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Morning Market Review for Oct. 26, 2020

Wheat tumbles on Russian rains. (Comments are updated by 7:30 a.m. Central Time.)

Corn edges lower on favorable harvest forecasts; soybeans mixed

  • Corn down 1-2 cents
  • Soybeans unchanged to up 1 cent, soyoil up $0.64/lb, soybean meal down $2.9/ton
  • Wheat down 4-13 cents

*Prices as of 6:55 am CDT.

Quote of the Day: “Without subsoil moisture, we could see a 2012 repeat,” a Nebraska corn grower warned of depleted soil moisture levels. 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

Clear weather forecasts in the Midwest will likely pave the way for an uptick in harvest activity this week. A round of trader profit-taking was also likely at play in this morning’s lower prices. December futures traded $0.02/bushel lower to $4.1725. March 2021 futures shed $0.0175/bushel to $4.185.

Ukrainian corn prices strengthened last week after agricultural consultancy APK-Inform slashed 2020 corn yields due to a severe drought during the growing season. The consultancy’s forecast of 2020 corn yields now ranges between 1.0 billion – 1.2 billion bushels compared to 2019’s harvest volume of 1.4 billion bushels.

As of last Thursday, Ukrainian farmers had combined 52% of planted 2020 acreage. Export prices for Ukrainian corn rose $0.51/bushel last week to $5.92 - $6.02/bushel as prospects for smaller exportable supplies weighed on traders’ minds. Ukraine is the world’s fourth largest corn exporter.

A week of rain and snow delays will likely stall harvest progress for corn in today’s Crop Progress report. A week ago, 60% of the U.S. corn crop was harvested. Today’s report will likely show harvest progress advancing in the Plains, but stalling advancement in the Upper Mississippi River Valley and Eastern Corn Belt.

Last week’s delays harken back to 2019 harvesting conditions and raise concerns about yield loss and how long delays will last as cooler temperatures settle in. But a silver lining – weather outlooks for this week will dry out beginning Wednesday, with warmer temperatures on the horizon by the end of the week.

Planting delays in Brazil due to dry weather and harvest delays in the Upper Midwest boosted speculator support in commodities according to the most recent Commitment of Traders report for the reporting week of October 14-20.

CFTC’s weekly report, issued last Friday, found speculators ever more bullish towards corn after adding 32,680 long positions to their portfolio. Money managers grew their net buying position to 218,825 contracts, the third-highest level on record for the time of year.

Conversely, producers added 118,385 short positions to their portfolios for the week ending October 20, the fifth-largest weekly addition of short contracts by growers since weekly position data began recording in 2006. As December futures prices rose $0.1775/bushel during the reporting period and surpassed the pivotal $4/bushel benchmark, growers booked steady sales amid tight carry in the market.

Producers ended the week as net sellers of corn to the tune of 469,159 contracts. It was the third-largest short covering by producers on record for the time of year.

Corn futures prices have added nearly a dollar per bushel in the last month, AgMarket.Net’s Matt Bennett writes. Will the rally last through harvest? Steady basis levels are not likely to move soon, but that doesn’t mean it’s time to get greedy. Bennett advises taking advantage of the recent runup in prices in the latest Ag Marketing IQ column.

Soybeans

Soybeans were mixed in overnight trading as strong Brazilian soybean exports to China rattled U.S. export confidence. Profit-taking was also at play after prices matched four-year highs on strong Chinese demand and dry planting conditions in Brazil.

November futures were unchanged to $0.0075/bushel higher this morning at $10.845. December soyoil futures tacked on a $0.64/lb gain to $34.75 while December soymeal futures shed $2.9/ton to $383.50 as domestic feed demand has waned in response to rising prices.

Chinese customs data released yesterday found China’s September soybean imports from Brazil to increase 51.4% from a year ago. China purchased a total of 266.4 million bushels of soybeans from Brazil in September 2020, an increase of 90.4 million bushels from 2019.

The soybean harvest slowed last week, with updated harvest paces expected from USDA’s weekly Crop Progress report later today. As of last week’s report, 75% of the crop was harvested with the majority of harvest remaining in the Eastern Corn Belt and South.

Last week’s snow and rain will likely have less of an impact on soybean harvests in comparison to corn. Soybean harvest is largely completed in the Northern Plains and Upper Mississippi River Valley, where the majority of rain and snow activity was centered last week. Corn harvest still has a ways to go in that area where the average completion rates ranged between 47% - 59%. Soybeans were 72% - 96% harvested in the same region, so harvest delays in the area may be less significant compared to corn.

Rains forecasted in Brazil last weekend failed to materialize substantial precipitation in many key growing areas. The prospect for a smaller Brazilian soybean crop as a result weighed on traders’ minds and sent speculators trimming 6,167 short positions for the week ending October 20.

Hedge fund managers remain net buyers of soybeans and grew their position to 231,892 contracts for the reporting week. Fund interest increased in soybeans late last week which will likely drive an even wider long position for money managers in next week’s report.

On the flip side, producers added 16,631 short positions on the week to grow their net selling position to 373,040 contracts. A $0.21/bushel rise in November futures prices sent farmers booking cash sales, though volumes varied as futures prices fluctuated during the reporting period.

The record-breaking short covering continued from previous weeks. Friday’s producer soybean position was the largest short position for the time of year and the second largest all-time volume.

Money managers also continued to set records as they increased their bullish prospects on soybean meal in the early days of an Argentine oilseed workers’ strike. For the week ending October 20, speculators added 5,778 long positions to widen their net buying position to 81,636 contracts – a new high for the time of year.

Wheat

Contract

Price Change*

Price*

Chicago SRW – December Futures

-$0.0875

$6.24

Kansas City HRW – December Futures

-$0.135

$5.5625

Minneapolis HRS – December Futures

-$0.04

$5.735

 

Rains in Russia last week and over the weekend improved growing conditions for the 2021 winter wheat crop, sending international wheat prices lower as concerns about 2021 yields abate. Rains and snow expected in the Southern Plains today will help alleviate dry soil conditions for the newly planted 2021 hard red winter wheat crop. A stronger dollar also contributed to weaker prices in the wheat complex this morning as the ICE Dollar Index rose 0.22% to $92.970.

Last week’s rain and snowfall replenished depleted soil moisture conditions in the Northern U.S. last week. Snowfall over the Central Plains this weekend could help soil conditions as winter wheat crops begin to emerge.

Last week’s Crop Progress found 77% of prospective winter wheat acres planted as of October 18, with 51% of those acres featuring emerging wheat plants. While planting progress in today’s report could stall due to last week’s weather, the much-needed precipitation could help emergence rates for the young crop.

Speculators widened their long positions on Kansas City and Chicago wheat over the October 14 20 reporting week on increasingly dry winter wheat planting conditions in the Black Sea and the U.S. Southern Plains. Money managers added 11,978 long positions to their net buying position on Chicago soft red winter wheat to widen it to 49,728 contracts.

Similarly, speculative managers trimmed 5,142 short positions from Kansas City hard red winter wheat futures and options for the week. Their net buying position grew to 38,146 futures and options contracts.

For the first time in over 2 years, speculators became net buyers of Minneapolis spring wheat in Friday’s Commitment of Traders report. Rising prices in the wheat complex carried Minneapolis prices along for the ride as dry global conditions plague planting and harvesting conditions in major global wheat producing countries.

For the week ending October 20, speculators trimmed 5,058 short positions to become net buyers of spring wheat to the tune of 4,492 contracts.

Weather 

It’s going to be a chilly day in the U.S. Plains and Upper Midwest, according to NOAA’s short-range forecasts. Snow from the Central Rockies this weekend will shift into the Central and Southern Plains today through Wednesday with at least two inches of precipitation accumulation replenishing depleted soil moisture levels in the region. Skies will clear in the Midwest and Northern Plains this week, allowing farmers to finish harvest 2020 activities.

Tropical Storm Zeta will likely become a hurricane later this morning. The storm, which will move over the Yucatan Peninsula by this evening, is expected to reach the Northern Gulf coast by Wednesday. Sustained winds from Zeta have been clocked at 70 mph and are expected to increase as it moves over the Yucatan.

Financials 

Coronavirus cases in the U.S. rose to 8,637,109 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. The death toll increased to 225,239 deaths as of press time. U.S. cases rose by nearly 84,000 on Sunday, surpassing Saturday’s toll as the highest daily caseload in the U.S. since the pandemic’s onset. While increased testing has contributed somewhat to higher cases, the pandemic has spread rapidly through rural U.S. areas in recent weeks.

Extreme weather conditions around the world are slashing crop yields and sending food prices soaring. Dry weather in the U.S., Russia, and Brazil are having detrimental impacts on soybean and wheat yields while flooding in Vietnam, Malaysia, and Indonesia has damaged palm trees and inundated rice fields.

The United Nations estimates that rising food inflation could mean that one in ten world citizens goes hungry in 2020. Plentiful ending stocks were forecasted in 2020/21 marketing years, but reduced harvests in many of the world’s top food-producing countries may limit exportable supplies.

As more countries abandon a “just-in-time” delivery method for food production in favor of a stockpiling mentality, American farmers are poised to benefit from this shift. But this more expensive system of food delivery will likely exact a socioeconomic toll on world’s most vulnerable populations.

Happy Monday! Ready to attack this week head on? Here’s a quick recap last week’s top ag marketing stories to kickstart your market planning for the week. Also, here are seven other ag-related stories that were also highly relevant to farmers last week.

Farmland values continue to hold steady in the pandemic era. Rising grain prices in the past couple months as well as additional governmental aid to farmers and low interest rates has allowed land assets to retain their values exceptionally well in times of extreme economic turbulence.

In fact, farmland auctions barely slowed down in 2020 despite COVID-19 restrictions. Officials with the Federal Reserve Bank of Kansas City, FarmerMac, and University of Illinois outline their improving outlook for U.S. farmland in a recent webinar hosted by USAgriculture.

U.S. stock futures tumbled lower this morning as the October surge in coronavirus cases in the U.S. and Europe erodes optimism for the economic outlook this winter. Congress and the White House failed to reach a deal on a stimulus package. Losses are likely limited by strengthening economic progress in China. The S&P 500 index fell 0.90% on the sentiments to $3,421 this morning.

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