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Morning Market Review for Nov. 27, 2020

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Grain markets remain unchanged from Wednesday’s close amid slow holiday activity (Comments are updated by 7:30 a.m. Central Time.)

Stock markets continue rally on vaccine optimism

Good morning! I hope you and yours had a wonderful Thanksgiving holiday yesterday. A quick reminder that the Chicago Board of Trade closes early today, so watch for the afternoon Farm Futures report a little earlier today. Enjoy your weekend!

Corn: Corn futures prices were unchanged from Wednesday’s close, with December futures slated to open at $4.20/bushel when trade at the Chicago Board of Trade begins this morning. March futures stood at $4.275/bushel.

Corn export sales to be reported this morning by USDA for the week ending November 19 are expected to range between 31.5 million – 55.1 million bushels. Daily flash sales as reported by USDA via private exporters eased during the reporting week, with 13.2 million bushels of corn ordered for delivery in 2020/21 by Mexico (7.7 million bushels) and an unknown buyer (5.5 million bushels).

If Monday’s export inspections report from USDA is any indicator, corn bushels shipped out from U.S. export terminals for the November 13 – 19 reporting week could slip. Monday’s report found a 1% decrease in corn loading volumes for the week, totaling 32.8 million bushels.

South African corn estimates are pegged at 606.6 million bushels for the 2020/21 marketing year, according to the South African government’s Crop Estimates Committee (CEC). The CEC estimates yields will be 36.7% higher than 2018/19 yields on higher moisture levels received during the 2020 growing season. South Africa is expected to be the world’s seventh largest corn exporter during the 2020/21 marketing year, according to the USDA.

Soybeans: January soybeans will likely trade at $11.84/bushel when markets open in Chicago this morning. March soybeans stood at $11.8575. December soymeal futures held steady at $38.18/lb while December soymeal futures will likely dance with the $400/ton benchmark again today on strong poultry feed demand, opening at $396.90/ton.

Soybean export sales in today’s weekly export sales report from USDA will likely come in between 25.7 million – 51.4 million bushels. No large daily flash sales were reported for the week ending November 19 as soaring futures prices deterred buying interest from international customers. It was the first time since June that a reporting week did not feature a large flash soybean sale.

Similarly, export loading paces for soybeans are also expected to fall short of last week’s totals. Monday’s export inspections report found 16.8 million fewer bushels of soybeans had been loaded out of U.S. export terminals for the week ending November 19 for a total of 73.9 million bushels.

Brazilian farmers are expected to harvest 4.89 billion bushels of soybeans in the 2020/21 year, according to Brazilian ag consultancy Agroconsult. The estimate represents a 64.4-million-bushel reduction from previous government estimates as La Niña weather patterns continue to exacerbate drought conditions in the South American country.

Planting delays due to the Brazilian drought will likely benefit U.S. farmers, however. Agroconsult also hinted that growers in Mato Grosso, Brazil’s largest soybean-producing state, will likely only have 165.3 million bushels of soybeans ready for export by January 31, 2021, compared to 400.5 million bushels as of January 31, 2020.

The reduced availability means that international buyers will remain dependent on U.S. soybean supplies a little longer than usual this year, offering a longer window of higher soybean prices to American producers.

Rains in Argentina’s central grains producing region this week benefited the world’s third-largest soybean crop. Planting advanced 10.6% from a week ago, as reported by the Buenos Aires Grains Exchange yesterday.

China is on track to be the largest buyer of U.S. agricultural products. The world’s second largest economy imported 124.9 million bushels of U.S. soybeans in October, nearly three times more bushels than the same time a year ago.

In total, China is expected to buy $27 billion of ag goods between September 2019 – 2020. China remains behind in their Phase One purchasing commitment of $36.5 billion for the 2020 calendar year despite a five-month surge of soybean and corn purchases.

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 today’s export sales report, which will show cancelled export orders – and make strategic moves if necessary.

Wheat:

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The ICE Dollar Index sunk to a 19-month low amid the Thanksgiving holidays, giving wheat producers a little extra something to be thankful for this holiday. The index traded at $91.980, offering world markets a potentially lucrative option for cheaply priced wheat, especially amid rising grain prices as of late.

Wheat export sales for the week ending November 19 are predicted by trade analysts to range between 7.3 million – 16.5 million bushels. No daily flash sales of wheat over 3.7 million bushels were reported to USDA for the reporting week.

Weekly export inspections reports found wheat loading paces to increase slightly, up 7% to 13.2 million bushels. That pace, though a slight improvement from last week, remains slightly lower than weekly average loading rates outlined by USDA’s 975-million-bushel export forecast for U.S. wheat. Wheat export paces continue to remain strong in the 2020/21 marketing year as international food hoarding continues to benefit residual wheat suppliers, especially the U.S.  

Planting for the 2021/22 French wheat crop is largely finished, according to data released by French farm agency FranceAgriMer. The European Union’s largest wheat producer reported an exponentially better crop compared to a year ago, when a soggy fall delayed and prevented soft wheat acreage from being planted. FranceAgriMer rated 96% of the local soft wheat crop to be in good to excellent condition as of Monday.

High global wheat prices likely encouraged higher 2021/22 soft wheat acres to be sowed in France. But the dry and mild weather conditions that favored soft wheat acreage expansion this year in France could forewarn danger for the crop. If substantial rains do not fall in December, the French crop could fall in line with other countries across the globe – notably Argentina, the U.S., and Ukraine – who are likely to incur yield damage due to sustained drought activity.

Weather: Clear skies are on the horizon for the weekend across the Heartland, according to NOAA’s short-range forecasts. The Southern Plains could see some much-needed moisture this weekend as a high-pressure system rolls through the region, though early estimates from NOAA do not offer high hopes for accumulation over a half inch.

Financials: Coronavirus cases in the U.S. rose by a staggering 287,542 since Wednesday morning to 12,886,202 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. The death toll increased by 3,486 lives over the Thanksgiving holiday to 263,462 deaths as of press time. Hospitalizations surged over 90,000 for the first time since the pandemic landed on American soil, with those rates expected to rise in the coming weeks after Thanksgiving gatherings.

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 inched up this morning, on pace to record new highs today on strength from previous trading sessions this week. Markets have largely ignored overwhelming rates of new COVID-19 cases this week in favor of optimism over positive developments of coronavirus vaccines in recent weeks. S&P 500 futures rose 0.21% to $3,635.00 as the rally extended its legs.

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