Despite bullish commodity forecast from Goldman, fund selling lowers corn and soybean prices
- Corn down 1-3 cents
- Soybeans down 3-6 cents, soyoil up $0.28/lb, soymeal down $3.40/ton
- Wheat up 6-9 cents
*Prices as of 6:50 am CST.
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A Goldman Sachs brief released late last night indicated forecast returns of 15.5% on commodities over the next 12 months. The report suggested that commodities will remain the best hedge against inflation as the economy recovers from the pandemic’s fallout. This will undoubtedly lead to a greater presence of managed money funds in the ag commodity space, which could add an extra layer of volatility to ag commodity prices.
Despite Goldman’s bullish forecast for commodities, corn prices fell overnight, led by fund-driven selling and a stronger dollar. If the red ink continues today, it will be the fourth day in a row of lower corn prices. But this morning’s losses were limited to a few cents due in large part to concerns about tightening U.S. supplies.
USDA released updated monthly corn consumption rates for ethanol yesterday. January 2021 corn usage for fuel alcohol totaled 415.8 million bushels, the lowest volume since USDA began keeping track of the metric in 2015/16.
Cold weather and pandemic restrictions severely limited travel during the January 2021 reporting period, sending production rates for the fuel additive to its lowest point since September 2020. Monthly corn usage rates for ethanol fell nearly 15 million bushels from December 2020 production rates.
Marketing year to date corn consumption for ethanol remains 6.2% below 2019/20 pre-pandemic levels. Vaccine distribution and adoption will largely drive fuel demand recovery in the pandemic era and will be a pivotal factor to boosting 2020/21 corn usage rates for ethanol output.
AgMarket.Net’s Bill Biedermann thinks ag commodities are due to experience a super cycle. “History tells us that four to six years of cheap sideways consolidation builds demand and is usually followed by a two- to four-year rally in markets,” Beidermann shares in the latest Ag Marketing IQ column.
The fundamentals support this belief. U.S. corn and soybean stocks-to-use ratios are at historic lows. World demand for grains is surging in the pandemic era. And it isn’t going to take a lot to send prices higher, especially if acreage projections fall short this year. “We might be looking at a potential perfect storm,” Biedermann surmises.
Strong domestic demand and better than expected export numbers yesterday weren’t enough to stop soybean prices from falling $0.03-$0.06/bushel this morning on speculator selling. While yesterday’s crush rates and weekly export loading paces capped the morning’s losses, the soybean sector will need more bullish news to stop prices from falling further today.
The January 2021 soybean crush flirted with a record high, according to usage data released by USDA yesterday afternoon. U.S. soy processors crushed 196.5 million bushels of soybeans in January, up nearly 2% from December 2020’s third largest volume on surging domestic demand.
The January 2021 crush rate was a mere 57,294 bushels lower than the all-time high of 196.55 million bushels, set in October 2020. The data suggests that even amid high soybean prices and tightening domestic soybean stocks, demand – and comfortable crush margins – continues to support rising usage rates. Furthermore, price levels may not yet be adequate enough to trigger anticipated demand rationing at this point in the marketing year.
U.S. soybean exports for the week ending February 25 looked significantly better than loading paces the prior week. After early speculation Chinese demand would continue to taper off, yesterday’s Grains Inspections for Export report from USDA found another week of robust Chinese soybean demand amid ongoing Brazilian shipping delays.
Soybean loading paces rose 2.8 million bushels on the week to 32.3 million bushels for the week ending February 25. Soybean shipments destined for China comprised 15.6 million bushels, or 48%, of that total. U.S. soybean prices will continue to hang in the balance of Brazil’s harvest and shipping progress this week.
The wheat complex has largely ignored a strengthening dollar over the past couple trading sessions, rising over 1% this morning on declining crop conditions in the Southern Plains and tightening global exportable supplies.
Ukrainian marketing year to date wheat exports registered at 503.3 million bushels as of yesterday, using up 78.3% of its exportable supplies for the 2020/21 marketing year. Year to date Ukrainian wheat exports are about 17% lower than a year ago after a smaller wheat crop was harvested in 2020 due to weather damage.
Regardless, a 643.0 million-bushel quota has been placed on Ukrainian wheat exports for 2020/21, which ends in Ukraine on June 30. U.S. wheat exporters stand to benefit if Ukraine’s exportable wheat supplies run out before the end of June. Ukraine is the world’s sixth largest exporter of wheat.
Wheat conditions in the Southern Plains took a hit as winterkill and drought damage concern were further evaluated. Top wheat producer Kansas saw a 3% decline in weekly ratings to 37% good to excellent as of February 28. Top soil moisture in Kansas running short to very short on moisture totaled 42% across the state, suggesting that drought concerns are as prominent as ever in the Sunflower State.
Texas’ winter wheat crop was rated 28% good to excellent, down 2% from the week prior. Crops in Oklahoma also took a 2% ratings hit to 46% good to excellent. Even amid a 5% increase in annual winter wheat acreage, yield damage due to drought and winterkill damage over the past couple months could severely limit 2021/22 production potential for the U.S. wheat crop.
Mostly clear skies are forecast across the Midwest and Plains tomorrow and Thursday, according to NOAA’s short-range forecasts. Farmers in the drought-stressed Central Plains could see some relief late this week as a winter storm system begins to develop in the Central and Southern Rockies beginning Thursday afternoon.
Coronavirus cases in the U.S. rose by 58,667 to 28,664,604 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. The death toll increased by 1,568 lives to 514,660 deaths as of press time.
Farmers across the country are in the final days of penciling out crop plans for 2021. Cost and revenue projections vary from state to state. Farm Futures executive editor Mike Wilson assembled a list of crop budgets for each state, compliments of the respective land grant universities. Many of these universities offer additional financing planning info, which Wilson also links. Because, as Wilson points out, “good financial planning is at the heart of every profitable farm.”
Water Street Solutions’ Darren Frye could not agree more. To stay on course with financial goals during planting season, Frye recommends keeping financials updated, working with a market advisor to keep marketing goals on track, and reassessing long-term financial goals and visions during the spring to ensure a profitable year in the latest Finance First column.
The Senate will debate this week on a potential $1.9 trillion stimulus plan passed by the House of Representatives late last week. What does that mean for ag? Farm Futures policy editor Jacqui Fatka summarizes the $16 billion potentially earmarked for the food and agriculture industry, pointing out that $3.6 billion will go towards reinforcing the food supply chain from future shocks.
About $5 billion will be distributed to minority farmers – one of the most hotly debated items in the House Ag Committee. The bill also features an extension of the 15% increase in Supplemental Nutrition Assistance Program (SNAP) benefits for another three months. Another $2.1 billion will go towards rural hospitals, schools, and public safety facilities. The biofuel industry will likely be in line for $1 billion in pandemic compensation.
U.S. stock futures edged slightly lower this morning on a round of profit-taking after the S&P 500 notched its largest gain in over nine months in yesterday’s trading session. Inflation concerns continue to concern investors as the selloff of government bonds increases.
“The state of the bond market is driving everything,” Fahad Kamal, chief investment officer at Kleinwort Hambros, told the Wall Street Journal this morning. “The central banks continue to be the real pivot in markets right now: as long as they continue to buy enormous amounts of bonds in the market, the upside move [in yields] is capped.”
|Morning Ag Commodity Prices - 3/2/2021|
|Contract||Units||High||Low||Last||Net Change||% Change|
|MAR '21 CORN||$ / BSH||5.485||5.42||5.455||-0.02||-0.37%|
|MAY '21 CORN||$ / BSH||5.39||5.315||5.3475||-0.035||-0.65%|
|JUL '21 CORN||$ / BSH||5.2725||5.2||5.23||-0.04||-0.76%|
|SEP '21 CORN||$ / BSH||4.8575||4.805||4.825||-0.0325||-0.67%|
|DEC '21 CORN||$ / BSH||4.69||4.6375||4.66||-0.0275||-0.59%|
|MAR '22 CORN||$ / BSH||4.77||4.72||4.745||-0.02||-0.42%|
|MAY '22 CORN||$ / BSH||4.81||4.765||4.7925||-0.015||-0.31%|
|MAR '21 SOYBEANS||$ / BSH||13.95||13.835||13.88||-0.045||-0.32%|
|MAY '21 SOYBEANS||$ / BSH||13.9575||13.8075||13.8575||-0.055||-0.40%|
|JUL '21 SOYBEANS||$ / BSH||13.845||13.67||13.7325||-0.0775||-0.56%|
|AUG '21 SOYBEANS||$ / BSH||13.4175||13.2575||13.32||-0.0725||-0.54%|
|SEP '21 SOYBEANS||$ / BSH||12.62||12.495||12.5625||-0.0425||-0.34%|
|NOV '21 SOYBEANS||$ / BSH||12.2075||12.085||12.1525||-0.04||-0.33%|
|JAN '22 SOYBEANS||$ / BSH||12.17||12.0725||12.15||-0.0125||-0.10%|
|MAR '22 SOYBEANS||$ / BSH||11.94||11.855||11.915||-0.01||-0.08%|
|MAY '22 SOYBEANS||$ / BSH||11.835||11.7875||11.835||-0.0175||-0.15%|
|MAR '21 SOYBEAN OIL||$ / LB||51.05||50.35||51.05||0.28||0.55%|
|MAY '21 SOYBEAN OIL||$ / LB||49.49||48.62||49.39||0.16||0.33%|
|MAR '21 SOY MEAL||$ / TON||420.9||417||417||-3.2||-0.76%|
|MAY '21 SOY MEAL||$ / TON||419.4||414.2||414.5||-3.8||-0.91%|
|JUL '21 SOY MEAL||$ / TON||417||411.8||412||-4.1||-0.99%|
|AUG '21 SOY MEAL||$ / TON||406.4||401.8||401.8||-3.6||-0.89%|
|SEP '21 SOY MEAL||$ / TON||391.3||389.4||389.4||-3.2||-0.82%|
|MAR '21 Chicago SRW||$ / BSH||6.4625||6.4||6.4||-0.0375||-0.58%|
|MAY '21 Chicago SRW||$ / BSH||6.605||6.455||6.585||0.0825||1.27%|
|JUL '21 Chicago SRW||$ / BSH||6.5125||6.3775||6.5||0.075||1.17%|
|SEP '21 Chicago SRW||$ / BSH||6.4825||6.355||6.4675||0.065||1.02%|
|DEC '21 Chicago SRW||$ / BSH||6.525||6.4025||6.51||0.06||0.93%|
|MAR '21 Kansas City HRW||$ / BSH||6.0825||#N/A||6.1425||0||0.00%|
|MAY '21 Kansas City HRW||$ / BSH||6.3225||6.195||6.3025||0.07||1.12%|
|JUL '21 Kansas City HRW||$ / BSH||6.3775||6.255||6.365||0.0775||1.23%|
|SEP '21 Kansas City HRW||$ / BSH||6.4175||6.3075||6.405||0.07||1.10%|
|DEC '21 Kansas City HRW||$ / BSH||6.4925||6.385||6.4875||0.075||1.17%|
|MAR '21 MLPS Spring Wheat||$ / BSH||6.0525||#N/A||6.2825||0||0.00%|
|MAY '21 MLPS Spring Wheat||$ / BSH||6.405||6.3075||6.405||0.07||1.10%|
|JUL '21 MLPS Spring Wheat||$ / BSH||6.4875||6.39||6.4875||0.0725||1.13%|
|SEP '21 MLPS Spring Wheat||$ / BSH||6.5225||6.46||6.5225||0.0375||0.58%|
|DEC '21 MLPS Spring Wheat||$ / BSH||6.635||6.54||6.6325||0.0675||1.03%|
|MAR '21 ICE Dollar Index||$||91.405||91.07||91.145||0.109||0.12%|
|AP '21 Light Crude||$ / BBL||60.9||59.45||60.88||0.24||0.40%|
|MA '21 Light Crude||$ / BBL||60.66||59.23||60.66||0.24||0.40%|
|APR '21 ULS Diesel||$ /U GAL||1.8249||1.7882||1.8241||0.0049||0.27%|
|MAY '21 ULS Diesel||$ /U GAL||1.8174||1.7811||1.8174||0.006||0.33%|
|APR '21 Gasoline||$ /U GAL||1.9463||1.9063||1.9448||0.0019||0.10%|
|MAY '21 Gasoline||$ /U GAL||1.9354||1.8982||1.9339||0.0006||0.03%|
|MAR '21 Feeder Cattle||$ / CWT||0||#N/A||137.2||0||0.00%|
|APR '21 Feeder Cattle||$ / CWT||0||#N/A||141.125||0||0.00%|
|AP '21 Live Cattle||$ / CWT||0||#N/A||118.975||0||0.00%|
|JU '21 Live Cattle||$ / CWT||0||#N/A||117.5||0||0.00%|
|APR '21 Live Hogs||$ / CWT||0||#N/A||87.725||0||0.00%|
|MAY '21 Live Hogs||$ / CWT||0||#N/A||89.575||0||0.00%|
|FEB '21 Class III Milk||$ / CWT||15.63||#N/A||15.64||0||0.00%|
|MAR '21 Class III Milk||$ / CWT||16.16||16.15||16.16||0.04||0.25%|
|APR '21 Class III Milk||$ / CWT||17.31||#N/A||17.41||0||0.00%|