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Morning Market Review for October 20, 2021

scyther5/Thinkstock Markets-122316-scyther5-ThinkstockPhotos-2000
Soy on pace for fifth day of gains. (Comments are updated by 7:30 a.m. Central Time.)

Plus – soymeal rally points to a soybean demand imbalance

  • Corn up 2-5 cents
  • Soybeans up 6-11 cents; Soymeal up $0.90/ton; Soyoil up $0.96/lb
  • Wheat up 2-5 cents

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China stole the show overnight with several key pieces of information released to the public following government meetings with state planners that are expected to last through the weekend.

Soybean imports

  • According to China’s General Administration of Customs, September soybean imports into China were down for another month following negative crush margins and low hog prices.
  • Soybean shipments into China from Brazil in September were 18% lower than a year ago on the sentiments.

Untimely fall rains

  • Incessant rains in China over the past few weeks continue to delay fall harvesting and winter wheat sowing.
  • State planners are hoping that the winter wheat crop can be salvaged before winter and in the early stages of next spring’s emergence. Increasing acreage is expected to ensure a bumper crop.
  • About 80% of the autumn crops have been harvested, though quality concerns amid the heavy rainfall could limit the usability of the harvested grain.

The energy crunch

  • Chinese commodity markets tumbled overnight as state planners consider another round of factory closures to curb sky rocketing coal prices.
  • Coal powers about 60% of China’s electric grid. Factory closures earlier this month contributed to lower-than-expected GDP ratings for the world’s second largest economy
  • Factory closures also mean that soybean processing would stall in China during peak fattening season for the Chinese hog herd. That could have a potentially negative impact on global soybean prices if it occurs again.

Fertilizer shortages

  • Another Chinese state planner cited high coal prices as a primary reason to further crack down on fertilizer capacity and sales in China.
  • National Development and Reform Commission (NDRC) spokeswoman Meng Wei said the state would source fertilizer producers coal, electricity, natural gas, and sulfur inputs to ensure domestic chemical fertilizer production.
  • State fertilizer reserves will also be released to Chinese farmers.
  • The government will continue monitoring fertilizer imports and exports, though it remains unlikely the export ban on phosphate and urea will be lifted any time soon.

Pig prices to remain low

  • It is likely that low pig prices will remain at play in Chinese hog markets until after the Lunar New Year Holiday in January.
  • Rapid expansion following the 2018 African swine flu (ASF) outbreak in China’s hog herd has pushed supplies into surplus conditions, dropping futures prices to less than break even levels and triggering a selloff in breeding stock.

 

Corn

Corn prices traded $0.02-$0.05/bushel higher overnight on slower than anticipated harvest progress reported by USDA on Monday. Despite lower energy prices in the overnight trading session, the recent rally in the energy complex has also lent some support to the corn complex.

Soybeans

Soybean prices rose $0.07-$0.11/bushel overnight, on track to notch a fifth straight day of gains triggered by a rally in the soyoil market amid dwindling global edible oil supplies. Export demand continues to battle for U.S. bushels against domestic processors and the prospect of expanding biodiesel production continues to add optimism to the soy complex.

A USDA attaché stationed in Brazil forecasts the 2021/22 soybean crop about 37 million bushels higher than USDA’s current estimate of 5.291 billion bushels. The post factors in a 4% annual increase in soybean acreage this year, topping out at 100.1 million acres. This will likely push Brazilian soybean production to 5.327 billion bushels.

Brazilian soy exports are likely to rise 8% next year on the bin-busting crop to 3.38 billion bushels, according to the post. USDA continues to be slightly more optimistic about higher Brazilian soy exports next year as its estimate from the October 2021 WASDE sits at 3.417 billion bushels.

Bullish forces took soymeal prices for a wild ride yesterday. Soymeal stocks are in short supply currently, as evidenced by lower-than-expected NOPA crush volumes for the month of September, as reported last Friday.

Cash offerings for soymeal at rail terminals have been on the upswing this week as slow farmer soybean sales to processors have limited production, leading to dwindling domestic soymeal supplies. Grain originators have pointed out that many Midwestern growers are currently selling freshly harvested soybeans to fill previously booked contracts or are selling directly on the cash market to export buyers.

Soybean export inspections rose by nearly a third last week on seasonal demand increases, largely from China. However, cash bids at river terminals destined for the U.S. Gulf are beginning to soften as these facilities begin to absorb more supplies than capacity will allow.

But soymeal demand is not going anywhere anytime soon if the U.S. poultry flock has anything to say about it. Weekly egg sets for broilers – a leading indicator for poultry meat production – are 6% higher over the past four weeks than the previous five-year average for the same period.

102021 Weekly egg sets.png

About 55% of U.S. soymeal supplies are purchased and fed to poultry farms in the American Southeast, shipped via railways from the Midwest. Poultry growers are currently in a seasonal lull in terms of flock volumes and egg sets.

However, U.S. chicken demand has been hot this year. Year to date egg set volumes are already 2% higher than a year ago and on pace to set a record high this year. And within the next four weeks, production will begin peaking in advance of New Year’s – and all those weight loss resolutions and new diet intentions.

With soybean export paces picking up over the past couple weeks, soy processors are going to either have to widen cash offerings or hold off on ramping up production schedules until export volumes ease in order to compete by price with export buyers.

Based on the carry in the soybean futures market, it looks like processors may be willing to sit tight and wait for cheaper soybeans for at least the next few weeks before seasonal poultry production begins to ramp up.

That will keep soymeal supplies tight for a little while longer until poultry feeders need to start building those New Year’s supplies. But if export paces do not hold steady in the coming weeks and supplies begin to overflow on the river, processors may take advantage of softer futures prices and ramp up production.

Expect this demand dynamic between processors and exporters to continue over the next couple months leading up to Brazil’s soybean harvest in late January. Until there is some global supply relief, export markets will continue to drive U.S. prices and be the primary influence over consumption patterns.

Wheat

Tight global supplies offset a stronger dollar, lifting prices in the wheat complex $0.02-$0.06/bushel overnight. International demand for wheat remains strong despite higher prices and tightening supplies.

A USDA attaché in Australia forecasts 2021/22 Australian wheat production at 1.157 billion bushels this year, following a second consecutive season of plentiful rains. The second straight bumper crop total matches current USDA estimates for Australian wheat production and suggests the Land Down Under will enjoy another lucrative export season, especially on the heels of spring wheat shortfalls in the Northern Hemisphere this summer.

Australia is the world’s fifth largest wheat exporter and a major global spring wheat supplier.

Another USDA attaché in Algeria expects domestic wheat production to fall by 38% in 2021/22, which will increase import demand for the world’s sixth largest importer. The post estimates that 2021/22 wheat imports into the North African country will reach 294 million bushels despite current government guidance to reduce imports.

Algeria typically sources most of its grain from the European Union, namely France. But despite rapid EU exporting paces so far this year, Algeria has been forced away from primary buyer France and has been increasingly sourcing its wheat from Germany and Russia.

Weather

Yesterday’s winter storm developing in the Central Rockies in Wyoming will push rain and a chance of snow into the Northern Plains and Upper Midwest over the next 24 hours, according to NOAA’s short-range forecasts. Over an inch of precipitation is expected in the region over the next 24 hours. The system will shift into the Eastern Corn Belt by tomorrow.

Financials

Wall Street futures edged lower overnight on concerns about inflation and economic recovery across the globe. S&P 500 futures inched 0.07% lower to $4,508.25 on the sentiments.

Also worth a read on our website, FarmFutures.com:

Morning Ag Commodity Prices - 10/20/2021
Contract Units High Low Last Net Change % Change
DEC '21 CORN $ / BSH  5.3475 5.285 5.345 0.0425 0.80%
MAR '22 CORN $ / BSH  5.435 5.3725 5.4325 0.0425 0.79%
MAY '22 CORN $ / BSH  5.47 5.415 5.47 0.0375 0.69%
JUL '22 CORN $ / BSH  5.47 5.4175 5.4675 0.0325 0.60%
SEP '22 CORN $ / BSH  5.3 5.2725 5.3 0.02 0.38%
DEC '22 CORN $ / BSH  5.28 5.2425 5.28 0.0225 0.43%
MAR '23 CORN $ / BSH  5.3375 5.33 5.33 0.0075 0.14%
NOV '21 SOYBEANS $ / BSH  12.3875 12.2475 12.3875 0.1075 0.88%
JAN '22 SOYBEANS $ / BSH  12.4775 12.34 12.4775 0.1075 0.87%
MAR '22 SOYBEANS $ / BSH  12.5675 12.43 12.565 0.1075 0.86%
MAY '22 SOYBEANS $ / BSH  12.6525 12.52 12.6525 0.105 0.84%
JUL '22 SOYBEANS $ / BSH  12.7025 12.5675 12.7025 0.0975 0.77%
AUG '22 SOYBEANS $ / BSH  12.655 12.605 12.655 0.0975 0.78%
SEP '22 SOYBEANS $ / BSH  12.47 12.3575 12.465 0.085 0.69%
NOV '22 SOYBEANS $ / BSH  12.3875 12.28 12.3875 0.08 0.65%
JAN '23 SOYBEANS $ / BSH  12.3825 12.2975 12.3825 0.065 0.53%
DEC '21 SOYBEAN OIL  $ / LB 63.72 62.3 63.54 1.15 1.84%
JAN '22 SOYBEAN OIL  $ / LB 63.15 61.92 63.02 1 1.61%
DEC '21 SOY MEAL $ / TON 324.6 321.7 323.6 1 0.31%
JAN '22 SOY MEAL $ / TON 324.4 321.7 323.4 1 0.31%
MAR '22 SOY MEAL $ / TON 324.8 322.6 324.4 1.1 0.34%
MAY '22 SOY MEAL $ / TON 326.8 324.7 326.7 1.1 0.34%
JUL '22 SOY MEAL $ / TON 330.3 328 330 0.9 0.27%
DEC '21 Chicago SRW $ / BSH  7.44 7.365 7.4175 0.0575 0.78%
MAR '22 Chicago SRW $ / BSH  7.5575 7.49 7.5375 0.0525 0.70%
MAY '22 Chicago SRW $ / BSH  7.585 7.53 7.5675 0.045 0.60%
JUL '22 Chicago SRW $ / BSH  7.4625 7.4025 7.44 0.035 0.47%
SEP '22 Chicago SRW $ / BSH  7.4825 7.425 7.4575 0.035 0.47%
DEC '21 Kansas City HRW $ / BSH  7.54 7.4775 7.51 0.0275 0.37%
MAR '22 Kansas City HRW $ / BSH  7.6025 7.545 7.5775 0.025 0.33%
MAY '22 Kansas City HRW $ / BSH  7.6225 7.58 7.5975 0.0175 0.23%
JUL '22 Kansas City HRW $ / BSH  7.53 7.49 7.5 0.0075 0.10%
SEP '22 Kansas City HRW $ / BSH  7.52 7.5 7.5075 0.005 0.07%
DEC '21 MLPS Spring Wheat $ / BSH  9.8 9.73 9.785 0.0425 0.44%
MAR '22 MLPS Spring Wheat $ / BSH  9.65 9.6 9.645 0.035 0.36%
MAY '22 MLPS Spring Wheat $ / BSH  9.4525 9.4525 9.4525 0.0275 0.29%
JUL '22 MLPS Spring Wheat $ / BSH  9.2075 9.2025 9.2025 0.0175 0.19%
SEP '22 MLPS Spring Wheat $ / BSH  8.3225 8.32 8.32 0 0.00%
DEC '21 ICE Dollar Index $ 93.88 93.67 93.84 0.112 0.12%
 NO '21 Light Crude $ / BBL  83.34 81.97 82.19 -0.77 -0.93%
 DE '21 Light Crude $ / BBL  82.6 81.36 81.6 -0.84 -1.02%
NOV '21 ULS Diesel $ /U GAL 2.5674 2.5228 2.5328 -0.0279 -1.09%
DEC '21 ULS Diesel $ /U GAL 2.5603 2.5148 2.5247 -0.027 -1.06%
NOV '21 Gasoline $ /U GAL 2.4857 2.4323 2.4464 -0.0291 -1.18%
DEC '21 Gasoline $ /U GAL 2.4268 2.3746 2.388 -0.0296 -1.22%
OCT '21 Feeder Cattle $ / CWT 0 #N/A 155.1 0 0.00%
NOV '21 Feeder Cattle $ / CWT 0 #N/A 158.85 0 0.00%
 OC '21 Live Cattle $ / CWT 0 #N/A 125 0 0.00%
 DE '21 Live Cattle $ / CWT 0 #N/A 130.025 0 0.00%
DEC '21 Live Hogs $ / CWT 0 #N/A 77.4 0 0.00%
FEB '22 Live Hogs $ / CWT 0 #N/A 80.45 0 0.00%
OCT '21 Class III Milk $ / CWT 17.92 #N/A 17.91 0 0.00%
NOV '21 Class III Milk $ / CWT 19.22 19.19 19.19 -0.03 -0.16%
DEC '21 Class III Milk $ / CWT 18.96 18.96 18.96 0 0.00%

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