Morning Market Review for July 28, 2021

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Brazilian frost lifts corn. (Comments are updated by 7:30 a.m. Central Time.)

Rallies from USDA’s slashed condition ratings begin to lose steam

  • Corn mixed
  • Soybeans down 1-2 cents, soymeal down $0.80/ton, soyoil down $0.23/lb
  • Wheat up 13-19 cents

*Prices as of 6:50 am CDT.

Good Morning!  More moderate temperatures are on the horizon for the Corn Belt. 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

Chicago corn futures were mixed this morning, hovering within $0.01-$0.02/bushel of both gains and losses across the seven nearby contracts. Traders continue to weigh drought damage to the crop against scattered rains and export prospects, namely to China. A stronger dollar and shrinking U.S. cattle herd also limited any further upward price mobility for the complex.

But the Brazilian government just issued frost warnings for key areas where corn and wheat are produced, so the market could see some upward price movement as more traders begin their day on the Chicago Board of Trade in the coming hours.

Recent weekly gasoline consumption levels have surged past volumes recorded two years ago a few times this summer. But it is difficult to characterize a handful of weeks of surging usage rates as a full recovery when marketing year to date gasoline consumption remains 7% below levels recorded during the same time in 2018/19.

This will likely remain the theme and the most significant limitation of ethanol production in the coming weeks. Fresh fuel consumption and ethanol blending data expected out from the U.S. Energy Information Administration today will provide new insights into these trends.

Weekly ethanol output has ranged between 42.5 million – 44.8 million gallons per day over the past 10 weeks. Barring a significant increase in ethanol blending rates by refiners or consumer gasoline demand in today’s report, expect EIA’s ethanol production estimate to continue hovering in that range for the week ending July 16.

 Farm Futures contributing analyst Bryce Knorr reminds growers that the August WASDE is coming up and farmers may want to start creating some hedges against further downside price risk ahead of USDA’s updated yield estimates.

“While new crop lags nearly a dollar below May contract highs, history suggests potential for more pain ahead,” Knorr cautions in the latest Ag Marketing IQ column. “Over the past 10 years futures dropped half the time the day of the August report, and were lower six times two weeks later.”

Knorr argues that puts can be a valuable strategy to pursue in the event prices continue on a downward spiral, though pursuing that strategy may depend on your cost structure. “Evaluating options in this fashion isn’t easy,” Knorr surmises. “But knowing how a position might respond can help decide whether it’s better to pay a little or a lot for a put – or perhaps forgo this type of protection altogether.”

Soybeans

Soybean futures edged $0.01-$0.02/bushel lower this morning as profit-takers sold off a recent runup in prices due to declining crop conditions as a result of heat damage. Concerns about Chinese demand continue to rattle traders’ confidence in the soy market while lower palm oil prices overnight weighed soyoil futures lower.

Argentine soybean growers have already sold 948 million bushels of their freshly harvested 2020/21 crop as of July 21, according to fresh data released by the Argentine Agriculture Ministry yesterday. The Buenos Aires Grains Exchange projects 1.6 billion bushels of soybeans were harvested in Argentina this summer, suggesting 59% of new crop supplies have already been consumed.

But that pace is slower than the same time last year, when 1.03 billion bushels had already been sold. Argentina has battled non-stop disruptions to trade flows over the past six months as drought curbed crop output and has slowed and shrunk shipping volumes on the Parana River, the country’s main shipping artery.

Several dockworker strikes during the same period protesting wages, working conditions, and vaccination rates amid the pandemic have also held up shipping volumes this year, further slowing the country’s international grain flows.

Have the recent price fluctuations in the grains market left you excited or stressed out? Advance Trading’s Eric Meyer points out that a good marketing plan can make the difference between the two. Meyer expects that the excited farmer likely has price floors in place to hedge against downward price potential. Similarly, this group likely has strategies in place to capitalize on upward price movement as well.

Meyer encourages farmers to take control over their marketing plans while price remain profitable in the latest Ag Marketing IQ column. “The markets can go higher or lower but it’s no reason to feel stress.”

The cost of doing nothing is likely higher than the cost of using a couple sound hedging strategies. “No one really knows how the rest of this year will play out,” Meyer concludes. “What we do know is we are seeing prices not seen in quite a while, with the potential of moving higher or lower. So, rather than allowing the daily ups and downs determine what kind of mood we are in, let’s gain some perspective by gaining some control of our revenue.”

Wheat

Wheat prices rose $0.13-$0.19/bushel overnight on frost concerns in Brazil and poor crop quality in the U.S. Plains. Damage to overseas supplies due to untimely rains and drought continues to rattle the market. A stronger dollar capped the morning’s rally.

Yesterday marked the first day of the Wheat Quality Council’s (WQC) annual spring wheat tour, which resumed this year after last year’s tour was cancelled due to the pandemic. The tour kicked off yesterday by surveying crops in southern and east central North Dakota, where 100% of the state is experiencing moderate to exceptional drought conditions.

As expected, yield estimates are well below historical averages due to drought stress on the crop, with yesterday’s tour turning out an estimate of 29.5 bushels per acre after 100 field samples from the region. The five-year average estimate typically recorded by the tour stands at 43.3 bushels per acre.

Plants are also shorter than average, increasing the difficulty for combines to harvest it and dramatically shrinking hay output for livestock producers across the state as well.

Spring wheat is milled for flour used in artisanal breads, pizza dough, and bagels and is also frequently blended with lower grades of wheat to improve flour quality. North Dakota is the country’s largest producer of spring wheat. The WQC’s tour will resume today in the upper portions of the state.

Russian agricultural consultancy Sovecon expects Russian wheat exports to edge lower in the 2021/22 marketing year as a rainy harvest season and farmer hesitancy to sell the freshly harvested wheat crop slows export rates. Sovecon expects Russia will export 1.36 billion bushels of wheat in 2021/22, down nearly 4% from the consultant’s previous estimates.

Russia continues to update its ongoing wheat export tax on a weekly basis. The added cost has deterred some Russian growers from booking sales in hopes of more lucrative pricing options in the future. “Many farmers still prefer to postpone sales, hoping that the current export tax could be lifted in several months,” Sovecon’s Andrey Sizov told Reuters yesterday.

“In our view, this looks like wishful thinking, but it does slow down exports."

Sovecon expects Russia will harvest 3.02 billion bushels of wheat in the coming weeks. Current USDA forecasts peg the crop at 3.12 billion bushels. Russia is the world’s largest wheat exporter.

Weather

The recent heatwave finally has an end in sight, according to NOAA’s short-range forecasts. Temperatures will likely fall into the 80’s in the Upper Midwest by tomorrow, though blistering temperatures will likely remain in place in the Southern Plains. The cooldown bodes well for crops – especially corn crops that are entering into peak pollination activity this week.

While there is a chance of scattered showers in the Great Lakes region today and tomorrow, don’t expect significant accumulation for crop areas enduring heat stress. Wisconsin and Southern Michigan could see the best prospects for rain over the next 24 hours, with up to an inch and half expected to begin cooling down the region by tomorrow morning.

Financials

Coronavirus cases in the U.S. rose to 34,606,501 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. It was a daily increase of 71,065 cases – one of the largest daily caseload increases since vaccinations rates peaked earlier this year. The death toll increased to 611,304 deaths as of press time.

The CDC announced yesterday that all persons, vaccinated and unvaccinated, are recommended to wear masks in indoor spaces in areas of the country where COVID-19’s Delta variant is spreading at high rates.

According to the CDC, 69% of U.S. adults have received at least one COVID-19 vaccine. Over 163 million Americans (49%) are fully vaccinated. Over 3.9 billion vaccine doses have been administered worldwide.

It’s halfway through the 2021 growing season and Water Street Solutions CEO Darren Frye points out that it is a great time to evaluate how your farm’s progress towards financial goals are going. “You can revisit projections created earlier in the year to make updates and changes, now that you probably know more information about things like costs, revenues, and the current state of your crops,” Frye suggests.

In the latest Finance First column, Frye recommends that farmers take some time in the next few weeks to evaluate 2021 crop year projections, long-term operational goals, and financial metrics. “Once you’ve checked in with these three areas, you may have a clearer picture of where your operation currently stands,” Frye explains.

U.S. stock markets wavered between minor gains and losses in the overnight trading session. Favorable earnings from big tech companies left the Dow and S&P 500 indices trading near record highs, though comments about inflation expected from the Federal Reserve later today, rising COVID-19 cases due to the highly contagious Delta variant, and China’s ongoing clampdown of its tech companies will likely continue to put a cap on gains through the rest of the week.

“There is a general fishing for direction right now,” Aoifinn Devitt, chief investment officer at Moneta Group, told the Wall Street Journal this morning. “The strong underpinning of the market is that there is a lot of capital waiting on the sidelines, waiting for an opportunity to enter, and that means any corrections are very short lived.”

S&P 500 futures traded 0.11% higher at last glance to $4,399.25.

Morning Ag Commodity Prices - 7/28/2021
Contract Units High Low Last Net Change % Change
SEP '21 CORN $ / BSH  5.54 5.45 5.48 -0.0075 -0.14%
DEC '21 CORN $ / BSH  5.51 5.4275 5.4625 0 0.00%
MAR '22 CORN $ / BSH  5.5825 5.505 5.54 0.0025 0.05%
MAY '22 CORN $ / BSH  5.6225 5.5475 5.5825 0.0025 0.04%
JUL '22 CORN $ / BSH  5.615 5.555 5.5925 0.01 0.18%
SEP '22 CORN $ / BSH  5.12 5.08 5.0875 -0.0175 -0.34%
DEC '22 CORN $ / BSH  4.9825 4.9375 4.9675 0.0125 0.25%
AUG '21 SOYBEANS $ / BSH  14.29 14.105 14.18 -0.0025 -0.02%
SEP '21 SOYBEANS $ / BSH  13.775 13.58 13.665 -0.005 -0.04%
NOV '21 SOYBEANS $ / BSH  13.71 13.505 13.57 -0.025 -0.18%
JAN '22 SOYBEANS $ / BSH  13.75 13.5575 13.625 -0.0175 -0.13%
MAR '22 SOYBEANS $ / BSH  13.645 13.47 13.5225 -0.0175 -0.13%
MAY '22 SOYBEANS $ / BSH  13.6 13.435 13.4875 -0.015 -0.11%
JUL '22 SOYBEANS $ / BSH  13.55 13.42 13.48 0 0.00%
AUG '22 SOYBEANS $ / BSH  13.225 13.225 13.225 -0.0525 -0.40%
SEP '22 SOYBEANS $ / BSH  12.8 #N/A 12.8075 0 0.00%
AUG '21 SOYBEAN OIL  $ / LB 66.63 65.62 66.13 -0.13 -0.20%
SEP '21 SOYBEAN OIL  $ / LB 64.98 63.88 64.42 0.03 0.05%
AUG '21 SOY MEAL $ / TON 359.7 355 357.4 -1.4 -0.39%
SEP '21 SOY MEAL $ / TON 359.1 354.4 356.9 -1.3 -0.36%
OCT '21 SOY MEAL $ / TON 358.4 353.6 356.2 -1.3 -0.36%
DEC '21 SOY MEAL $ / TON 362.4 357.4 359.8 -1.4 -0.39%
JAN '22 SOY MEAL $ / TON 362.6 358.6 360.7 -1.1 -0.30%
SEP '21 Chicago SRW $ / BSH  6.91 6.7375 6.8825 0.1375 2.04%
DEC '21 Chicago SRW $ / BSH  7.005 6.84 6.9775 0.135 1.97%
MAR '22 Chicago SRW $ / BSH  7.075 6.91 7.0475 0.1325 1.92%
MAY '22 Chicago SRW $ / BSH  7.0725 6.9275 7.06 0.135 1.95%
JUL '22 Chicago SRW $ / BSH  6.9075 6.76 6.8875 0.12 1.77%
SEP '21 Kansas City HRW $ / BSH  6.565 6.4075 6.5425 0.1275 1.99%
DEC '21 Kansas City HRW $ / BSH  6.6775 6.52 6.655 0.1275 1.95%
MAR '22 Kansas City HRW $ / BSH  6.75 6.5975 6.7275 0.1275 1.93%
MAY '22 Kansas City HRW $ / BSH  6.7325 6.7 6.7325 0.1 1.51%
JUL '22 Kansas City HRW $ / BSH  6.66 6.5225 6.66 0.1225 1.87%
SEP '21 MLPS Spring Wheat $ / BSH  8.9875 8.795 8.985 0.2025 2.31%
DEC '21 MLPS Spring Wheat $ / BSH  8.865 8.7 8.86 0.18 2.07%
MAR '22 MLPS Spring Wheat $ / BSH  8.7375 8.635 8.735 0.1675 1.96%
MAY '22 MLPS Spring Wheat $ / BSH  8.5525 8.5425 8.5525 0.0925 1.09%
JUL '22 MLPS Spring Wheat $ / BSH  8.4 8.4 8.4 0.06 0.72%
SEP '21 ICE Dollar Index $ 92.61 92.4 92.57 0.134 0.14%
 SE '21 Light Crude $ / BBL  72.6 71.7 71.93 0.28 0.39%
 OC '21 Light Crude $ / BBL  72 71.16 71.37 0.23 0.32%
AUG '21 ULS Diesel $ /U GAL 2.1609 2.1417 2.1479 0.004 0.19%
SEP '21 ULS Diesel $ /U GAL 2.1627 2.1429 2.1485 0.0029 0.14%
AUG '21 Gasoline $ /U GAL 2.3328 2.3142 2.3214 0.0073 0.32%
SEP '21 Gasoline $ /U GAL 2.3007 2.2808 2.2876 0.0063 0.28%
AUG '21 Feeder Cattle $ / CWT 0 #N/A 160.7 0 0.00%
SEP '21 Feeder Cattle $ / CWT 0 #N/A 164 0 0.00%
 AU '21 Live Cattle $ / CWT 0 #N/A 122.925 0 0.00%
 OC '21 Live Cattle $ / CWT 0 #N/A 128.425 0 0.00%
AUG '21 Live Hogs $ / CWT 0 #N/A 107.475 0 0.00%
OCT '21 Live Hogs $ / CWT 0 #N/A 92.525 0 0.00%
JUL '21 Class III Milk $ / CWT 16.53 16.53 16.53 -0.01 -0.06%
AUG '21 Class III Milk $ / CWT 16.64 16.6 16.6 -0.01 -0.06%
SEP '21 Class III Milk $ / CWT 16.65 16.65 16.65 -0.01 -0.06%
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