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Morning Market Review for July 7, 2020

Stable crop conditions mute rallies. (Comments are updated by 7:30 a.m. Central Time.)

Stronger than expected crop condition reports alleviate yield concerns

  • Corn down 4-6 cents
  • Soybeans down 3-5 cents, soyoil down $0.26, soybean meal down $0.4
  • Wheat mixed
  • *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. We will publish an updated analysis on last week’s crop reports on our website, FarmFutures.com, later this morning. Thank you!

Corn: Better than expected crop conditions eased traders’ concerns about hot and dry weather forecasts and led to a round of profit-taking this morning. July corn futures traded $0.04/bushel lower to $3.425 as the contract nears expiration, suggesting few physical deliveries of July contracts have been made. September futures shed $0.0375/bushel to $3.4275 while new crop December futures dropped $0.05/bushel to $3.5125.

Cash corn prices were mixed at elevator locations across the Corn Belt yesterday, though were mostly unchanged elsewhere. Rail facilities finished rolling over their cash bids to the September futures contract. Another day of rising temperatures brought rising futures prices, leading to a steady stream of new cash sales by growers.

Corn basis and change

Weekly corn export inspections fell nearly 11.0 million bushels to 37.9 million bushels for the week ending July 2, according to USDA-AMS’s latest Grains Inspection for Export report released yesterday. Yesterday’s corn export inspection total could place corn exports on their weakest weekly pace in three weeks.

Over half of corn bushels weighed and/or inspected for export last week were sourced out of the U.S. Gulf. Mexico was the top destination for corn bushels inspected at export facilities last week, with 12.2 million bushels shipped to our neighbor to the south last week.

With 10 weeks remaining in the current marketing year, Monday’s total falls painfully short – nearly 6 million bushels – of the 43.8 million bushels per week mark that U.S. corn exports need to average to hit USDA’s 1.775-billion-bushel forecast for 2019/20 corn exports.

Hot and dry weather over the holiday weekend began to take its toll on the U.S. corn crop in the latest Crop Progress report from USDA. Yesterday’s report found corn ratings had dropped 2% from the previous week to 71% good to excellent as of July 5. Silking progress continued to lag behind the five-year average of 16%, coming in at 10% complete for the week. Progress in the Central Plains and Eastern Corn Belt struggled against historical average for the second straight week.  

Last week’s acreage report showing 5 million fewer acres of corn planted in 2020 on top of a hot and dry July forecast led December ’20 corn futures to rally $0.2825 higher on the week. Bill Biederman of AgMarket.Net points out that another round of COVID-19 lockdowns, a collapse of the Phase 1 trade deal, and rising social unease could erase December corn’s gains. For more on how to mitigate a potential price decrease, check out his latest Ag Marketing IQ column.

Yesterday was a busy day for private exporters, who reported an 8.0-million-bushel new crop corn sale to China. USDA also announced a 7.2-million-bushel corn sale to Mexico yesterday. Of the total, two thirds or 4.8 million bushels will be shipped in the 2020/21 marketing year while the remaining 2.4 million bushels will be scheduled for delivery in 2021/22.

Soybeans: Soybean futures prices backed off yesterday’s four-month high yesterday on a round of profit-taking and strong crop conditions. July and August futures both traded $0.0275/bushel lower to $8.9575. August soyoil futures fell $0.26/lb to $28.28. August soymeal futures retreated $0.4/ton to $297.4.

Cash soybean offerings dropped $0.05/bushel at crush facilities in Decatur, Indiana and Lincoln, Nebraska yesterday as heavy cash sales in previous days following rising futures prices from last week’s reduced acreage report left processors with plenty of inventory. A Council Bluffs, Iowa processor bucked the trend, raising basis $0.02/bushel to $0.30 below August futures prices. New cash sales remained steady as futures prices rallied on dry weather forecasts and a 9.7-million-bushel old crop soybean purchase by China, as announced by USDA yesterday.

Soybean Basis Change

Soybean export inspections last week are on track to notch the highest volume in the last 10 weeks if realized in Thursday’s weekly export report from USDA. Yesterday’s export inspections report found 19.2 million soybean bushels had passed through U.S. export inspection last week. It was nearly a 7.0 million bushel increase from the previous week and is on pace to beat out the five-year average for the week.

Most of last week’s soybean export inspections were on bushels destined for China. Nearly 6.2 million soybean bushels were shipped to China last week. This was welcome news to U.S. farmers, who have been waiting on China to meet their Phase 1 trade commitments. China remains woefully behind their Phase 1 purchasing targets, having only purchased 7.7% of Phase 1 soybeans with about half the calendar year remaining.

But a single strong week of soy exports may not be enough to salvage 2019/20 U.S. soybean export demand. In order to meet USDA’s 1.65-billion-bushel target for 2019/20 exports, U.S. soy exporters will have to ship a weekly average of 28.0 million bushels for the next 10 weeks. Soybean exports historically start increasing in the final seven weeks of the marketing year, offering a glimmer of hope that U.S. soybean demand in the coming weeks will support current price levels.

The weekend’s heat wave did little to alter growing progress for U.S. soybeans according to the latest Crop Progress report. Crop conditions were unchanged from last week, as the soybean crop was rated 71% good to excellent for the week ending July 5.

About 31% of U.S. soybeans had bloomed as of Sunday. Strong progress in the Upper Mississippi Valley and Ohio boosted blooming progress ahead of the five-year average of 24%. In the first week of reports on pod development, 2% of the crop had set pods, slightly lower than the five-year average of 4%.

Advance Trading’s Paul Dubravec points out that the recent grains rally gave producers a chance to liquidate old crop stocks and set up potential pricing opportunities for new crops. While there was no way to be prepared for the COVID-19 black swan event, farmers can always have their marketing plan primed to take advantage of any price scenario. Check out his tips to be ready to execute on your marketing plan in his latest Ag Marketing IQ column.

Wheat:

Wheat contracts price changes

The wheat complex saw little price action this morning as U.S. harvest progress continues at a relatively normal pace. The ICE Dollar Index rose 0.16% to $96.835, offering little upside potential for the wheat complex.

Cash offerings for soft red winter wheat rose slightly across the Midwest yesterday. Basis rose $0.05/bushel to $0.10 over September Chicago SRW futures on Lake Erie at Toledo, Ohio. A Decatur, Indiana elevator increased basis $0.05/bushel to $0.05 under July SRW futures prices.

Cash hard red winter wheat prices across the Plains were mixed to flat yesterday. Basis dropped $0.10/bushel to $0.15 below September Kansas City HRW futures at an Enid, Oklahoma elevator on harvest pressure. But farther to the south in Galveston, Texas, a Gulf loading facility raised basis $0.10/bushel to $1.10 over September futures as harvest came to a close in the far Southern Plains.

Protein premiums for hard red winter cash wheat delivered to or through Kansas City by rail dropped for higher levels of protein content yesterday, as shown below:

wheat protein content, basis range, change

After posting multiple weeks in a row of strong weekly wheat exports, wheat volumes inspected for export eased 6.9 million bushels to 12.0 million bushels for the week ending July 2. Mexico was the top destination for U.S. wheat last week, with 3.3 million bushels shipped to our neighbor to the South. The second-highest volume of U.S. wheat was shipped to China last week, totaling 1.8 million bushels.

But only five weeks into the 2020/21 marketing year, one week of subpar exports likely makes little difference at this point. Wheat exports for the new marketing year are 13% higher than the five-year average.

Winter wheat harvest edged back ahead of the five-year average this week as 56% of the crop was reported harvested as of July 5, led by rapid progress in the Plains. Hot and dry weather docked the crop’s good to excellent rating 1% to 51% for the week, though it likely makes little difference as harvest begins to wind down.

The steamy weather benefited the spring wheat crop last week, which was reported to be 63% headed as of Sunday. It was a 27% increase from heading progress a week ago and inched closer to the five-year average of 68% for the same time period. Spring wheat conditions improved 1% from a week ago to 70% good to excellent in yesterday’s report.

Weather: Another day of hot temperatures and mostly clear skies can be expected across most of the Midwest today, according to NOAA's short-range forecast. A chance of rain is possible across the Eastern Corn Belt this evening, though accumulation is not expected to be significant. Scattered showers in the Northern Plains could bring over an inch of rain to North Dakota and Minnesota today.

Financials: Coronavirus cases in the U.S. rose by 49,895 cases overnight to 2,938,624 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. The death toll increased by 359 lives to 130,306 deaths as of press time. At the current rate, the U.S. will likely surpass the three million caseload mark by tomorrow.

USDA will release the July World Agricultural Supply and Demand Estimates (WASDE) report on Friday. We will do a report preview in the Friday Farm Futures Daily morning report. But for those eager to dig into the numbers, the latest Ag View Pitch podcast takes a deep dive into what Friday’s report could bring for grain prices.

Summer is a busy time on the farm and as evidenced by last week’s acreage reports, it can create rapid changes in revenue potential as well. These quick price shifts can have significant impacts on repayment capacity and even collateral positions. Make sure you are staying in constant contact with your lender this summer as these price rallies occur, Darren Frye of Water Street Consulting suggests. Communication between farmers and lenders – especially in today’s volatile price environment – can help to foster a positive lending relationship, Frye writes in the latest Finance First column.

Light began to shine through the cracks in the latest stock futures rally, as investors grow increasingly concerned that rising coronavirus cases and stalling levels of economic activity could limit economic growth. U.S. stock futures tumbled on the sentiment, due in large part to a round of profit-taking after yesterday’s rally. S&P 500 futures shed 20.65 points or 0.65% to $3,151.25 on the underlying concerns.

Energy prices slipped this morning on concerns about an international oversupply of liquified natural gas, a key derivative of U.S. shale production. U.S. sweet crude futures dropped $0.30/barrel to $40.33 on the concerns while diesel futures dropped $0.0105/gallon to $1.2312.

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