Morning Market Review for May 14, 2021

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Grains recover after yesterday’s selloff. (Comments are updated by 7:30 a.m. Central Time.)

Corn leads the way with tightening global supplies and strong Chinese demand outlook

  • Corn up 7-16 cents
  • Soybeans up 10-16 cents, soyoil up $0. 90/lb, soymeal up $7.70/ton
  • Wheat up 15-20 cents

*Prices as of 6:50 am CDT.

Corn

Corn prices recovered from yesterday’s selloff overnight, rising nearly 3% in overnight trading as a strong demand outlook and lingering concerns over drought in Southern Brazil and the U.S. increased worries about global supply conditions. July futures remain well below the $7/bushel benchmark, sitting at $6.8125/bushel at last glance.

USDA slashed Brazilian corn estimates for the 2020/21 marketing year in Wednesday’s WASDE report. That came as no surprise to AgBravo’s Julio Bravo. Persistent drought in Brazil’s southern states following a delayed planting season is expected to “limit the crop yield in about 40% of the impacted acres,” Bravo explains in the latest South American Crop Watch column.

But rising demand from both domestic and international sources continues to support strong corn prices, especially as the production forecasts continue lower. Bravo is hopeful the drought, which began in April, will relent in the coming days.

“Hopefully this scenario changes halfway through the month and rain falls again, so that the losses do not exceed over half of the production,” Bravo surmises.

Export orders for 2021/22 corn shipments reached a new weekly high last week, according to weekly export sales data released by USDA yesterday. Export shipment volumes for all three grains were rather dismal, so USDA’s weekly reading of 82.1 million bushels of 2021/22 corn export sales helped to somewhat slow the bleeding of yesterday’s selloff.

Soybeans

Soybeans followed the corn rally higher this morning, with July 2021 futures back within striking distance of the $16/bushel benchmark. Improving prospects for Chinese demand supported the morning’s gains.

Nearly 71% of Argentina’s soybean harvest is completed, according to the Buenos Aires Grains Exchange. Despite a dry growing season, the weather conditions during harvest have been favorable for quick speeds. The exchange expects Argentine farmers will produce 1.6 billion bushels of soybeans this year.

Only 25% of Argentina’s corn crop has been harvested so far. The Buenos Aires Grains Exchange expects a corn harvest this year of 1.8 billion bushels.

Following a resurgence of African swine fever and other diseases during the winter months in northern and northeastern regions, China’s hog herd grew 1.1% larger from the prior month in April. Data from China’s Ministry of Agriculture and Rural Affairs showed the country’s sow population was 97.6% of late 2017 totals in April.

This is good news for international soybean suppliers, especially those in the U.S. Chinese hog farmers have also focused on replacing poor-performing sows with animals with better genetics in the first part of 2021. Current animals coming to slaughter in China tend to be heavier. Both observations favor stronger feeding rates, which would increase China’s demand for U.S. and Brazilian soybeans in the coming months.

The National Oilseed Producers Association (NOPA) releases updated monthly soybean crush data for April 2021 on Monday. Trade estimates peg the April 2021 crush between 162.8 million and 172.0 million bushels with an average guess of 168.7 million bushels. If realized, it would be the second largest April crush on record, following the April 2020 crush of 171.8 million bushels.

The April 2021 crush is likely to be 5% lower than March 2021 crush volumes as processors scramble to find readily available soybean supplies for feedstock. Much of the 2020/21 soybean crop has already been shipped into international export channels or already processed early in the 2020/21 marketing year. Several plants also took downtime during April, helping to reduce expensive soybean purchases amid soaring commodity prices.

Soybean prices took a thrashing yesterday as markets digested Wednesday’s WASDE results. But Total Farm Marketing’s Naomi Blohm was not surprised by USDA’s 2021/22 forecasts. “The usual “tweaks” were made, easily changeable in upcoming reports to grease the wheel as needed,” Blohm reasons in the latest Ag Marketing IQ column.

Blohm will be keeping an eye on biofuel demand and production as summer and the new marketing year approaches. “Specifically under the soybean oil category, biofuel demand is expected to be up to 12,000 million pounds, up from 9,500 million pounds this last year,” Blohm analyzes. “No wonder new soybean crushing facilities are being built!”

Mississippi River closures in Memphis, Tennessee could provide some price action for exporters in the coming weeks, depending on how quickly the river can be reopened. At any rate, Blohm remains in awe that contract highs have been recorded in May and wonders how high they will reach in June and July.

“Over the past 15 years there were only two times that the price high for grains was made during the month of May; 2014 when large planted acres were expected, ending stocks were growing, and  prices were still coming down from the 2012 highs; and 2018 during the black swan of the tariff/trade war.  Usually the price high for corn and soybeans occurs during either June or July. (2012 was the exception with the price high occurring in August due to the drought.)”

Wheat

Wheat prices also bounced back this morning, though traders are continuing to balance strong yield prospects in the Northern Hemisphere with dry weather concerns, specifically in the U.S. Northern Plains and Russia. Gains were supported by a stronger corn complex and a weaker dollar.

French wheat conditions held steady last week thanks to well-timed rains, according to France’s farm office, FranceAgriMer. For the week ending 10, 79% of France’s soft wheat crop was reported to be in good to excellent condition, maintaining the same reading as the prior reporting week.

It marked a halt to four straight weeks of declining soft wheat conditions after a dry spring and series of cold snaps threatened to damage the crop. France is the European Union’s largest producer of wheat.

A bridge closure in Memphis, Tennessee on Tuesday is beginning to take its toll on U.S. grain exports. A crack in the bridge over mile markers 736 and 737 on the Mississippi River led the Tennessee Department of Transportation to shut down river activity in the vicinity to investigate the issue.

But that section of the Mississippi is a critical part of grain passage to and from the Gulf of Mexico. As of last night, 341 barges were waiting to pass south of the bridge with another 430 barges in line to go north up the river.

Passage will likely reopen in the coming days after TDOT finishes its investigation, but grain futures prices and cash offerings have already taken a hit on the slowdown, despite concerns about global supply availability.

Weather

Temperatures will reach the 70s across the Plains and Midwest today, according to NOAA’s short-range forecasts. Scattered showers are expected across the upper Plains and Midwest today through Sunday, with the Southern Plains seeing rainfall by Sunday. The Upper Mississippi River Valley will likely receive a half inch of rain in the next 24 hours while Kansas is likely to see over an inch in the same time period.

Financials

Coronavirus cases in the U.S. rose by 37,941 cases as of yesterday to 32,853,349 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. The death toll increased by 805 lives to 584,495 deaths as of press time. According to the CDC, 47% of the total U.S. population has received at least one vaccine. Nearly 119 million Americans (36%) are fully vaccinated.

Not all family farms are passed on to family members. Farm Financial Strategies’ associate, Mike Downey, points to an industry survey suggesting “68% of farmers do not have children who farm, and over one-half of them have not identified a successor.”

There are opportunities for young people looking to get into farming, Downey shares in the latest More than Dirt column. Downey points to a 2,200-acre farm in northwest Illinois (my old stomping grounds) that will likely be passed on to a non-family member as an opportunity for young producers to make a start.

“This is their way to give back and extend an opportunity for someone to carry forward and enjoy the same benefits the farming way of life has provided to them and their family,” Downey explains.

Morning Ag Commodity Prices - 5/14/2021
Contract Units High Low Last Net Change % Change
MAY '21 CORN $ / BSH  0 0 7.19 0 0.00%
JUL '21 CORN $ / BSH  6.87 6.66 6.8125 0.065 0.96%
SEP '21 CORN $ / BSH  5.9875 5.765 5.9525 0.1225 2.10%
DEC '21 CORN $ / BSH  5.7475 5.495 5.7175 0.135 2.42%
MAR '22 CORN $ / BSH  5.8 5.5525 5.765 0.1275 2.26%
MAY '22 CORN $ / BSH  5.8125 5.5725 5.8125 0.1575 2.79%
JUL '22 CORN $ / BSH  5.7975 5.55 5.7525 0.12 2.13%
MAY '21 SOYBEANS $ / BSH  16.1 #N/A 16.1225 0 0.00%
JUL '21 SOYBEANS $ / BSH  16.1275 15.77 15.975 0.135 0.85%
AUG '21 SOYBEANS $ / BSH  15.5075 15.175 15.39 0.1675 1.10%
SEP '21 SOYBEANS $ / BSH  14.63 14.34 14.5475 0.15 1.04%
NOV '21 SOYBEANS $ / BSH  14.135 13.8825 14.075 0.11 0.79%
JAN '22 SOYBEANS $ / BSH  14.1125 13.88 14.065 0.115 0.82%
MAR '22 SOYBEANS $ / BSH  13.75 13.5675 13.75 0.1225 0.90%
MAY '22 SOYBEANS $ / BSH  13.6675 13.4725 13.63 0.1075 0.79%
JUL '22 SOYBEANS $ / BSH  13.635 13.4875 13.6 0.11 0.82%
MAY '21 SOYBEAN OIL  $ / LB 0 #N/A 68.04 0 0.00%
JUL '21 SOYBEAN OIL  $ / LB 66.25 65.45 65.83 0.05 0.08%
MAY '21 SOY MEAL $ / TON 0 #N/A 423.5 0 0.00%
JUL '21 SOY MEAL $ / TON 431.4 420.1 428.6 7.2 1.71%
AUG '21 SOY MEAL $ / TON 425.9 415 423.7 7 1.68%
SEP '21 SOY MEAL $ / TON 419.1 408.8 417.5 6.5 1.58%
OCT '21 SOY MEAL $ / TON 409.9 401.4 409.7 6.2 1.54%
MAY '21 Chicago SRW $ / BSH  7.3025 7.2725 7.2725 0.0075 0.10%
JUL '21 Chicago SRW $ / BSH  7.2125 7.035 7.19 0.175 2.49%
SEP '21 Chicago SRW $ / BSH  7.2025 7.035 7.18 0.1675 2.39%
DEC '21 Chicago SRW $ / BSH  7.2425 7.075 7.2225 0.1675 2.37%
MAR '22 Chicago SRW $ / BSH  7.2825 7.12 7.2525 0.15 2.11%
MAY '21 Kansas City HRW $ / BSH  0 #N/A 6.5225 0 0.00%
JUL '21 Kansas City HRW $ / BSH  6.7525 6.5875 6.725 0.1475 2.24%
SEP '21 Kansas City HRW $ / BSH  6.81 6.6425 6.7775 0.145 2.19%
DEC '21 Kansas City HRW $ / BSH  6.885 6.715 6.845 0.1375 2.05%
MAR '22 Kansas City HRW $ / BSH  6.945 6.79 6.945 0.165 2.43%
MAY '21 MLPS Spring Wheat $ / BSH  0 #N/A 7.455 0 0.00%
JUL '21 MLPS Spring Wheat $ / BSH  7.605 7.4325 7.5575 0.145 1.96%
SEP '21 MLPS Spring Wheat $ / BSH  7.6425 7.4775 7.6225 0.155 2.08%
DEC '21 MLPS Spring Wheat $ / BSH  7.685 7.515 7.685 0.18 2.40%
MAR '22 MLPS Spring Wheat $ / BSH  7.66 7.55 7.6575 0.1125 1.49%
JUN '21 ICE Dollar Index $ 90.795 90.42 90.435 -0.3 -0.33%
 JU '21 Light Crude $ / BBL  64.75 63.33 64.65 0.83 1.30%
 JU '21 Light Crude $ / BBL  64.76 63.35 64.65 0.81 1.27%
JUN '21 ULS Diesel $ /U GAL 2.0164 1.9857 2.0146 0.0137 0.68%
JUL '21 ULS Diesel $ /U GAL 2.0152 1.9848 2.0133 0.0143 0.72%
JUN '21 Gasoline $ /U GAL 2.1151 2.0823 2.1111 0.0158 0.75%
JUL '21 Gasoline $ /U GAL 2.1117 2.08 2.1078 0.0148 0.71%
MAY '21 Feeder Cattle $ / CWT 0 #N/A 137.45 0 0.00%
AUG '21 Feeder Cattle $ / CWT 0 #N/A 150.5 0 0.00%
 JU '21 Live Cattle $ / CWT 0 #N/A 115.6 0 0.00%
 AU '21 Live Cattle $ / CWT 0 #N/A 119.4 0 0.00%
MAY '21 Live Hogs $ / CWT 0 #N/A 111.475 0 0.00%
JUN '21 Live Hogs $ / CWT 0 #N/A 110.1 0 0.00%
MAY '21 Class III Milk $ / CWT 18.99 18.98 18.99 -0.04 -0.21%
JUN '21 Class III Milk $ / CWT 19.62 19.59 19.59 -0.03 -0.15%
JUL '21 Class III Milk $ / CWT 19.88 19.84 19.84 -0.04 -0.20%
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