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Morning Market Review for September 16, 2021

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Expect another choppy session today with limited upside gains. (Comments are updated by 7:30 a.m. Central Time.)

Editor's note: Farm Futures writers Jacqueline Holland and Ben Potter are on assignment at Husker Harvest Days this week. Stop in at the Hospitality Tent to hear their Farm Futures Insights every day at 10 am CDT! Advance Trading Inc.'s Drew Moore and Cat Sullivan will be providing daily market updates in their absence. Enjoy their commentary!

Corn

Corn futures were sharply higher yesterday on broad commodity strength and settled up 11-13 cents. Overnight strength persists as of this writing, but not sure corn can keep in the green today with wheat markets under pressure. Strong energy (crude oil/RBOB up 3%) and uncertainty around production (yield anecdotes have been underwhelming) set the positive tone for corn on Wednesday.

Cash has also stabilized, and spreads remain firm, indicating the market needs higher prices to originate grain. Ethanol production in the week ending September 10th improved to 937,000 barrels per day vs. 923,000 last week last week and the second consecutive weekly increase. Production was 1% above last year and 9% below 2019. On an annualized corn grind rate, this week’s production equated to 4.96 billion bushels (assuming a 2.90 gallon per bushel ethanol yield and .5% of the ethanol from sorghum feedstock). The average annualized run rate is 4.925 billion bushels over the first two weeks of the 2021/21 crop year. Considering the recent slowdown in production rates our grind forecast is 5.150 billion bushels and below the USDA estimate at 5.2 bbu.

Ethanol stocks continue to decline amid the relatively low production rates but steady demand. There were no ethanol imports this week. The broad support for commodities, production uncertainty and strong cash & spreads are all positive features and prices have returned to the low end of the summer range ($5.35-$5.55). Current levels may act as technical resistance, however, and cash markets should ease heading into harvest. Let’s see if futures can manage to settle above the key $5.35 December futures (CZ) area and watch cash markets closely for indication if the recent strength can be sustained.

Soybeans

Soybeans were able to maintain a positive close even after news of two separate cancellations yesterday morning. China cancelled 132,000 metric tons and “Unknown” announced a 196,000 metric ton cancellation which did pressure prices early in yesterday’s futures session. Prices regrouped as the day went on and then the NOPA crush report at 11am CST provided support as crush was 5.4 million bushels higher than the average trade guess coming in at 158.8 million bushels. While Wednesdays crush was better than expected, last August crush number was 165.1 million bushels. Meal exports were favorable being up 100,000 metric tons vs. last year but, domestic usage dropped 7% vs. last year.

Current marketing year usage is down 1.4% from last year. Oil stocks climbed 51 million pounds from last month to 1.668 billion pounds vs. 1.519 last August. On the products side Oil was 1 ½ cents firmer and meal settled over $2 per ton lower. CIF (Gulf) values were mostly steady on the day but, freight was higher in many regions pushing terminal values lower. Processor bids were mixed with most steady while a few plants firmed for spot and a few where harvest is starting were lower. Soybeans continue to show relative strength supported by other commodities not necessarily on their own supply & demand outlook, staying within Friday’s (USDA Report) trading range.

Without any hedge pressure yet as harvest is just getting underway, aggressive selling hasn’t been seen this week as funds have already pared down their long position. Difficult to see how the carry out isn’t growing under the current situation, as more demand shifts to South America and the crop has the potential to keep getting larger. Expect another choppy session today with limited upside gains, as sales & shipments could be disappointing and seasonal harvest pressure expected to begin shortly.

Wheat

Wheat futures closed firmer across the board on Wednesday. Minneapolis led at up 16 ¾ to 17 ½. Kansas City  was up 13 ¾ to 14 ¼, with Chicago up 11 ½ to 12 ½. General ideas of global supply shrinking keeps underpinning the market. Domestically at least some areas of the Hard Red Winter Wheat belt received beneficial rains for new seeding. A sizeable CCC tender that had been due yesterday was canceled. We’ll see if it pops back up with slight changes. Hard Red Winter Wheat (KC) offers continue to be thin as shippers focus on fall harvest needs. As basis stays firm, spreads have kept a firm tone as well, through new crop (July 2022). The recent $1 break appears to have put the wheat market into a better speculative balance, but most analysts don’t think the market has solved the fundamental imbalances created the historic Northern Plains, Pacific Northwest, Canada droughts, the sharp reduction in the Russia crop, and quality issues in the EU. Further strength is expected although today has a negative tone to start the day.

Weather

The National Weather Service will release an updated U.S. forecast for the month of October this morning. Isolated to scattered showers forecast through Fri. in the western U.S. Midwest, then mostly dry Sat.-Sun.  Temps are projected to be above normal through Sun.  Mostly dry conditions forecast on Thu. in the eastern Midwest, followed by isolated showers on Fri.-Sat. & mostly dry conditions on Sun.  Temps projected to be above normal through Sun.  Isolated showers forecast through Fri. in the Central & Southern Plains, then mostly dry on Sat.-Sun.  Temps projected to be above normal through Sunday.

Livestock   

Choice boxed beef was $3.07 lower on Wednesday at $319.82 and is down $15.04 compared to a week ago. Light cash cattle trade developed on Wed. at $124 in the South, which is generally steady with last week’s average. Live cattle futures came under pressure as cash trade in the South was steady with last week while trade in the North was generally $1 lower. Boxed beef was down sharply with choice cuts down $3.07 and select cuts down $6.73.

Considerable divergence between October and deferred contracts. Spread trading was evident as traders viewed October as oversold due to the large discount to cash and thinking continued weakness will impact later contracts. Mandatory pork carcass cutout value increased $0.23 on Wed. to $104.18 but is still $4.98 lower vs. the prior week. Lean Hog Index fell $1.42 on Wed. to $95.35.  October futures firmed $1.900 but remain $13.075 below the index.

Energy

Weaker: CLV21, -$0.11 @ $72.50; EBX, +$0.26 @ $75.48; EBX-QCLV, +.14; RBV, +.0011; NGV, -.112; HOV, -.0053. Chicago ethanol edged $.0075 higher to $2.51. Basis—mixed: NYC, +$.0075 @ +$.1650; Gulf, -$.0025 @ +$.02; Dallas, +$.0075 @ +$.01; Tampa, -$.0025 @ +$.0950; LA, -$.0075 @ +$.35. Ethanol RINs, down 2 ½; 2019’s, @ 122-129; 2020’s, @ 123-129; 2021’s, @ 123-127; 2022’s, @ 122-127. The Oct RBOB/Sep ethanol spread is down $.0183 at @ -$.2117/gallon     

Highlights (as of 5:45am CST)

  • TRENDS—CZ, +1 ½; SX, +4 ½; WZ, -2 ¾; KWZ, -1 ¾. 
  • Dalian: SF, +13; CF, -6; SMF, -$0.40; BOF, +$.0095; POF, +$.0138
  • What caught my eye: Seems like “disappointing” corn yields are more common than usual with the early reports TY.  FWIW, past 3 years have all seen Sep to final declines of an average of 4 bpa, 340 mbu or 24% of this year’s projected USDA carry-out 
  • Global markets are mixed this morning with little in the way of fresh news
    • Asia:  Lower:  Nikkei, -0.62%; Shanghai, -1.34%; Hang Seng, -1.46%
    • EUROPE:  Higher: DAX, +0.51%; FTSE, +0.4t6%; CAC, +0.98% 
    • WALL STREET:  Lower:  DOW futures, -31; S&P, -6; NAS, -33.5
    • EXTERNALS: Oct crude, -$0.11 @ $72.50; Gold: -$16.20 @ $1,779; Dec $ Index, +0.226 @ 92.760
  • CZ, +$.0150 @ $5.35; CH, +$.0175 @ $5.4250.  The funds were estimated buyers of 15 K at mid-week
  • SX, +$.0450 @ $12.99; SF, +$.0425 @ $13.0775.  Funds: bot 6 SB; sold 3 SM, bot 6 SBO.  BRD crush: $0.86, +1 (X/V); LY, $0.79
  • WZ, -$.0275 @ $7.0950; WH, -$.0175 @ $7.22.  The funds bought 7, France joined Canada with a smaller crop estimate    

The risk of trading futures and options can be substantial. All information, publications, and material used and distributed by Advance Trading Inc. shall be construed as a solicitation. ATI does not maintain an independent research department as defined in CFTC Regulation 1.71. Information obtained from third-party sources is believed to be reliable, but its accuracy is not guaranteed by Advance Trading Inc. Past performance is not necessarily indicative of future results.

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