Morning Market Review for Oct. 29, 2020

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Grains selloff on rising COVID-19 cases continues. (Comments are updated by 7:30 a.m. Central Time.)

Grains selloff on rising COVID-19 cases continues

  • Corn falls below $4/bushel benchmark; Chicago wheat fights to stay above $6/bushel
    • Corn down 5-7 cents
    • Soybeans down 2-5 cents, soyoil down $0.28/lb, soybean meal down $2.6/ton
    • Wheat down 3-8 cents

 

*Prices as of 6:50 am CDT.

 

Quote of the Day: “Mold developing due to excess moisture!” an Ohio corn farmer fretted about recent rains that bogged down harvest season in the Eastern Corn Belt. 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: Rising coronavirus cases in the U.S. and Europe fueling economic uncertainty sent corn futures below the $4/bushel benchmark this morning. December futures dropped $0.07/bushel to $3.945 on the volatility while March 2021 futures shed $0.06/bushel to $3.9825.

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Corn export sales expected this morning will likely be slightly higher compared to the previous week for the reporting period ending October 22, according to trade estimates. Market analysts peg today’s new crop corn sales between 27.6 million – 59.1 million bushels.

 

At least 23.5 million bushels have already been accounted for via daily flash sales reported via USDA. Of that total, nearly 13.6 million bushels were booked by buyers from unknown destinations. Mexico ordered another 9.9 million bushels for delivery in the 2020/21 marketing year.

Ethanol production recovered last week after dipping 2.6% lower the previous week. For the reporting week ending October 23, ethanol output recovered the previous week’s declines, rising 1.2 million gallons/day to 39.5 gallons/day. That translates to approximately 102.5 million bushels of corn consumed as feedstock for the biofuel, matching the highest total in seven weeks.

Ending stocks for the week dropped 0.6% on the week to 823 million gallons as the industry braces for a potential return of tightened restrictions surrounding the pandemic. It was the lowest weekly stock volume in nearly four years, suggesting plants are running below capacity to more efficiently absorb any potential downturns in the fuel market.

Fuel demand also saw a slight recovery in yesterday’s report from the Energy Information Administration. Weekly gasoline consumption improved 10.8 million gallons/day to 358.9 million gallons/day. While it was a strong improvement from the prior week, fuel demand remains nearly 12% lower than pre-pandemic levels.

Ethanol blending rates held strong at 11.01% for the week ending October 23. Rates typically hover close to the 10% benchmark, which could signal reduced ethanol production in next week’s report if fuel demand drops.

 

Soybeans: Soybean futures also took a hit on the resurgence of COVID-19 cases around the world, though losses were limited by export demand prospects. November futures prices shed $0.0525/bushel to $10.52. December soyoil futures fell $0.28/lb to $33.14 while December soymeal futures dropped $2.6/ton on lower soybean prices to $374.10.

More strike action is anticipated after a potential compensation offer to the Argentine oilseed workers’ union was deemed “insufficient.” The union was dissatisfied with a projected COVID-19 bonus payment, increasing the likelihood that last week’s 24-hour strike would be duplicated.

Argentina is the world’s largest exporter of processed soy products. While last week’s strike did not significantly impact trade flows, the economic uncertainty added by a potential strike has led to higher global prices for soy products.

Soybean export sales are expected to ease slightly in today’s export sales report. Trade estimates place the new crop sales at 36.7 million – 73.5 million bushels.

The reporting week of October 16 – 22 was a busy one for international soybean buyers. A total of 29.7 million bushels were ordered via large daily sales as reported by USDA. China booked 6.4 million bushels, Mexico ordered 5.6 million, and an unknown buyer earmarked 17.6 million bushels.

Export shipments for soybeans are expected to climb even higher than recent peaks today. Monday’s export inspections report found 12.7 million more bushels of soybeans had been weighed for export inspection during the reporting week for a total of 97.9 million bushels.

 

Wheat

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Wheat prices trended lower this morning due to the economic fallout surrounding rising COVID-19 cases. Rains in key wheat-producing regions in Russia and the U.S. Southern Plains also limited any upward price mobility. A stronger dollar was the final nail in the coffin for the wheat complex this morning as the ICE Dollar Index rose $0.301 to $93.710 as investors sought safe haven asses amid the increasing economic volatility encapsulating the latest virus resurgence.

 

A USDA attaché estimates 2020/21 Argentine wheat production nearly 59 million bushels lower than previous USDA expectations. La Niña drought conditions withered the wheat crop to 639.3 million bushels, the attaché forecasted. Dry La Niña weather conditions are expected to continue to stress the crop until at least the end of the year.

 

New crop wheat export sales are also expected to trend lower in this morning’s export sales report despite an uptick in interest from Southeast Asian buyers. Market forecasters predict today’s total will range between 7.3 million – 25.7 million bushels.

 

South Korea booked a large daily sale on October 22 as reported by USDA’s daily flash sale notices. Nearly 4.8 million bushels of wheat were ordered for eventual export to the Southeast Asian country.

 

After a lackluster week last week, export shipments for wheat could see an improvement this week. Export inspections data released for the reporting week on Monday saw a 50.8% increase on the week to 13.4 million bushels shipped to international destinations.

 

Weather: Rains will shift into the Eastern Corn Belt today, according to NOAA’s short-range forecasts. At least an inch of precipitation accumulation is expected, adding to waterlogged soils in the region amid peak harvest season. Skies should clear across the Midwest by tomorrow morning, giving soils a chance to dry out as harvest progress resumes full speed ahead.

 

Financials: Coronavirus cases in the U.S. rose by 79,638 to 8,859,432 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. The death toll increased by 973 lives to 227,701 deaths as of press time.

U.S. stock markets fought to recover losses from yesterday’s selloff due to rising COVID-19 cases across the country. GPD data to be released this morning will show a record recovery rate in the third quarter, but GDP is expected to remain well below pre-pandemic levels, likely limiting any gains in the stock market this morning.

GDP data will largely drive companies’ confidence in the future. If GDP data is not strong enough this morning, companies may revert back to March measures, where they completely avoided future earnings projections on the basis of an uncertain economic outlook. Such a reaction could be devastating to equities markets. S&P 500 futures traded 0.56% higher at last glance to $3,281.75.

Officials across the ag industry praised the U.S. EPA’s announcement to allow the herbicide dicamba to be used until the completion of the 2025 growing season. New regulations will go into place to manage effective use of the herbicide, including adding a volatility reduction agent, using downwind buffers of 240 – 310 feet, simplifying usage instructions, and a June 30 cutoff date for soybean growers and July 30 deadline for cotton growers seeking to register for dicamba use.

The presidential election is just around the corner! The latest edition of the Midweek Markets podcast outlines the two candidates policies on agriculture. Last week’s This Business of Farming column about what keeps farmers up at night generated a lot of new reader responses about the state of politics in farm country. Rural America remains deeply divided about the future direction of America, casting uncertainty to the future following next week’s election results.

 

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