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Morning Market Review for Sept. 24, 2020

Rising dollar inflicts pain on grain markets. (Comments are updated by 7:30 a.m. Central Time.)

Harvest pressure continues to weigh prices lower

  • Corn down 4-5 cents
  • Soybeans down 8-11 cents, soyoil down $0.38/lb, soybean meal up $2.3/ton
  • Wheat down 3-7 cents

*Prices as of 6:50 am CDT.

Quote of the Day: Soybean harvest in Tennessee, “looks pretty good,” according to a local Farm Futures reader. “We are hearing yields of 40 bpa to 70 bpa,” the grower shared in the latest Feedback from the Field update. Yield estimates continue to roll in from across the country with early numbers varying significantly.

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

Rapid harvest paces, diminishing fund interest, and concern about South American crop sizes weighed on the corn complex this morning. December futures fell $0.0475/bushel to $3.6375 on the overarching sentiments while March futures slipped $0.045/bushel to $3.73.

Cash corn prices were mixed across the Corn Belt, reflecting varying levels of inventory across the Midwest. Ethanol basis notably slipped for a third day in a row on harvest pressure in the Eastern Corn Belt. Cattle feed demand drove significant increases in cash offerings in East Texas and the Texan Panhandle.

Weekly ethanol production notched a second straight week of declines for the week ending September 18, 2020. Weekly output dipped 2.2% from the previous week to 38.1 million gallons/day – the lowest volume in 12 weeks. Blending rates remained stable at 10.64% while ethanol profit margins continued to perform in the black despite slipping slightly on the week.

Blending demand from refineries edged 0.7% lower on the week to 35.2 million gallons/day, which has been an average blending volume over the past three months. Gasoline demand also hovered in the middle ground of standard trading ranges over the last 12 weeks, totaling 357.6 gallons/day for the week ending September 18.

Reduced ethanol production volumes for the week were partially offset by 462,000 gallons/day of imported ethanol added to the U.S. blending supply chain. In the last 12 weeks, weekly ethanol imports into the U.S. have averaged 676,000 gallons/day. The uptick in international ethanol purchases helped increased weekly ethanol stock volumes by 8 million gallons to 839.9 gallons.

Even as President Trump increases aid to Farm Country and promises to shore up blending requirements for refineries under the Renewable Fuel Standard (RFS), farmers remain skeptical refineries will be forced to remain compliant with the RFS. Farmers are now calling on Trump to announce – and enforce – biofuel blending mandates for 2021 to stabilize corn demand as the new crop rolls in from the fields.

Soybeans

Steady Chinese demand continues to provide a cap on losses to the soy complex this week as steady harvesting paces, a stronger dollar, and planting progress in Brazil and Argentina send futures prices lower for a fourth straight day. November soybean futures shed $0.095/bushel in overnight trading to $10.05. October soyoil futures followed $0.38/lb lower to $32.31. October soymeal futures also backed off recent highs, easing $2.3/ton this morning to $339.8.

Soybean basis improved on the Mississippi River yesterday as well as at several elevators in the Eastern Corn Belt, suggesting strengthening export demand as beans roll in off combines.

Even while nearby soybean futures prices have backed off last Friday’s highs, at over $10/bushel, soybeans are still profitable as long as marketing decisions are properly executed, Farm Futures contributing grain analyst Bryce Knorr acknowledges. Is your farm positioned to take advantage of these price levels? The $1.7975 price rally bested previous rally records set in 2011 and 2012. And as fund support eases, the window for making profitable sales may be narrowing.

Monday’s sell off was an example extreme price action, especially in the heat of harvest season. But when prices reach extreme highs, as they did in the lead up to Monday, a call option is an invaluable tool to hedge against rising prices. Matthew Kruse points out. Likewise, put options are best utilized when prices bottom out. Kruse, President of Commstock Investments, breaks down the basics of call and put strategies in today’s markets in the latest Ag Marketing IQ column

Wheat

Contract

Price Change*

Price*

Chicago SRW – December Futures

-$0.0725

$5.4175

Kansas City HRW – December Futures

-$0.065

$4.7775

Minneapolis HRS – December Futures

-$0.03

$5.30

A stronger dollar continues to take its toll on the wheat complex as global investors grow increasingly alarmed with rising coronavirus cases. The uptick in currency prevents U.S. wheat from being competitively priced against Russian bushels currently dominating the market. The ICE Dollar Index flirted with two-month highs this morning, up 0.15% to $94.585.

Cash wheat prices remained largely muted in terms of price action yesterday, especially as corn, soybean, and sorghum harvests pick up across the country. Growing concern about low soil moisture levels is looming over farmers in the Plains, especially as La Niña weather patterns begin to take hold over the next few months.

A parched Ukraine is expected to see rains this weekend. The improved forecast, which features significant precipitation accumulation over a minimum of two days, could benefit farmers planting crops that will remain dormant through the winter. As recently as Tuesday, soil moisture conditions reached the driest point in 10 years with only 10% - 15% of Ukrainian crop ground suited for planting progress. The dryness has led to planting delays in Ukraine as farmers await rains in hopes of offsetting potential yield offsets by the time winter wheat harvest rolls around in 2021.

Strengthening in the dollar this week has underpinned weakness in the wheat complex this week. The ICE Dollar Index has risen 1.6% since Monday to $94.480 at last glance as a jittery equities market early this week kickstarted a massive shift to the Dollar. Concerns about rising coronavirus cases and fears of a second round of lockdowns also sent investors flocking to the safe-haven asset.

ICE Dollar Index - December 2020 Futures

Chicago Federal Reserve President Charles Evans also sparked investor interest in the Dollar on Tuesday, after making remarks that the Fed could raise interest rates before the core inflation rate hits the 2% year-over-year average benchmark originally posited by the Fed to raise interest rates. The comments rattled investors, who interpreted Federal Reserve policy as holding steady on interest rates through 2023.

Weather

Scattered showers will pepper the Plains and Upper Midwest today, according to NOAA’s short-range forecasts which could slow early progress on soybean harvesting. Rains in the Pacific Northwest could temporarily stall winter wheat planting but would be a welcome relief to depleted soil moisture levels. Tropical Depression Beta continues to move north along the Mississippi River into the Southeast.

Financials

Coronavirus cases in the U.S. rose by 37,873 cases from yesterday to 6,935,414 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. The death toll increased by 1,102 lives to 201,920 deaths as of press time.

U.S. stock futures dipped slightly in a round of up and down overnight trading as traders remain jittery about the prospects of an additional round of pandemic stimulus from the U.S. government as well as rising coronavirus cases in Europe and progress on a vaccine. Weekly unemployment data released this morning will likely continue to show a slow recovery from the initial economic fallout from the pandemic.

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