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Morning Market Review for Oct. 23, 2020

Wheat reclaims gains and corn rises on dry weather. (Comments are updated by 7:30 a.m. Central Time.)

Beans wobble on rains in Brazil

  • Corn up 1-2 cents
  • Soybeans down 1 cent, soyoil down $0.06/lb, soybean meal up $3.4/ton
  • Wheat up 3-6 cents

*Prices as of 6:55 am CDT.

Quote of the Day: “Corn averaged 220 bpa,” and “soybeans average 69 bpa,” according to a central Illinois Farm Futures reader. 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

December corn futures matched yesterday’s 14-month peak this morning, supported by strong export demand – primarily from China. Planting concerns in South America and harvest worries in Ukraine due to dry weather continue to underpin strength in the corn market. December futures rose $0.0125/bushel on the sentiment to $4.175 as March 2021 futures tacked on a $0.02/bushel gain to $4.2025.

Chinese corn imports soared at over 39.4 million bushels for the month of September, according to customs data released overnight. Tight supplies and production concerns have led the world’s second largest economy to purchase nearly 263.8 million bushels year-to-date from international sellers.

This volume is significant because China’s annual tariff-rate quota (TRQ) is currently set at 283.5 million bushels per year for corn imports – a level they are likely to exceed at current shipping paces. China has never before used the entire quota, but analysts expect officials in Beijing to issue more quotas to source enough corn to quell rising domestic corn prices amid food security concerns.

With China’s outstanding corn export sale volume from the U.S. reported at 347 million bushels in yesterday’s weekly export sales report, market signals clearly favor continued corn demand from China going forward.

Rising corn prices and above average rainfall volumes are leading South African corn growers to increase corn acreage for the 2020/21 marketing year. Trade estimates peg prospective acreage at 6.5 million acres, 8.3% higher than last year’s crop. The 2019/20 corn crop is forecast at 604.4 million bushels, down about 0.5% from September estimates.

Today’s monthly Cattle on Feed report is likely to show an increase in the livestock herd as marketings show one of their strongest reporting months since the pandemic’s onset. As of October 1, trade estimates place cattle on feed at 12.0 million – 12.1 million head with an average of 12.022 head expected in today’s report.

Placements of new cattle in feedlots carrying over 1,000 head of animals in September are expected to range between 2.1 million – 2.3 million head with an average estimate of 2.2 million head anticipated when the report is released this afternoon, indicating a slight expansion in the cattle industry as output volumes at meatpacking plants improve.

Marketings for cattle during the month of September are predicted at 1.946 million head as strong retail demand for beef continues to drive packing margins higher. Trade estimates suggest today’s total marketing volume for September will likely range between 1.939 million – 1.962 million head.

Corn export sales rose by nearly two thirds from the previous reporting period to 75.1 million bushels for the week ending October 15. Buyers cancelled 2.9 million bushels of corn ordered for export during the reporting week, a minor increase from 763,736 bushels a week ago but still overall positive for corn export demand.

Outstanding new crop corn sales rose to 903 million bushels as export shipments rose 10% to 35.4 million bushels. China led all buyers with 14.3 million bushels for the week. China currently has ordered 347 million bushels of 2020/21 corn from U.S. exporters. Mexico is the next highest buyer at 151.3 million bushels.

Soybeans 

Soybean futures wobbled this morning as increased rains in Brazil eased trader concern about planting conditions and ultimately yield forecasts. Some profit taking also ensued this morning after the November contract posted a nearly six-year high in Tuesday’s trading session.

November futures prices shed $0.015/bushel to $10.7225 this morning as December soyoil futures followed $0.07/lb lower to $33.62. December soymeal continued to rally on feed demand and export uncertainty in Argentina, rising $3.4/ton in overnight trade to $385.80.

New crop soybean sales eased slightly for the week ending October 15. New sales fell by 18% on the week to 83.4 million bushels. Outstanding sales for the week totaled 1.25 billion bushels, down from last week due in large part to higher export loading paces.

Soybean shipments for the week rose 8% to 92.5 million bushels, the largest weekly soybean export shipment volume since November 2017. Soy shipments to China accounted for 72 million of those bushels as China shows few signs of easing demand any time soon. Nearly 613 million bushels of new crop soybean sales are awaiting loadout from the U.S. to China as of October 15.

Wheat

Contract

Price Change*

Price*

Chicago SRW – December Futures

+$0.0525

$6.28

Kansas City HRW – December Futures

+$0.0575

$5.66

Minneapolis HRS – December Futures

+$0.035

$5.78

Wheat futures clawed back recent losses this morning on a weaker dollar and continued worries about dry planting conditions in Russia continue to throw 2021 yield estimates into jeopardy. Russia is expected to have dry weather continue through next week, though a few showers are on the radar as November begins. The ICE Dollar Index fell 0.22% overnight to $92.760.

Argentina has received long overdue rains over the past two weeks after several months of severe drought exacerbated by La Niña weather conditions. But the rainfall likely did little to help the Argentine wheat crop, which is already 3% harvested.

Frost damage also is expected to limit yields on 16.1 million acres of wheat, which are now forecast at 617.2 million bushels, down 25.7 million bushels according to the Buenos Aires Grains Exchange. Argentina’s harvest will likely pick up more momentum in the weeks to come with increasing focus on corn and soybean planting progress in the world’s seventh largest exporter of wheat.

New crop U.S. wheat export sales rose for the week ending October 15 amid strong international demand. For the reporting week, sales added 2.3 million bushels to 24.7 million bushels.

However, export demand remains constrained by corn and soybean bushels dominating shipping channels as they are harvested out of Midwest fields. Wheat export shipments fell 11.6 million bushels from the previous week to 7.1 million bushels.

The volume was the lowest full weekly reading in the current marketing year and highly uncharacteristic of marketing year to date wheat export loading paces which prior to this week, were 14% higher than the five-year average.

Wheat export volumes remain strong, supported by rising Black Sea prices and a weakening dollar. But last week’s export volume indicates more shipping capacity is needed for wheat in the nation’s waterways to allow the product to flow into international markets.

Weather

Midwest and Plains farmers will receive a brief reprieve from snow and rain late today and through tomorrow only to have harvest progress again halted by snowfall on Sunday, according to NOAA’s short-range forecasts. Today’s rain accumulation in the Eastern Corn Belt is likely to be light – not topping more than three quarters of an inch in most areas. But it will likely provide farmers with a narrow – if any – window for soils to dry out before the new snow system moves in by Sunday afternoon.

Financials

Coronavirus cases in the U.S. rose by 72,846 to 8,411,262 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. The death toll increased by 839 lives from yesterday to 223,059 deaths as of press time.

The Coronavirus Food Assistance Program (CFAP) and other government aid programs helped to minimize economic damage from the fallout of the pandemic that otherwise could’ve devasted the farm economy. In a recent webinar hosted by Farm Credit leadership, lenders noted that debt-to-asset ratios are rising while working capital balances are falling across farm country. While major disaster may have been diverted thanks to government intervention, tightening credit conditions will leave little room for additional adversity for the ag sector in what remains of 2020.

U.S. stock futures were slightly higher this morning as traders awaited data from U.S. manufacturers which will provide more clues about the pace of pandemic recovery in the U.S. economy. Continued negotiations over a stimulus package between the White House and Democrats also boosted investors’ sentiments this morning as S&P 500 futures rose 0.28% to $3,459.25.

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