering 4.1% from a year prior as the cattle market weathers this latest liquidation phase. The trade expects June placements in today’s report to range between 1.56 million – 1.81 million head with an average guess of 1.72 million head.

As such, expect June 2021 marketings to rise from the previous month as the liquidation cycle ensues. Trade estimates peg today’s figure at 2.05 million head, with the market unlikely to see any significant price movement unless the estimate comes in outside of the expected 2.00 million – 2.11 million head range.

Average guesses for total U.S. cattle inventories are slightly smaller than May 2021 estimates, suggesting the country’s breeding herd could be impacted tight grain supplies, scorched pastures, and unsteady slaughtering speeds that have plagued livestock producers through 2021. Market analysts estimate today’s Cattle on Feed volume at 11.21 million head, though the final tally is likely to range between 10.96 million – 11.55 million head.

A smaller cattle herd could have bearish consequences for U.S. corn growers. Ethanol stocks rose this week, suggesting blender demand is not supportive of current production volumes, and corn export volumes thinned as countryside storage facilities begin to run dry on 2020 supplies. While corn stocks may end the year at a historically tight level, these demand factors need to be closely monitored as the new marketing year approaches.

Tight stocks are good for U.S. corn growers, but it’s impacts can become quickly muted if usage rates moderate in response to higher prices.

Soybeans

Soybean futures traded $0.06-$0.10/bushel lower this morning on a continued round of profit-taking following weather rallies and ongoing concerns about potential Chinese export demand for the 2021/22 shipping season.

Total Farm Marketing’s Naomi Blohm is keeping a close eye on a few major factors as July rolls to a close. Tight soybean stocks, soybean crop development, and weather forecasts in the Midwest are high on Blohm’s list, but so is recent flooding in Central China.

While the Chinese pig population returned to pre-ASF volumes this spring, the flood waters from recent showers could spread contaminated water, feed, and fecal matter to hog facilities where the virus could infect more herds.

The Henan province in Central China is not only the country’s second-largest pork producer but is also China’s largest wheat grower. Blohm notes that the province produces nearly 30% of the country’s total wheat output and 10% of China’s corn crop in the latest Ag Marketing IQ column. The area’s wheat harvest wrapped up in advance of the heavy showers, though analysts have voiced concerns about storage quality issues as the rain accumulates.

Should issues arise due to flooding, U.S. grain exports could be impacted. Keep an eye on news about export sales or outbreaks of ASF reported in the Henan province. Those will be the earliest indicators of the flood’s severity, as it impacts U.S. farmers.

Wheat

The Rhine River reopened in Germany overnight, freeing up grain and energy flows in Western Europe. Concerns about crop conditions around the world contributed to the morning’s gains, which featured the entire wheat complex up $.02-$0.05/bushel, with gains capped by a stronger dollar.

France’s soft wheat harvest is behind schedule this year. French soft wheat ratings declined on recent heavy rains, falling to 75% good or excellent as only 14% of the crop has been harvested. Two-thirds of the crop had been harvested a year ago, though smaller acreages and dry conditions sped up harvesting paces for that season.

France is the European Union’s largest wheat producer. The EU is the world’s second largest wheat exporter.

As global weather woes continue to raise concerns about global wheat supplies, Farm Futures contributing analyst Bryce Knorr hints that another year of turbulent wheat-growing weather could come sooner rather than later. Knorr points out that while La Niña is on the way out, it could return again this fall as ocean temperatures in the Central Pacific remain cooler than normal.

“While traders focus on U.S. production during the summer, export demand into 2022 could hinge on what happens from competitors around the world if La Niña returns as forecast,” Knorr explains a recent Ag Marketing IQ column. “The La Niña cycle offers mixed prospects on that because correlations are significantly weaker in the second of these back-to-back years.”

“So while grain production this year could be affected in the Former Soviet Union, it’s less clear whether Argentina could also be in the crosshairs for both corn and soybeans next year. That uncertainty holds true for wheat and feed yields in Australia and Brazil’s soybean crop, which might not benefit as much from the cooler equatorial Pacific as they did in 2021.”

Weather

A heat wave will continue to blast the Corn Belt today, according to NOAA’s short-range forecasts. Temperatures are expected to top 100 degrees in the Plains. Scattered showers in the Northern Plains are expected to shift east into the Upper Midwest early in the weekend, bringing up to an inch of accumulation to Minnesota and Northern Wisconsin over the next 24 hours.

The early stages of a heat wave have not yet registered in the most recent Drought Monitor’s update, though showers across the country through last weekend reduced nationwide drought conditions slightly. For the week ending July 20, 54% of the country remains in some sort of abnormally dry to exceptional drought condition, a nearly 1% reduction from the previous week’s report.

drought-monitor-072321.png

The showers lifted drought conditions in the Midwest nearly 5% lower to a 35.8% drought rating, while 72% of acreage in the U.S. High Plains remains in abnormally dry to exceptional drought.

The Drought Monitor expects that 31% of U.S. 2021 soybean acres are currently experiencing drought. Top producers Iowa, Minnesota, North Dakota, and South Dakota are finding 63%, 99%, 100%, and 98%, respectively, of their soybean acreage to be experiencing drought.

This is critical because the four states combine for nearly 35% of 2021 U.S. soybean acreage. Iowa, Minnesota, and North Dakota have the second through fourth largest soybean acreages in the country this year, while South Dakota’s 2021 soybean acreage ranks seventh largest.

With over a third of the 2021 soybean acres facing drought conditions, the supply outlook for soybeans is likely to tighten by the upcoming August 2021 Crop Production and WASDE reports, which could generate a bullish price action for the soy futures complex.

Financials

Coronavirus cases in the U.S. rose to 34,284,382 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. The death toll increased to 610,192 deaths as of press time.

According to the CDC, nearly 69% of U.S. adults have received at least one COVID-19 vaccine. Over 162 million Americans (49%) are fully vaccinated. Over 3.7 billion vaccine doses have been administered worldwide.

Vaccination rates have largely stalled across the U.S. as the virus’s more contagious Delta variant continues to rampage across unvaccinated populations in the U.S.

Court challenges to the Waters of the U.S. (WOTUS) rule, formally known as the Navigable Waters Protection Rule, have farmers across the country scratching their heads about what potential impacts could await for their farms as the Biden Administration considers potential revisions. Farm Futures’ policy editor Jacqui Fatka breaks down the latest winds from Washington regarding WOTUS in a recent article.

Morning Ag Commodity Prices - 7/23/2021
Contract Units High Low Last Net Change % Change
SEP '21 CORN $ / BSH  5.6925 5.6025 5.6175 -0.0275 -0.49%
DEC '21 CORN $ / BSH  5.65 5.56 5.5775 -0.035 -0.62%
MAR '22 CORN $ / BSH  5.7225 5.6325 5.65 -0.0375 -0.66%
MAY '22 CORN $ / BSH  5.7575 5.6725 5.69 -0.035 -0.61%
JUL '22 CORN $ / BSH  5.7475 5.665 5.685 -0.0325 -0.57%
SEP '22 CORN $ / BSH  5.1925 5.1375 5.1375 -0.0375 -0.72%
DEC '22 CORN $ / BSH  5.015 4.96 4.985 -0.0175 -0.35%
AUG '21 SOYBEANS $ / BSH  14.1975 14.01 14.0775 -0.085 -0.60%
SEP '21 SOYBEANS $ / BSH  13.7425 13.535 13.5975 -0.0925 -0.68%
NOV '21 SOYBEANS $ / BSH  13.68 13.48 13.5375 -0.085 -0.62%
JAN '22 SOYBEANS $ / BSH  13.725 13.525 13.585 -0.08 -0.59%
MAR '22 SOYBEANS $ / BSH  13.5625 13.4 13.46 -0.06 -0.44%
MAY '22 SOYBEANS $ / BSH  13.48 13.3625 13.405 -0.06 -0.45%
JUL '22 SOYBEANS $ / BSH  13.5 13.35 13.375 -0.065 -0.48%
AUG '22 SOYBEANS $ / BSH  13.285 #N/A 13.265 0 0.00%
SEP '22 SOYBEANS $ / BSH  12.84 #N/A 12.8225 0 0.00%
AUG '21 SOYBEAN OIL  $ / LB 65.57 64.4 65.4 0.4 0.62%
SEP '21 SOYBEAN OIL  $ / LB 64.2 63 64 0.47 0.74%
AUG '21 SOY MEAL $ / TON 365.4 358.4 358.6 -4.6 -1.27%
SEP '21 SOY MEAL $ / TON 364.1 357.8 358 -4.8 -1.32%
OCT '21 SOY MEAL $ / TON 363.4 357.7 358 -4.4 -1.21%
DEC '21 SOY MEAL $ / TON 368 361.3 361.7 -4.3 -1.17%
JAN '22 SOY MEAL $ / TON 367.4 361.5 361.6 -4.4 -1.20%
SEP '21 Chicago SRW $ / BSH  6.9375 6.8525 6.9225 0 0.00%
DEC '21 Chicago SRW $ / BSH  7.03 6.9425 7.0125 -0.0025 -0.04%
MAR '22 Chicago SRW $ / BSH  7.0975 7.0175 7.0825 0 0.00%
MAY '22 Chicago SRW $ / BSH  7.095 7.025 7.0825 -0.005 -0.07%
JUL '22 Chicago SRW $ / BSH  6.9075 6.8525 6.8975 -0.0125 -0.18%
SEP '21 Kansas City HRW $ / BSH  6.57 6.49 6.5575 0.02 0.31%
DEC '21 Kansas City HRW $ / BSH  6.68 6.6075 6.67 0.0225 0.34%
MAR '22 Kansas City HRW $ / BSH  6.745 6.68 6.74 0.0225 0.33%
MAY '22 Kansas City HRW $ / BSH  6.7675 6.7525 6.7575 0.0125 0.19%
JUL '22 Kansas City HRW $ / BSH  6.625 6.6 6.625 -0.0025 -0.04%
SEP '21 MLPS Spring Wheat $ / BSH  9.0875 8.995 9.055 0.015 0.17%
DEC '21 MLPS Spring Wheat $ / BSH  8.97 8.895 8.95 0.03 0.34%
MAR '22 MLPS Spring Wheat $ / BSH  8.8075 8.755 8.8075 0.025 0.28%
MAY '22 MLPS Spring Wheat $ / BSH  8.69 8.655 8.69 0.03 0.35%
JUL '22 MLPS Spring Wheat $ / BSH  8.54 #N/A 8.5175 0 0.00%
SEP '21 ICE Dollar Index $ 93.04 92.785 92.985 0.155 0.17%
 SE '21 Light Crude $ / BBL  72.11 71.46 71.85 -0.06 -0.08%
 OC '21 Light Crude $ / BBL  71.36 70.73 71.12 -0.02 -0.03%
AUG '21 ULS Diesel $ /U GAL 2.139 2.1245 2.1334 0.0008 0.04%
SEP '21 ULS Diesel $ /U GAL 2.1402 2.1251 2.1352 0.0016 0.07%
AUG '21 Gasoline $ /U GAL 2.2681 2.2564 2.266 -0.0072 -0.32%
SEP '21 Gasoline $ /U GAL 2.246 2.2295 2.2408 -0.0066 -0.29%
AUG '21 Feeder Cattle $ / CWT 0 #N/A 158.2 0 0.00%
SEP '21 Feeder Cattle $ / CWT 0 #N/A 160.7 0 0.00%
 AU '21 Live Cattle $ / CWT 0 #N/A 120.8 0 0.00%
 OC '21 Live Cattle $ / CWT 0 #N/A 126.675 0 0.00%
AUG '21 Live Hogs $ / CWT 0 #N/A 106.65 0 0.00%
OCT '21 Live Hogs $ / CWT 0 #N/A 91.725 0 0.00%
JUL '21 Class III Milk $ / CWT 16.56 16.56 16.56 -0.01 -0.06%
AUG '21 Class III Milk $ / CWT 16.59 16.4 16.4 0.01 0.06%
SEP '21 Class III Milk $ / CWT 17.04 16.94 16.94 0.12 0.71%
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