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Morning Market Review for Oct. 20, 2020

Grains post modest gains on weather delays. (Comments are updated by 7:30 a.m. Central Time.)

Disrupted trade flows in South America support soy prices

  • Corn up 1 cent
  • Soybeans up 6-7 cents, soyoil up $0.46/lb, soybean meal up $2.1/ton
  • Wheat up 2-4 cents

*Prices as of 6:55 am CDT.

Quote of the Day: “[Corn] yields down 30%,” an Iowa farmer observed of corn yields amid heat stress and wind damage. Check out our latest responses from the Feedback from the Field series to see how your farm stacks up against other growers’ harvest progress across the country.

How is harvest going on your farm? Click here to share your crop updates via a short survey. Results are updated daily in our interactive map so you can stay in the loop on harvest development across the country.

Corn

Despite weakness in the energy complex this morning, corn futures inched out slight gains this morning as stalled harvest activity begins to create concern about crop quality. December and March futures both added $0.0075/bushel to $4.06 and $4.1125, respectively, in early morning trade.

Corn harvesting rates soared in yesterday’s Crop Progress report from USDA. Dry and clear conditions for the October 12 -18 reporting week enabled the last of the nation’s corn crop to reach its final stage of maturity, with USDA reporting 97% of the crop matured in yesterday’s weekly update, up 3% from a week ago and another 3% ahead of the five-year average. Yesterday’s report marks the last week of the season USDA will report on crop maturity.

Last week’s clear weather conditions enabled farmers to harvest another 19% of the 2020 corn crop, with harvest progress at 60% complete as of Sunday. As expected, the week’s completion total pulled away from the five-year average of 43% and soared ahead of average trade estimates of 57% for the week.

But winter storms in the Northern Plains and Upper Mississippi River Valley will likely curb harvest progress in addition to rain showers in the Eastern Corn Belt this week. Crop conditions stabilized at 61% good to excellent this week for the second week in a row. Ratings will likely fall next week as the precipitation takes a toll on the fully matured crop.

USDA will today release bioenergy statistics for the third quarter of 2020. The report likely won’t have a significant impact on markets as it will provide little new information. But it will provide deeper insights to corn use for ethanol for the 2019/20 marketing year, specifically about quarterly usage and regional production rates.

Marketing year 2019/20 corn use for ethanol will total 4.852 billion bushels in today’s report. Since March 2020, about 573 million bushels of corn demand for ethanol have left the demand pipeline due to reduced consumer fuel demand in the pandemic era. That totals 4.2% of the 2019 corn crop.

But long-term demand for biofuels may be more lucrative than previously thought, due in large part to a potential increase in supply. A Reuters report found that aged U.S. oil refineries earmarked for decommission may have a second life by way of producing biofuels. About 14% of current refining capacity "faces the risk of lower utilization or closure" as plants approach over 70 years of age.

Since shuttering a refinery is an odious feat which includes disassembling machinery and pipelines and remediating the land, many refineries are opting to convert to biofuels facilities instead. With growing demand for renewable energy in the U.S., American farmers stand to gain significantly from this potential increase to biofuel production capacity.

International demand for U.S. corn was hot yesterday as Mexico and another unknown buyer booked 4.8 million and 13.6 million bushels, respectively, of corn per a daily flash sale announcement released by USDA. Additionally, weekly export inspections data found 8.6% more corn had been weighed for export for the week ending October 15 for a total of 35.9 million bushels. Export loading paces continue to outrun those of a year ago, with marketing year to date shipping paces nearly 77% higher than the same period in 2019/20.

December corn futures topped $4/bushel yesterday. After months of unprofitable prices, the recent upward swing in prices is a windfall to producers awaiting profit-opportunities. With tightened long-term outlooks for ending stocks, Advance Trading’s Paul Dubravec points out that grain markets could be headed towards a long-term bull cycle.

With little carry in the market, should farmers be abandoning their marketing plans and selling grain straight off the combine? Not necessarily, Dubravec cautions. Producers should be penciling out storage and interest costs against carry and cash prices to evaluate how to effectively store bushels. Dubravec recommends the implementation of call options as a potential alternative tool to capture market value in the latest Ag Marketing IQ column.

Soybeans

A 24-hour soy workers’ strike began late yesterday in Argentina and an import tariff on soybeans and corn was slashed in Brazil amid rising inflation in food prices, reducing global trade flows of soybeans and soy products out of South America and providing underlying price support to U.S. soy futures. Those factors, combined with harvest delays in the U.S., led futures prices higher this morning.

November futures rose $0.0575/bushel to $10.60. December soybean oil futures followed $0.46/lb higher to $32.99. December soymeal futures were on pace to notch a new two-year high this morning, rising $2.1/ton to $375.30.

With 97% of all U.S. soybean plants dropping leaves, the soybean crop has finally reached its final stage of maturity, rising 4% from last week’s Crop Progress report and 2% higher than the five-year average.

Another week of largely clear weather allowed soybean harvest progress to advance 14% to 75% complete for the week ending October 18. Harvest progress remains 17% ahead of the five-year average – slightly smaller than last week but still a substantial margin, nonetheless.

Winter weather conditions in the Northern Plains and Upper Mississippi Valley are likely to have less of an impact on soybean harvest than that of corn. Harvest in North Dakota, South Dakota, and Minnesota is 92%, 90%, and 96% complete, respectively, for the year. The crop in Wisconsin likely stands to bear the highest risk in this week’s weather events with only 72% of the crop harvested.

But regardless, harvest is moving at breakneck speeds and the weekend’s weather events should have less impact on yields this year than last. The five-year average for harvest during the same time period in Wisconsin is 47% complete. And even with states in the Eastern Corn Belt dragging down the national average, dry forecasts in the 8 to 10-day NOAA forecast will ensure a speedy finish to harvest season (knock on wood).

Soybean export loading paces eased slightly for the week ending October 15 but remain strong for the time of year. Yesterday’s weekly export inspections report from USDA found 8.2 million bushels of soybeans had been loaded out to international buyers for the reporting week of October 9-15, resulting in a total of 79.9 million bushels on the week.

Demand from China dwarfed U.S. soybean export terminals last week as the world’s second largest economy snapped up the majority of soybean bushels weighed and/or inspected for export at U.S. port facilities. Over 65.4 million bushels of soybeans were sent to China over the reporting period. Chinese soy purchases accounted for 82% of exported soybeans from the U.S. last week, leaving little room for competition from any other major international buyer.

Wheat

Wheat contracts price changes

Russia received long-awaited rains over the weekend, though the precipitation did not fully quench depleted soil moisture levels. Wheat prices in Russia and Ukraine continue to soar amid dry planting conditions and farmer resistance to sell grains. A weakening dollar also supported higher wheat prices this morning as the ICE Dollar Index fell 0.16% overnight to $93.275.

Dry weather caught up with winter wheat planting last week as progress fell closer to the five-year average. For the week ending October 18, winter wheat sowing advanced 9% to 77% complete. The five-year average of 72% complete for the same time period crept closer to sowing paces as delays due in large part to dry soil conditions weighed on planting progress.

Emergence rates slowed due to persistent dry soil conditions as well. As of Sunday, 51% of the planted winter wheat crop had emerged, up 10% from the previous week but only 3% higher than the five-year average. States in the Southern Plains shouldered the majority of the delays, namely Oklahoma and Nebraska, which fell 6% and 9%, respectively, behind the five-year average for the week.

Wheat export shipments took an uncharacteristic dip in yesterday’s export inspections report from USDA. For the week ending October 15, wheat volumes weighed and/or inspected for export dropped by 10.1 million bushels from the previous week to 8.8 million bushels.

Marketing year to date wheat loading paces have held steady at nearly 6% higher than the same period during the prior marketing year, so yesterday’s readings were slightly surprising, especially as strong export demand for wheat continues to strengthen cash offerings for wheat in the Pacific Northwest and U.S. Gulf.

Weather

Winter weather will continue to batter the Northern Plains and Upper Mississippi River Valley today, according to NOAA’s short-range forecasts. Wisconsin and Minnesota are expected to receive an inch of precipitation in the next 24 hours, slowing corn and soybean harvests in the region. Rain showers will persist in the Eastern Corn Belt with up to an inch of accumulation expected in Southern Illinois and Indiana. Skies are likely to clear in the Eastern Corn Belt by Thursday, but will remain snowy and rainy in the Northern U.S.

Financials

Coronavirus cases in the U.S. rose by 59,711 to 8,215,605 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. The death toll increased by 458 lives from yesterday to 220,134 deaths as of press time.                                                                                      

Over 4 million acres of California land has burned this year due to massive wildfires and persistent drought in the Western U.S. Ranchers have been hit especially hard as rangelands, national forests for grazing, and even entire herds of cattle have gone up in flames since the wildfires began several months ago. California’s cattle industry only accounts for 2% of the total U.S. bovine herd and the damaged herds and acreage are not likely to cause significant shortages at the meat counter. But the industry faces an uphill battle to rebuild as severe weather events become increasingly commonplace.

Water Street Solution’s Darren Frye wants producers to ask themselves, what do you run your farm by? The most common traits he has found include values and mission, future goals, and farm financials. Having a sound grasp on these three items will provide your business with a strong foundation to achieving success. Check out Frye’s latest Finance First column for more details on how to utilize these elements in daily management.

U.S. stock futures were on the upswing as investors remain optimistic about Congressional deadlines for a potential stimulus package. S&P 500 futures traded 0.65% higher to $3,445.00 on the sentiment.

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