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Morning Market Review for Oct. 21, 2020

Markets-122316-scyther5-ThinkstockPhotos-2000 scyther5/Thinkstock
Soybeans rise on Argentine oilseed workers’ strike. (Comments are updated by 7:30 a.m. Central Time.)

Harvest delays support modest price increases for corn

  • Corn up 1-3 cents
  • Soybeans up 7-10 cents, soyoil up $0.15/lb, soybean meal up $6.7/ton
  • Wheat up 1-2 cents

*Prices as of 6:55 am CDT.

Quote of the Day: Damage estimates from a turbulent last leg of crop development continue to roll in from growers. Dry conditions in northern Ohio over the growing season prompted one farmer to compare 2020 yields to those of the 1988 drought. “This is going to be the poorest corn crop since 1988,” the grower lamented.

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

Harvest delays due to snow and rain in the High Plains and Midwest helped prop up price gains in the corn complex this morning. Prices soared to their highest levels in 14 months overnight, with additional support from strong Chinese export demand and dry planting conditions in Brazil also lending strength to this morning’s gains. December futures traded $0.035/bushel higher to $4.1225. March 2021 futures tacked on a $0.025/bushel gain to $4.1575.

Cash corn prices rose at processor and elevator locations across the Corn Belt yesterday to compete with rising export demand in the U.S. Gulf. With a tight carry in the futures market and strengthening basis levels, farmers have little incentive to fill storage bins. Cash sales have remained steady as the December 2020 corn futures contract trades over the $4/bushel benchmark.

Location

10/19/2020 Basis (in cents/bushel)

10/20/2020 Basis (in cents/bushel)

Daily Change

Elevators

     

   Cincinnati OH

-6

-4

2

   Burns Harbor IN

-15

0

15

   Lincoln NE

-25

-25

0

   Chicago IL

-40

-40

0

   Council Bluffs IA (elevator)

-20

-20

0

Processors

     

   Chicago IL

27

27

0

   Decatur IL

0

0

0

   Cedar Rapids IA

-5

-4

1

   Blair NE

-22

-18

4

River Terminals

     

   Toledo OH

-15

-15

0

   Seneca IL

-16

-16

0

   Savanna IL

-23

-25

-2

   Davenport IA

-23

-23

0

   Morris IL

-45

-45

0

Rail

     

   Columbus OH

10

10

0

   Evansville IN

8

8

0

   Hereford TX

100

100

0

   Fort Worth TX

100

100

0

Ethanol Plants

     

   Linden IN

-30

-30

0

   Union City IN

0

0

0

   Annawan IL

-7

-7

0

   Council Bluffs IA

-22

-22

0

December futures price as base.

     

Source: Refinitiv

     

 

As expected, yesterday’s U.S. Bioenergy Statistics quarterly report showed 4.582 billion bushels of corn were consumed in the 2019/20 marketing year for ethanol production. The estimate is 524 million bushels fewer than ethanol corn consumption in 2018/19 due in large part to a reduction in fuel demand amid the pandemic.

Fourth quarter ethanol production only consumed 1.2 billion bushels of corn, up from 955 million bushels in March – May 2020. Fourth quarter output volumes tend to be the highest of the year, as the June – August reporting months fall in the peak summer travel period. But this year’s fourth quarter production estimates were the second lowest of the year as markets readjust to pandemic-era demand.

Only 34.9% of all corn used in 2019/20 was used for fuel ethanol production, the lowest level since the 2008/09 marketing year. Production remains tight compared to pre-pandemic levels as lower blending and export volumes mute any measurable usage gains. Capacity continues to tighten to adjust to the new market conditions, with ending ethanol stocks in July 2020 at 830.9 million gallons – the lowest level since December 2016.

What does this mean for today’s weekly ethanol production update from the U.S. Energy Information Administration? Likely more of the same – sideways production volumes 6% - 14% lower than pre-pandemic levels in early 2020. As a large part of the workforce remains homebound to curb the virus’ spread, fuel consumption will continue to be an average of 9.5% lower than pre-pandemic demand.

Last week’s Petroleum Inventory Status report from the EIA showed a second consecutive week of strengthening ethanol production, with weekly output up 1.5% to 39.4 million gallons/day. The increase was largely attributed to schools resuming in-person instruction in early October. But weekly output levels as of last week remain 11% lower than production in January 2020. If today’s reading breaks out of that range, markets could see bullish price reactions.

Carry in the corn market is currently tight, making storage hedge strategies slightly more tricky than usual. But that’s par for the course in 2020, Farm Futures contributing analyst Bryce Knorr writes. Knorr digs into carry behaviors and why current strong basis prices are encouraging farmers to sell off the combine this fall in the latest Ag Marketing IQ column.

Soybeans 

More Chinese demand and dry planting conditions in Brazil sent soybean prices higher this morning. November soybean futures rose $0.10/bushel to $10.74 on the sentiments. December soyoil futures added $0.15/lb to $33.46 while December soymeal futures continued $6.7/ton higher to $378.60 on dwindling exportable soymeal supplies in Argentina.

Soymeal prices also derived support from strong U.S. pork and poultry feeders. Rising margins eased slightly this morning despite the upswing in export demand.

Cash soybean prices inched up at an elevator location along the Ohio River yesterday. Strong export demand in the U.S. Gulf also lifted cash prices along the Mississippi River. Basis at crush plants across the U.S. has widened in recent days to compete with increasing export demand. Harvest activity remained slow amid rain and snow delays across the Midwest.

Location

10/19/2020 Basis (in cents/bushel)

10/20/2020 Basis (in cents/bushel)

Daily Change

Elevators

     

   Cincinnati OH

-5

0

5

   Chicago IL

-5

-5

0

   Burns Harbor IN

-15

-15

0

Processors

     

   Decatur IL

10

10

0

   Decatur IN

-15

-15

0

   Morristown IN

-15

-15

0

   Lafayette IN

-12

-12

0

   Sioux City IA

-40

-40

0

   Des Moines IA

-30

-30

0

   Cedar Rapids IA

-30

-30

0

   Council Bluffs IA

-47

-47

0

   Lincoln NE

-30

-30

0

River Terminals

     

   Toledo OH

-12

-12

0

   Seneca IL

-25

-25

0

   Savanna IL

-27

-24

3

   Davenport IA

-29

-29

0

   Morris IL

-25

-25

0

Source: Refinitiv

     

November futures price as base.

     

 

Contract negotiations over higher wages between the Argentine Labor Ministry and SOEA, the Argentine oilseed workers’ union, remain at a standstill as the soy processor workers’ strike continues. A COVID-19 bonus paid out to workers at a Chinese COFCO location enabled some soy processing to continue in the country today. The bonus enables some trade flows to continue in the world’s largest exporting country of soy products.

Wheat

Contract

Price Change*

Price*

Chicago SRW – December Futures

+$0.01

$6.335

Kansas City HRW – December Futures

+$0.0325

$5.7425

Minneapolis HRS – December Futures

+$0.025

$5.8025

 

Wheat prices continue to rise on dry and delayed planting conditions in Russia and Ukraine. Ukrainian wheat prices soared to $6.94/bushel FOB, flirting with 21-month highs on concerns over next year’s harvest. A weakening dollar also contributed to this morning’s gains as the ICE Dollar Index fell 0.26% to $92.805.

Cash wheat prices were largely unchanged yesterday across the Midwest and Southern Plains. Farmers have sold most of their 2020 crop but booked a small volume forward sales on the 2021 crop yesterday as futures prices continued higher.

Dry planting conditions in the Southern Plains prevented farmers in the region from booking an excessive amount of new crop sales, however. Farmers remain wary of 2021 yield prospects as persistent dry weather hinders crop development.

Protein premiums on spot hard winter wheat sales in Kansas City delivered via rail were mixed yesterday, as shown below.

HRW Wheat Protein Content   

Basis Range**

Change

Ordinary      

+85/+95

 

11.00%

+105/+115

 

11.20%

+110/+120

 

11.40%

+110/+120

 

11.60%

+110/+120

 

11.80%

+122/+132

 

12.00%

+125/+135

 

12.20%

+130/+140

 

12.40%

+130/+140

-5

12.60%

+130/+140

-5

12.80%

+130/+140

-5

13.00%

+135/+145

 

13.20%

+135/+145

 

13.40%

+135/+145

 

13.60%

+135/+145

 

13.80%

+135/+145

 

14.00%

+145/+155

+7

**Premium in cents/bu. over December futures

Source: Refinitiv

 

Wheat harvest in Ukraine is finished and farmers across the country are racing to finish planting winter crops. About 76% of prospective winter wheat acreage has been planted already – a total of 11.4 million acres. Planting conditions continue to suffer amid the worst drought conditions in Ukraine in 10 years. The severe drought has left only 10% - 15% of arable land able to plant winter crops with any sort of hope for decent yields in 2021.

Weather

More snowfall will attempt to top yesterday’s records in the Northern Plains today. Another system from the Northern Rockies will move in to the region through tomorrow, blanketing the Dakotas and Minneapolis with up to a foot of accumulation in South Dakota, according to NOAA’s short-range forecasts. Light rain showers will continue through the Eastern Corn Belt, with up to an inch possible in Iowa over the next 24 hours as harvest delays continue across the Midwest.

Growers across the Plains and Midwest finally found some relief this week from dry temperatures exacerbated by La Niña weather conditions, despite delays to harvesting activities. In the short-run, changes for above average rainfall will range between 33% - 40% across much of the Heartland, with changes increasing to as much as 50% in the far Eastern Corn Belt, according to NOAA’s 6 to 10-day outlook.


Precipitation graphic

But the rain delays will likely be short-lived. By the time Halloween rolls around late next week, showers will abate and leave the vast majority of the Midwest and Plains with 33% - 40% chances for below normal precipitation activity. Ohio and Pennsylvania are the exception, with changes of above average rainfall estimated between 33% - 40%.

A wet spring delayed planting activity in parts of the Eastern Corn Belt, so this updated forecast will present a new set of challenges to producers anxiously awaiting to complete harvest activities in that region.

Temperatures will likely trend cooler over the next week with the greater U.S. crop growing region experiencing a 33% - 80% chance of below average temperatures between now and October 29. Temperatures could warm slightly at the onset of November but will likely continue to trend below average to kickstart the new month.

Temperature graphic

Financials

Coronavirus cases in the U.S. rose by 59,461 to 8,275,066 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. The death toll increased by 949 lives from yesterday to 221,083 deaths as of press time.

Succession planning is an emotional undertaking, but that doesn’t mean that feelings should get in the way of penciling out the costs incurred in transitioning farm ownership. As Next Gen Ag Advocates’ Mike Downey lines out in the latest More than Dirt column, calculating buy-out costs before a will is written and regularly adjusting values to reflect current land prices and farm incomes can prevent sweat equity from being discounted when the will is executed.

U.S. stock markets backed off yesterday’s optimism about a potential stimulus package from Congress this morning, sending equities markets slightly lower in overnight trading. S&P 500 futures traded 0.08% lower to $3,429.50 at last glance.

“It just seems like we are in a very fragile period for markets, with people on a bit of a knife edge with what’s happening with COVID and in the approach to the U.S. election,” Altaf Kassam, State Street Global Advisors’ head of investment strategy and research for Europe, the Middle East and Africa told the Wall Street Journal this morning. “All these back-and-forths over the stimulus deal don’t help, though. It’s more noise than signal, and markets are getting pushed around by it.”

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