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Morning Market Review for March 5, 2021

scyther5/Thinkstock Markets-122316-scyther5-ThinkstockPhotos-2000
Wheat stumbles on a rising dollar. (Comments are updated by 7:30 a.m. Central Time.)

Plus – extra insights from yesterday’s export report

  • Corn up 3-5 cents
  • Soybeans up 2-6 cents, soyoil up $0.34/lb, soymeal down $1.30/ton
  • Wheat down 1-3 cents

*Prices as of 6:50 am CST.

Editor’s Note: Today is the last day to complete our March 2021 survey! Click here to share 2021 acreage intentions with fellow Farm Futures readers across the country. We will release our final 2021 acreage estimates in a few weeks, just ahead of USDA’s March 31 Prospective Plantings report. Thanks!

China’s parliament opened last night. In the annual work report, Premier Li Keqiang outlined a series of goals China will be targeting during the 2021 year to ensure that food security and self-sufficiency remains the country’s top priority.

Li outlined an expansion of oilseed acreage in China this year. China’s state planner later echoed the sentiment, announcing increased acreages for corn to keep soybean output stable, with an increased emphasis on bringing previously unused land into production. Spending on stockpiling edible oil reserves will not likely change significantly from 2020, with China’s state planner projecting 122.5 billion yuan to be spent to secure supplies.

China’s exclusive focus over the next five years will be to advance its bio-breeding program on an industrial scale in an effort to increase yields.

China expects its economy to grow by at least 6% this year, if not more. The world’s second largest economy will add over 11 million urban jobs this year.

U.S. farmers are likely going to feel the impact of China’s policies sooner rather than later. China’s drive towards self-sufficiency does not bode well in the long run for export potential. But the increased focus on food security all but ensures that U.S. export volumes to China over the next year will remain steady.

Corn

Corn prices rose by 1% this morning on rising prices in the energy complex. OPEC and allied producers will not increase production in April, citing uncertainty surrounding the economic recovery from the pandemic as the main deterrent from expansion. Gains were held in check by a stronger dollar.

Cash corn offerings varied dramatically around the Corn Belt yesterday. Basis was mixed at river locations and weakened at a pair of ethanol and processing plants. Clusters of cash sales over the past few weeks left buyers with varying levels of inventory, particularly for those shipping down to the Gulf.

New farmer sales were slow yesterday as most growers continue to hold out for higher prices. With March 1 rent checks cleared from the bank and many roads about to be posted as warmer temperatures melt the snow – if they haven’t been posted already – expect cash sales to remain scarce unless the futures market unexpectedly flies higher.

Corn basis and change

What yesterday’s weekly export report from USDA lacked in new corn export sales, it more than made up for in corn export shipping paces. Corn export loading volumes for the week ending came in at 79.1 million bushels. It was the highest volume of the 2020/21 marketing year and based on this analyst’s export database reaching back to 1998/99, it was the highest weekly corn export volume on record.

It was a bright spot for the corn market, even though corn export sales for the week fell woefully below market expectations. Old crop sales held steady at 22.1 million bushels, up slightly from the previous week, but new crop sales totaled an anemic 1.5 million bushels, below all trade estimates. Export cancellations surged to 17.5 million bushels for the week ending February 25, up from 3.5 million bushels last week.

Soybeans

Reduced soybean forecasts from Argentina yesterday and continued harvest delays in Brazil sent the soybean complex rising this morning. Increasingly tight supply forecasts for U.S. soybean processors continues to increase availability concerns this summer.

Cash soybean prices were largely unchanged across the Midwest yesterday as farmer sales continued to remain scarce. Farmers with any soybeans left in their bins are likely to wait until prices sky rocket before booking new cash soybean sales.

Soybean export loading paces released by USDA yesterday indicate Chinese buyers continue to rely on U.S. buyers for soy supplies as harvest delays continue to back up vessels in Brazilian export terminals. Shipments for the week ending February 25 held steady at 42.6 million bushels, rising nearly 4 million bushels from the previous reporting week. China also led the charge on booking new crop export sales, snapping up nearly all of the 7.3 million bushels of 2021/22 soybean export sales reported by USDA last week.

But signs of a slowdown in Chinese buying paces are apparent and inevitable. China cancelled 2.3 million bushels of 2020/21 soybean export sales last week, the highest in the current marketing year. And soybean loading paces to China over the past three weeks averaged a meager 11.6 million bushels. Prior to that, marketing year to date soybean exports to China averaged 55.3 million bushels a week.

University of Minnesota agricultural economist Ed Usset is a big fan of booking crop sales during the spring. But as 2020 showed farmers, sometimes prices are not always at optimal levels during the spring. Usset challenges reader to take a new approach in the latest Advanced Marketing Class column.

Using a minimum price objective on new crop sales that is consistent with break-even levels allows farmers to book advance sales but still have the flexibility to capture upward price potential. In fact, Usset points out that this strategy has beat harvest prices every year since 1989 by $0.16/bushel for corn and $0.41/bushel for soybeans.

Wheat

The dollar rose to a three-month high overnight after Asian and U.S. stocks fell on rising U.S. Treasury bond yields. The move did little to help the wheat complex, which traded $0.01-$0.03/bushel lower in the overnight trading session.

Cash offerings for both hard and soft red winter wheat in the Southern Plains and Midwest was largely unchanged yesterday. Growers in the Southern Plains reportedly booked light cash sales yesterday as futures prices inched slightly lower despite positive export reports.

Old crop wheat export sales grew 29% from the previous week to 8.2 million bushels in yesterday’s export report while new crop sales rose by 59% to 863,468 bushels in the same reporting period. Wheat export shipments saw a slight uptick to 15.0 million bushels.

But those were not the key stories in the wheat market yesterday. Wheat export paces have diminished in recent weeks due to declining volumes to China over the past six weeks. Wheat exports to China over the last five weeks are 53% lower than average loading paces for the entire marketing year. It’s a dramatic shift in momentum for the wheat export market, especially considering rapid loading paces to China this year.

To be sure, the recent slowdown is not entirely reflective of China’s renewed interest in U.S. wheat during 2020/21. Marketing year to date wheat exports to China currently stand at 69.3 million bushels with three quarters of the 2020/21 year in the books. That’s more than the last three years of U.S. wheat shipments to China – combined.

U.S. wheat buyers will need traditional wheat buying powerhouses Mexico and Japan to step up purchases in the coming weeks to help support current demand targets and underlying futures prices. 2020/21 marketing year to date shipments of U.S. wheat to Mexico and Japan are down 7.3% compared to the same time a year prior. A strengthening dollar could limit buying power for Japanese and Mexican buyers, though constricted Black Sea wheat supplies may not leave buyers from these countries with a cheaper alternative in the short run.

Weather

Mostly clear skies and mild temperatures are forecast across the Midwest and Plains this weekend, according to NOAA’s short-range forecasts. Farmers in the drought-stressed Southern Plains could see some relief this morning as showers roll through the region today.

Financials

Coronavirus cases in the U.S. rose to 28,827,140 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. The death toll increased to 520,356 deaths as of press time.

Personnel management is one of the most challenging obstacles in running a farm. “’Plug and play’ is what we all with employees,” Tim Schaefer writes. “Just hire them, put them in a cab, and don't worry about them. They'll do an expert job. Plug them in and turn them loose.”

But the reality is drastically different than that expectation. Every employee has different management needs in order to have a positive impact on farming operations. Schaefer offers a Will Skill matrix that helps farmers to better understand what types of management styles they should be using on their employees based on the amount of skill and desire they possess in the latest Transitions and Strategies column.

030221TransitionsStrategiesBlog770.jpg

U.S. milk production rose 3% in December 2020 and the uptick caused futures prices to fall early in the year. But May 2021 Class III futures hit $18.09/cwt yesterday, the highest point since the last stimulus bill was passed in late December 2020, which increased government cheese purchases for the food box program.

Dairy farmers in the Heartland are beginning to run into obstacles booking soybean meal feed shipments for the summer, Total Farm Marketing’s Naomi Blohm reports. If rations are significantly altered in the event of soybean shortages later this year, Blohm predicts milk production could take a hit on lower quality protein substitutes. These factors, in addition to strong global demand for cheese, butter, and milk powder products, could provide U.S. dairy farmers with some of the most profitable milk prices seen in years, Blohm writes in the latest Ag Marketing IQ column.

Yesterday’s stock market selloff continued to leave markets on edge overnight after Federal Reserve Chairman Jerome Powell’s comments yesterday did little to reassure investors about the state of the economy. Powell’s emphasis that full employment remains out of reach and a reduced chance of the Fed buying up Treasury bonds to sustain low interest rates spooked the markets as the economy continues to recover from the economic fallout of the pandemic. S&P 500 futures inched up 0.26% to $3,775.50 on the sentiment.

Morning Ag Commodity Prices - 3/5/2021
Contract Units High Low Last Net Change % Change
MAR '21 CORN $ / BSH  5.5075 5.445 5.5075 0.045 0.82%
MAY '21 CORN $ / BSH  5.3975 5.3 5.395 0.07 1.31%
JUL '21 CORN $ / BSH  5.29 5.2 5.2875 0.0625 1.20%
SEP '21 CORN $ / BSH  4.96 4.8975 4.96 0.0425 0.86%
DEC '21 CORN $ / BSH  4.795 4.74 4.7925 0.0375 0.79%
MAR '22 CORN $ / BSH  4.8675 4.82 4.865 0.0325 0.67%
MAY '22 CORN $ / BSH  4.9075 4.86 4.9075 0.0325 0.67%
MAR '21 SOYBEANS $ / BSH  14.17 14.1425 14.17 0.0175 0.12%
MAY '21 SOYBEANS $ / BSH  14.215 14.0325 14.19 0.085 0.60%
JUL '21 SOYBEANS $ / BSH  14.0375 13.8625 14.025 0.075 0.54%
AUG '21 SOYBEANS $ / BSH  13.6 13.4425 13.5825 0.065 0.48%
SEP '21 SOYBEANS $ / BSH  12.815 12.67 12.815 0.0775 0.61%
NOV '21 SOYBEANS $ / BSH  12.37 12.23 12.3675 0.0625 0.51%
JAN '22 SOYBEANS $ / BSH  12.335 12.2075 12.32 0.0475 0.39%
MAR '22 SOYBEANS $ / BSH  12.1325 12.0425 12.1325 0.06 0.50%
MAY '22 SOYBEANS $ / BSH  12.035 11.9375 12.0225 0.0125 0.10%
MAR '21 SOYBEAN OIL  $ / LB 51.98 #N/A 52.38 0 0.00%
MAY '21 SOYBEAN OIL  $ / LB 51.13 50.2 51.11 0.4 0.79%
MAR '21 SOY MEAL $ / TON 418.4 416.2 417.8 -0.3 -0.07%
MAY '21 SOY MEAL $ / TON 418.3 414.5 416.6 0 0.00%
JUL '21 SOY MEAL $ / TON 416.6 412.7 414.8 -0.1 -0.02%
AUG '21 SOY MEAL $ / TON 406.7 403.2 404.9 -0.2 -0.05%
SEP '21 SOY MEAL $ / TON 394.6 391.8 392.9 -0.1 -0.03%
MAR '21 Chicago SRW $ / BSH  6.495 6.47 6.47 -0.0275 -0.42%
MAY '21 Chicago SRW $ / BSH  6.5675 6.4675 6.4825 -0.0275 -0.42%
JUL '21 Chicago SRW $ / BSH  6.455 6.3675 6.3825 -0.0275 -0.43%
SEP '21 Chicago SRW $ / BSH  6.4275 6.3625 6.375 -0.0225 -0.35%
DEC '21 Chicago SRW $ / BSH  6.48 6.4125 6.4225 -0.0275 -0.43%
MAR '21 Kansas City HRW $ / BSH  5.97 #N/A 6.1275 0 0.00%
MAY '21 Kansas City HRW $ / BSH  6.25 6.17 6.18 -0.03 -0.48%
JUL '21 Kansas City HRW $ / BSH  6.305 6.2275 6.24 -0.0225 -0.36%
SEP '21 Kansas City HRW $ / BSH  6.3525 6.2825 6.2925 -0.025 -0.40%
DEC '21 Kansas City HRW $ / BSH  6.425 6.365 6.365 -0.03 -0.47%
MAR '21 MLPS Spring Wheat $ / BSH  5.84 #N/A 6.355 0 0.00%
MAY '21 MLPS Spring Wheat $ / BSH  6.45 6.39 6.415 -0.02 -0.31%
JUL '21 MLPS Spring Wheat $ / BSH  6.5 6.4575 6.48 -0.0175 -0.27%
SEP '21 MLPS Spring Wheat $ / BSH  6.555 6.5025 6.5275 -0.0175 -0.27%
DEC '21 MLPS Spring Wheat $ / BSH  6.5975 6.56 6.5875 -0.02 -0.30%
MAR '21 ICE Dollar Index $ 92.05 91.64 91.935 0.291 0.32%
 AP '21 Light Crude $ / BBL  65.57 63.82 65.28 1.45 2.27%
 MA '21 Light Crude $ / BBL  65.37 63.59 65.09 1.47 2.31%
APR '21 ULS Diesel $ /U GAL 1.9405 1.8885 1.9335 0.0375 1.98%
MAY '21 ULS Diesel $ /U GAL 1.9354 1.8837 1.9297 0.0375 1.98%
APR '21 Gasoline $ /U GAL 2.0403 1.9939 2.0343 0.0364 1.82%
MAY '21 Gasoline $ /U GAL 2.0373 1.993 2.0319 0.0372 1.86%
MAR '21 Feeder Cattle $ / CWT 0 #N/A 135.1 0 0.00%
APR '21 Feeder Cattle $ / CWT 0 #N/A 138.975 0 0.00%
 AP '21 Live Cattle $ / CWT 0 #N/A 118.55 0 0.00%
 JU '21 Live Cattle $ / CWT 0 #N/A 116.975 0 0.00%
APR '21 Live Hogs $ / CWT 0 #N/A 87.3 0 0.00%
MAY '21 Live Hogs $ / CWT 0 #N/A 89.4 0 0.00%
MAR '21 Class III Milk $ / CWT 16.25 16.25 16.25 0.03 0.18%
APR '21 Class III Milk $ / CWT 17.52 #N/A 17.69 0 0.00%
MAY '21 Class III Milk $ / CWT 17.97 #N/A 18.09 0 0.00%
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