Morning Market Review for May 13, 2021

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Corn struggles to remain above $7/bushel following USDA reports. (Comments are updated by 7:30 a.m. Central Time.)

Plus – a deep dive into yesterday’s WASDE report

  • Corn down 6-14 cents
  • Soybeans down 13-21 cents, soyoil down $0.50/lb, soymeal down $6.80/ton
  • Wheat down 4-9 cents

*Prices as of 6:50 am CDT.

WASDE Fun Fact – New crop export paces to slow: Due to tightening U.S. supplies in the new crop year, combined corn, soybean, and wheat exports are expected to fall nearly 10% in 2021/22 from the previous year. But it may be too soon to determine that exports will be forced to shrink in an era of scarce grain stocks. Time and the highest bidder will likely have the final say in that determination.

More details about yesterday’s WASDE report will be highlighted in this morning’s report.

051221USGrainExports1540.jpg

Corn

Grain markets were eerily quiet overnight as traders around the world took the session to digest USDA’s latest estimates for the 2020/21 and 2021/22 marketing years. Corn futures traded 1.5% lower overnight following yesterday’s USDA estimates for 2021/22, which feature higher ending stocks and lower U.S. usage rates. The July 2021 corn contract fought to stay above $7/bushel, sitting at $7.0025/bushel at last glance.

Reductions in the Brazilian corn crop due to planting delays and drought conditions plaguing yield prospects for the safrinha crop have played a major role in strong U.S. corn exports in the latter half of the current 2020/21 marketing year. USDA added another 100 million bushels to 2020/21 U.S. corn export targets, with the new estimate of 2.775 billion bushels notching a new record high on unprecedented demand from China.

Chinese Corn Supplies

But a smaller than expected 2021 crop is likely to trim 2021/22 export prospects. USDA expects U.S. corn exporters will ship 2.45 billion bushels of corn into international channels in the new marketing year, 325 million fewer bushels than this year.

U.S. corn will face stiff competition on the international market next year. USDA estimates that 2.4 billion more bushels of corn will be produced across the world in the 2021/22 marketing year. Acreage expansion in China and Brazil will force U.S. corn exporters to price more competitive international bids by the fall.

Chinese demand for corn is expected to remain strong in the new marketing year, after its corn imports rose 271% in 2020/21 to 1.0 billion bushels. USDA expects this new era of heavy Chinese corn imports will continue into the new marketing year, leaving the U.S., Brazil, Ukraine, and Argentina to jockey for top position as supplier of choice for the Asian giant.

Despite earlier guidance last month from China’s ministry of agriculture recommending livestock producers reduce corn and soybean volumes in livestock rations, USDA expects China to continue its trend of steady corn and soybean purchases in the new year. China is likely to buy 3.8 billion bushels of international soybeans and another 1.0 billion bushels of corn next year from foreign sources.

Soybeans

Soybean prices relinquished yesterday’s gains in the overnight trading session and backed off nine-year highs as a large Brazilian crop in 2021/22 and reduced U.S. usage rates offset rising global edible oil demand.

After a subpar year of crop development amid battling La Niña weather conditions, Brazil will seek to increase soybean acreage and produce a new record volume of soybeans in 2021/22. Barring any further weather disruptions, USDA expects Brazil will harvest 5.3 billion bushels of soybeans next year.

Soybean stocks in the U.S. will end the current marketing year at the tightest level on record while 2021/22 supplies with a stocks-to-use ratio of 3.2% are expected to be the third smallest ending stocks in history. Rising crush rates are expected in 2021/22 as renewable biodiesel production expands across the country.

051221SoybeanStocksToUseRatio1540.jpg

A smaller Argentine soybean crop fresh out of the fields tightened old crop soybean supplies on a global scale. U.S. demand targets for 2020/21 were left unchanged in yesterday’s report. Old crop soybean futures prices rallied on the sentiment, with profitable harvest-time sales highly likely.

But as supplies in the U.S. tighten, USDA expects export demand will be the first casualty as a result of dwindling stocks. U.S. soybean exports are expected to fall 9% from last year to 2.075 billion bushels in 2021/22. For U.S. soybean growers, additional new crop pricing opportunities from exports are likely to be realized early in the marketing year, ahead of Brazil’s behemoth crop to be harvested next spring.

As China’s hog herd recovers, so too will its hunger for soybeans. The increase in corn acres will likely trim Chinese soybean production by 22.0 million bushels to 698 million bushels in 2021/22. USDA projects China will be forced to import an extra 110.2 million bushels of soybeans in 2021/22 compared to this year to make up for fewer soybean acres, bringing the 2021/22 total to 3.8 billion bushels.

Again, the timing of Chinese soybean purchases will play a critical role in price determination for new crop soybean prices. China focuses its soybean buying power in the U.S. during late summer through early winter, switching to Brazilian supplies in early spring and summer.

Wheat

A rising dollar weighed all grains prices lower this morning, but especially for wheat. Wheat futures fell $0.04-$0.09/bushel as the prospect of lower export loading paces and rising global supplies put a dent in the gains the sector has experienced this spring from higher livestock feed demand.

The U.S. wheat harvest expected later this summer is likely to be 3% larger than last year’s haul at 1.872 billion bushels. Despite strong export demand from China in the 2020/21 marketing year, U.S. wheat exports will likely fall in 2021/22 to give way for rising domestic feed demand for wheat.

Old crop U.S. wheat exports were slashed 20 million bushels lower to 965 million bushels in yesterday’s report. It was not much of a surprise – weekly export volumes have reverted to comparable volumes to this time last year. Stronger Chinese purchases this year offset lower Mexico purchases.

Mexico was the top buyer of U.S. wheat last year, but current marketing year to date U.S. wheat purchases are down 10% from the same time a year ago. The lag was a key contributor to reduction in wheat exports for the current year.

Rising global production will likely offset increases in livestock feed and human consumption of wheat in the 2021/22 marketing year. The European Union is expected to lead all global producers, increasing output by nearly 300 million bushels from last year to 4.9 million bushels of wheat.

Barring any significant weather events between now and harvest, it appears global wheat stocks will remain comfortable enough to satiate demand in the new marketing year.

Weather

Temperatures will reach the 70s across the Plains and Midwest today, according to NOAA’s short-range forecasts. Clear skies across the Heartland this morning will likely give way to a small system of rain showers focused over Nebraska tonight. The drought-plagued state could see up to an inch of accumulation over the next 24 hours.

Financials

Coronavirus cases in the U.S. rose by 35,994 cases as of yesterday to 32,815,408 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. The death toll increased by 842 lives to 583,690 deaths as of press time. According to the CDC, 46% of the total U.S. population has received at least one vaccine. Nearly 118 million Americans (35%) are fully vaccinated.

Government data on inflation was released yesterday and farmers have a pretty good reason to keep an eye on it, as Farm Futures contributing analyst Bryce Knorr points out. Inflation in the form of personal consumption expenditures rose 2.6% in March. Yesterday’s report on consumer prices saw a 4.2% increase from a year ago – the highest inflationary value since 2008.

Inflationary pressures are likely to remain high in the first half of 2021 as the world collectively recovers from the COVID-19 pandemic, with a majority of consumers focusing pent-up buying power on similar products during this period. Supply chain hiccups have continued to plague retailers and wholesalers at every level of the goods and services industry, adding extra costs to businesses which are forced to be passed on to consumers.

But personal expenditures aren’t the only prices farmers need to watch. Money managers often use commodities and farmland as a hedge against inflation, driving up prices for both, Knorr explains in a recent Ag Marketing IQ column.

Global supply and demand forces as well as weather typically have the last say in final cost and revenue projections. “So, depending on your vantage point, inflation can be a friend, a foe, or maybe just Mr. Irrelevant,” Knorr surmises.

U.S. stocks traded mixed to lower this morning, signaling another day of selloffs following yesterday’s steepest three-day routing since last October. Rising inflation weighed heavy on investors minds as markets processed the potential impacts of higher consumer goods.

“When you have rising inflation, those future cash flows start to need to be adjusted,” Salman Baig, a multi-asset investment manager at Unigestion, told the Wall Street Journal this morning. “People are looking for a place to ride out the storm.”

Energy futures fell this morning after Colonial Pipeline resumed operations on its pipeline from the Gulf to New York City yesterday, alleviating concerns about potential fuel shortages. S&P 500 futures eked out a 0.13% gain this morning to $4,064.00 while Dow futures traded 0.21% lower at $33,437.

Morning Ag Commodity Prices - 5/13/2021
Contract Units High Low Last Net Change % Change
MAY '21 CORN $ / BSH  7.575 7.44 7.44 -0.135 -1.78%
JUL '21 CORN $ / BSH  7.14 6.985 7.0125 -0.135 -1.89%
SEP '21 CORN $ / BSH  6.2275 6.095 6.125 -0.09 -1.45%
DEC '21 CORN $ / BSH  5.9275 5.7875 5.8425 -0.0875 -1.48%
MAR '22 CORN $ / BSH  5.9725 5.84 5.895 -0.085 -1.42%
MAY '22 CORN $ / BSH  5.9875 5.8625 5.915 -0.0825 -1.38%
JUL '22 CORN $ / BSH  5.96 5.8375 5.885 -0.085 -1.42%
MAY '21 SOYBEANS $ / BSH  16.57 16.4075 16.55 -0.055 -0.33%
JUL '21 SOYBEANS $ / BSH  16.4525 16.22 16.255 -0.17 -1.04%
AUG '21 SOYBEANS $ / BSH  15.75 15.555 15.59 -0.135 -0.86%
SEP '21 SOYBEANS $ / BSH  14.865 14.6825 14.735 -0.1275 -0.86%
NOV '21 SOYBEANS $ / BSH  14.4325 14.2075 14.235 -0.2025 -1.40%
JAN '22 SOYBEANS $ / BSH  14.3825 14.18 14.2275 -0.175 -1.22%
MAR '22 SOYBEANS $ / BSH  13.9775 13.7775 13.82 -0.165 -1.18%
MAY '22 SOYBEANS $ / BSH  13.825 13.6425 13.69 -0.1475 -1.07%
JUL '22 SOYBEANS $ / BSH  13.73 13.615 13.655 -0.13 -0.94%
MAY '21 SOYBEAN OIL  $ / LB 71.91 70.85 71.72 3.06 4.46%
JUL '21 SOYBEAN OIL  $ / LB 66.86 65.55 65.98 -0.42 -0.63%
MAY '21 SOY MEAL $ / TON 448 444.7 444.7 -6.2 -1.38%
JUL '21 SOY MEAL $ / TON 450.3 440.8 442.2 -6.6 -1.47%
AUG '21 SOY MEAL $ / TON 442.8 434.1 435.5 -6.5 -1.47%
SEP '21 SOY MEAL $ / TON 433.8 426.4 427.4 -6.4 -1.48%
OCT '21 SOY MEAL $ / TON 423.6 417.3 418.2 -5.5 -1.30%
MAY '21 Chicago SRW $ / BSH  7.5625 7.5 7.535 -0.0125 -0.17%
JUL '21 Chicago SRW $ / BSH  7.3425 7.1825 7.23 -0.0675 -0.92%
SEP '21 Chicago SRW $ / BSH  7.3225 7.165 7.21 -0.0725 -1.00%
DEC '21 Chicago SRW $ / BSH  7.3475 7.19 7.2325 -0.08 -1.09%
MAR '22 Chicago SRW $ / BSH  7.375 7.23 7.2525 -0.1 -1.36%
MAY '21 Kansas City HRW $ / BSH  6.775 6.775 6.775 -0.0525 -0.77%
JUL '21 Kansas City HRW $ / BSH  6.9375 6.7775 6.8175 -0.09 -1.30%
SEP '21 Kansas City HRW $ / BSH  6.98 6.8275 6.8675 -0.0825 -1.19%
DEC '21 Kansas City HRW $ / BSH  7.0475 6.8975 6.925 -0.095 -1.35%
MAR '22 Kansas City HRW $ / BSH  7.1175 6.9875 7.0125 -0.0725 -1.02%
MAY '21 MLPS Spring Wheat $ / BSH  0 #N/A 7.48 0 0.00%
JUL '21 MLPS Spring Wheat $ / BSH  7.6575 7.5575 7.6125 -0.0425 -0.56%
SEP '21 MLPS Spring Wheat $ / BSH  7.705 7.61 7.6325 -0.0675 -0.88%
DEC '21 MLPS Spring Wheat $ / BSH  7.7525 7.655 7.7325 -0.01 -0.13%
MAR '22 MLPS Spring Wheat $ / BSH  7.7875 7.73 7.73 -0.0475 -0.61%
JUN '21 ICE Dollar Index $ 90.91 90.575 90.725 0.039 0.04%
 JU '21 Light Crude $ / BBL  65.81 64.09 64.68 -1.4 -2.12%
 JU '21 Light Crude $ / BBL  65.83 64.12 64.69 -1.41 -2.13%
JUN '21 ULS Diesel $ /U GAL 2.069 2.0079 2.0282 -0.0413 -2.00%
JUL '21 ULS Diesel $ /U GAL 2.0642 2.0059 2.0247 -0.0405 -1.96%
JUN '21 Gasoline $ /U GAL 2.1606 2.1053 2.1233 -0.0377 -1.74%
JUL '21 Gasoline $ /U GAL 2.1546 2.1009 2.1172 -0.0383 -1.78%
MAY '21 Feeder Cattle $ / CWT 0 #N/A 136.75 0 0.00%
AUG '21 Feeder Cattle $ / CWT 0 #N/A 150.525 0 0.00%
 JU '21 Live Cattle $ / CWT 0 #N/A 118.6 0 0.00%
 AU '21 Live Cattle $ / CWT 0 #N/A 122.325 0 0.00%
MAY '21 Live Hogs $ / CWT 0 #N/A 111.8 0 0.00%
JUN '21 Live Hogs $ / CWT 0 #N/A 112.025 0 0.00%
MAY '21 Class III Milk $ / CWT 19.07 #N/A 19.07 0 0.00%
JUN '21 Class III Milk $ / CWT 19.71 19.64 19.71 0.07 0.36%
JUL '21 Class III Milk $ / CWT 20.02 19.92 19.92 -0.16 -0.80%
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