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Morning Market Review for Nov. 25, 2020

scyther5/Thinkstock Markets-122316-scyther5-ThinkstockPhotos-2000
Grain prices pause ahead of holiday. (Comments are updated by 7:30 a.m. Central Time.)

Plus – China shows signs of cancelling soybean export orders amid high prices

  • Corn down 1-2 cents
  • Soybeans up 1-2 cents, soyoil up $0.27/lb, soybean meal up $3/ton
  • Wheat up 1-5 cents

*Prices as of 6:55 am CDT.

Good morning! Happy Thanksgiving Eve! Futures markets will be closed tomorrow in observance of the holiday, so a morning report will not be published. Regular morning reports will continue as the markets re-open on Friday.

From my family to yours, I wish you all a happy, healthy, and safe Thanksgiving holiday filled with plenty of delicious food!

Corn

Corn futures edged slightly lower in Chicago this morning on concerns over a potential contraction in last week’s ethanol production. December futures shed $0.02/bushel to $4.2375. March futures were also on track to post a $0.02/bushel loss to $4.305.

Ethanol production data today will likely see a continued decline as coronavirus restrictions are reinstated across the country to combat the spread of the virus. Early travel for the Thanksgiving holiday – which is booming despite CDC warnings – could potentially offset some of the travel easing due to the renewed lockdown measures.

As of November 13, ethanol production had dropped 1.5% from the previous week’s seven and a half month high to 40.4 million gallons/day amid school closures and increased restrictions. Gasoline demand plummeted nearly 6% to 346.8 million gallons/day – the lowest level for fuel demand since early June. Ethanol stocks remained steady at 20.2 million gallons.

A new online trading platform that will go live a week from today could increase transparency surrounding the biofuels credit market. OTC Direct Markets, Ltd. seeks to improve access and liquidity to renewable identification numbers (RIN), which are the credits blenders use to prove compliance with the Renewable Fuel Standard’s blending requirement. The platform, titled OTC Direct, will increase profitability options for refineries, farmers, and traders involved in the bioenergy sector.

Soybeans

Stalled contract talks between Argentine oilseed workers and export companies could threaten to spur another worker strike in the world’s largest exporter of soybean products. Combined with dry weather in Brazil, the two factors supported fractional gains in the soybean market this morning despite news of waning Chinese export demand from the U.S.

January soybeans rose $0.0125/bushel to $11.925 on the sentiments. March soybeans added $0.0125/bushel to $11.945. December soyoil futures posted a $0.27/lb gain to $38.33 as December soymeal futures traded $3/ton higher to $401.30.

China imported 124.9 million bushels of U.S. soybeans in October, nearly three times more bushels than the same time a year ago. Steady demand from rebuilding hog herds and expanding poultry flocks facilitated the increase in soybean trade between the world’s largest economies. But the relationship may be showing early cracks in its armor.

Rising soybean prices on the Chicago Board of Trade are leading smaller Chinese soybean importers and processors to cancel export sales previously booked for December and January. The recent runup in futures prices has sent crush margins into negative territory, prompting small private processors in China to seek options to back out of export deals booked when prices had not previously been set by the futures market.

"Bringing in U.S. beans to China, at this price, means you lose money," a trader at a top soy crush facility in China told Reuters. Plus, basis export levels have fallen by 30% in November, signaling reduced global demand for U.S. soybeans as prices climb to four and a half year highs.

While volumes of cancelled sales were not shared in the Reuters report, it’s a clear indication of Chinese buying resistance at current price levels. If eroding Chinese enthusiasm for soybean prices continues, this likely marks a halt to steady Chinese soybean buying paces for the first time since June.

Farmers who have been enjoying high soybean prices may want to take a look at their long-term marketing plans before the Thanksgiving holiday – and Friday’s export sales report, which would report cancelled export orders – and make strategic moves if necessary.

Wheat

Contract

Price Change*

Price*

Chicago SRW – December Futures

+$0.0275

$6.14

Kansas City HRW – December Futures

-$0.0075

$5.6025

Minneapolis HRS – December Futures

+$0.05

$5.5575

 

Wheat futures were slightly mixed this morning as a weaker dollar and falling winter crop conditions supported gains in Chicago and Minneapolis. Kansas City futures wobbled amid the sentiments. The ICE Dollar Index fell $0.055 to $92.165 in overnight trading.

U.S. winter wheat acreage is likely to show an uncharacteristic uptick this year amid rising futures prices. If realized, it will mark the first time in eight years that U.S. winter wheat acreage expanded instead of contracted. USDA-NASS will likely release updated winter wheat acreage for the 2021/22 growing season in the December WASDE report, when the agency typically updates acreage levels.

Weather

Showers in the Eastern Corn Belt today will drop over an inch of precipitation on states east of the Mississippi River, according to NOAA’s short-range forecasts. However, today’s showers will pave the way for clear skies across the Heartland for the remainder of the week.

NOAA’s latest 6 to 10-day weather outlook released yesterday shows dry weather continuing into the first part of December. Chances of below average rainfall range between 33% - 50% for virtually all regions west of the Ohio River Valley. Dry conditions will spread across the entirety of the continental U.S. by the end of the week.

112520PrecipProbability.jpg

Temperatures will err on the cool side in the Southern Plains and Southeast between November 30 – December 4. NOAA predicts a 33% - 65% probability of below average temperatures during that period, with a 40% - 60% chance of above average temperatures in the Northern Plains and along the Pacific Coast. Similar temperature conditions are expected to persist through late next week as well.

112520TempProbability.jpg

Financials

Coronavirus cases in the U.S. rose by a staggering 176,665 to 12,598,660 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. The death toll increased by 2,269 lives to 259,976 deaths as of press time.

Fuel costs are serendipitously low as commodity prices continue to rise. Farm Futures contributing analyst Bryce Knorr points out nutrient costs per acre are 25% lower than the long-term average since 2008. But increasing demand from the U.S. during fall fertilizer season, China, and India and rising crop prices will likely spur input prices higher, Knorr outlines in the latest Ag Marketing IQ column.

U.S. stock futures slightly wobbled this morning after the Dow Jones Industrial Average rose past the 30,000-point benchmark yesterday for the first time in history fueled by advances in cyclical stocks like Honeywell, Apple, Microsoft, Boeing, and Goldman Sachs. The rise was significant because Dow industrials do not contain a high volume of technology stocks, which have been the most reliable sources of growth in the pandemic era.

S&P 500 futures inched up 0.06% to $3,634.75 while Dow futures edged 0.15% lower to $29,952 in overnight trading. Optimism over COVID-19 vaccine development and former Fed chairwoman Janet Yellen’s selection as the next Treasury secretary continue to underpin support in the markets as trade volumes ease ahead of the Thanksgiving holiday.

Speculation continues to circulate about President elect Biden’s potential pick for Secretary of Agriculture. The Farm Futures staff has compiled a list of potential candidates with several prospects being long-standing figures in the ag policy community. Policy expert Jacqui Fatka also takes a deep dive into potential EPA administrators as well as possible policy goals in the Biden administration in the latest DC Dialogue column.

Fun Fact

Farm Futures has deep historical ties to the position of Secretary of Agriculture. Our umbrella company, Farm Progress, also owns the publication, Wallaces Farmer. Wallaces Farmer is one of the industry’s oldest farm publications, dating back to the 1850s, before the USDA was created. Two of its namesake owners and editors served tenures as the head of the agency during its most formative years.

Editor Henry C. Wallace was an Iowa farm boy with a love for dairy cows and ag journalism (be still, my heart).  He served as editor of Wallaces Farmer following his father’s death in 1916 until President Warren G. Harding selected him as Secretary of Agriculture in 1921.

His son Henry A. Wallace took over editorial duties until he was tapped as President Franklin Delano Roosevelt’s Secretary of Agriculture from 1933 to 1940. The younger Wallace was instrumental in creating programs to help struggling farms during the Great Depression, repairing land damage due to the Dust Bowl through revolutionary conservation practices, and developing hybrid corn varietals.

Happy Thanksgiving! -JKH

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