News > Top Ag News > Closing Comments: 1/15/2021

Closing Comments: 1/15/2021

Jan 19, 2021

Corn & beans declined on Friday after a retest of Wednesday’s post-report highs halted overnight rallies.  With weather forecasters still calling for rainfall across Argentina on Friday-Saturday, traders went to the bank ahead of the 3-day Martin Luther King, Jr. holiday weekend.  Traders largely shrugged off reported sales of old-crop corn to Mexico & new-crop beans to unknown destinations.  Reports of record-high soybean crush in Dec. also failed to stem profit-taking.  Wheat bucked the corn & bean downturn, rallying on news that Russia would impose a 50-euro wheat export tariff from March 1  past the July 1 start to Russia’s 2021/22 wheat marketing year.  Smaller export tariffs on barley & corn exports were also confirmed to start March 15.  Although wheat closed higher, prices still ended far below their overnight highs.  At Friday’s close, March & July corn futures were each down 2.75c,  March beans were down 13.75c, July beans were 12.25c lower, March soymeal was down $1.70/ton, March soyoil crashed 1.26c/lb. lower, March soft red winter wheat rose 5.5c & July SRW wheat gained 2.75c. For the week, continuation charts of corn surged 35.25c higher to the highest weekly close since July 19, 2013, beans soared 41c to their highest weekly settlement since June 27, 2014, & SRW wheat blasted 36.75c higher to end at the highest weekly close since May 9, 2014. 
 
Grains opened steady/higher on Monday night, but soybeans soon led corn lower by 7:30 pm.  Wheat pushed higher in holiday-delayed trade on ideas that Russia would soon be out of the export market.  Traders viewed weekend weather in South America as generally bearish even though rain totals were near expectations.  Western Buenos Aires, Pampas, southern Santa Fe & Cordoba provinces saw generally .10-1” rainfall by 6 am CST Friday & northern Buenos Aires, northern parts of Sante Fe & Cordoba & northeastern Argentine states along with far southern Rio Grande do Sul, Brazil recorded similar rain totals by 6 am Saturday. Best rain totals of 1-2”+ were seen in Uruguay, far northern Argentina & western parts of RGDS, Santa Catarina & Parana in Brazil & southern Paraguay as the front worked northward.  By Sunday, Argentina was dry, but rainfall was still found in Brazil.  Forecasters see dry conditions for the next five days, but then additional 0.50-2” rain potential for Argentina by Jan. 25.  Although southern Brazil that could see above-normal precipitation during the period, much of Brazil has normal to below-normal rain chances for the next week. By 10:15 pm on Monday evening, March corn was down 4.5c, March beans were 22.75c lower & March SRW wheat was up 9c.  US equity futures & Asian stock markets were mostly higher on Monday night as world traders looked forward to what they hoped would be more predictable US policies after President-elect Biden is replaced Trump on Wednesday.  
 
The monthly National Oilseed Processors Association crush report released on Friday morning confirmed that the US continues to use soybeans at a record pace.  NOPA members crushed 183.159 mb beans in December, the most ever for that month & the fourth consecutive month of record-setting monthly comparisons.  Traders were still a bit disappointed, however, having expected crush at 185.2 mb.  NOPA members account for about 95% of the total US bean crush.  Cumulative Sept. 1-Dec. 31 crush has reached 710.913 mb, 39.070 mb above the previous record pace set in 2018/19.  NOPA members reported December soymeal exports at 1,037,365 short tons, down 44,350 tons compared to November, but 134,769 tons above last year.  Dec. 31 soyoil stocks rose 140.922 mil.lbs. for the month to a 6-month-high 1,6978.752 mil.lbs. Soyoil stocks were still 58.317 mil.lbs. below Dec. 31, 2019 & 13 mil.lbs. below pre-report estimates.  Strong export demand for soy products bolstered US soybean crush during the first four months of the 2020/21.
 
Friday’s CFTC Disaggregated Combined Futures & Options Commitments of Traders report for the weekly period ended Jan. 12 indicated that managed trading funds were net buyers of corn (+24,826 contracts), hard red winter wheat (+605) & hard red spring wheat (+4,049), but net sellers of soybeans (9,342 contracts net sold), soymeal (-186), soyoil (-19,381) & SRW wheat (-8,223). Because funds were big buyers in the wake of Tuesday’s USDA reports, the CFTC data hints funds had been selling ahead of those reports & that amplified the strong reaction to USDA’s modestly friendly forecasts. Funds remain solidly to heavily long all the major grain contracts. At Tuesday’s close, funds owned a net long position in corn of 374,714 contracts, their largest since March 1, 2011. Funds owned a net long HRS wheat position of 11,797 contracts, their largest since July 4, 2017.  At 55,062 contracts, the fund net long in HRW wheat was the second-highest since Sept 4, 2018.  Funds’ net long in soymeal (+84,108 contracts) was the fourth-highest since June 18, 2018.  Funds’ net long in soybeans (+166,485) & soyoil (+93,536) have been pared since they peaked at 238,394 on 10/6/20 & 112,989 on 12/29/20, respectively.  Fund managers have been “ringing the register” on beans & soyoil as prices have rallied to 6+ year highs.  Funds’ net long in SRW wheat (+16,987) was the second-highest since Nov. 10 despite profit-taking that took place ahead of USDA’s reports.  In the 6 major non-HRS wheat commodities, funds owned 970,008 long positions (down 2,524 for the week) & 178,816 short positions (up 9,177 for the week) on Jan. 12.  The resulting 5.4246:1 long/short ratio has been more bullish only 12.37% of the time since the June 2006 start to the data series.  History hints that a continued stream of bullish news will be needed to keep funds’ heavily long the grain complex.  Weather in South America is the mostly likely catalyst for the next move in grains. 
 
Thursday’s USDA Weekly Export Sales report for the week ended Jan. 7 showed that export sales continue to run well above historical averages for corn, soybeans & wheat.  Old-crop corn sales were reported at a 4-week high 56.600 mb, 2.5 times the pace to reach Tuesday’s downwardly revised export 2,550 mb
(-100 mb) forecast. Cumulative corn sales stand at a 1,786.6 mb, the highest early Jan. sales pace since at least 1979.  If corn sales thru the end of August were to equal the 25- & 40-year average volumes, corn exports are on track to reach 2,644-2,685 mb.  Weekly milo sales were reported at a 4-week- high 7.515, 3-times the pace needed to reach revised USDA’s upwardly revised 290 mb (+15 mb) export forecast. Cumulative grain sorghum commitments have already reached 207.8 mb by market week #19.  Old-crop soybean sales were an 8-week-high 33.363 mb, more than 6-times the average pace needed to reach revised USDA’s 2,230 mb (+30 mb) upwardly revised 2020/21 export forecast.  Cumulative soybean commitments have reached 2,045.7 mb, the fastest week #19 total ever by 270.2 mb!  USDA also reported that 11.978 mb of 2021/20 export sales were reported during the first week of January.  If bean sales were to reach the **average-- totals seen in the past 25- & 40-years, final shipments were be 2,372.8-2,403.2 mb, wiping out USDA’s projected end-August 140 mb carryover! The need for a BIG South American bean crop has never been higher.  The week’s old-crop soymeal sales (337,500 mt) were twice the average pace needed, & 60,000 mt of 2021/22 soymeal was also reported. Soyoil sales (11,100 mt) were below the 19,600 mt average sales needed.  Both soymeal & soyoil export sales are running modestly below their historical sales averages.  Wheat sales (8.153 mb of old- & 0.3671 mb of new-crop) fell to an 8-week low & below the 10.4 mb sales pace needed to reach USDA’s 985 mb export forecast for 2020/21. China was again a big factor in last week’s export business, buying 3.484 mb corn, 27.863 mb of 2020/21 beans (including 6.026 mb switched from unknown destinations & 2.932 mb cancelled), 2.425 mb of 2021/22 beans, 2.791 mb of milo (including 2.677 switched from unknown), 158,100 running bales of cotton, 1,600 mt (6.7%) of the 23,800 mt  total pork, 2,800 (16.7%) of the total 16,800 mt beef, 232,400 (68.3%) of the total 340,400 of hides.  China also cancelled the 0.059 mb of wheat that didn’t fit on a boat during the week. Total 2020/21 Chinese purchases stand at 463.333 mb for corn, 1,232.643 mb of beans, 166.622 mb of milo, & 87.637 mb of wheat.
 
In export news, USDA announced on Friday morning that 4.330 mb of 2020/21 US corn were sold to Mexico & 11.684 mb of 2021/22 US beans were sold to unknown destinations.  The farm agency did not report any daily export sales on Thursday. Russia officially confirmed on Friday export tariff rumors that had been circulating earlier in the week.  Russia will increase their previously announced 25 euro/mt wheat export tariff due to start on Feb. 15 to 50 euro/mt on March 1 & keep that higher tax rate intact past July 1.  Russia will also impose a 10 euro/mt export tax on barley & a 25 euro/mt tariff on corn exports starting March 15.  With those tax deadlines looming, exporters have a huge incentive to rush shipments as quickly as possible to avoid the tariffs. 
 
Locally, corn basis rose 4c & soybean & wheat basis levels were steady on Thursday. For the week, cash prices for Jan. deliver corn jumped up 31c, soybeans surged 44c higher, & wheat soared 37c higher.  As farmers rewarded the fresh 6+ year highs in cash grains, St. Louis barge freight rose about 5c/bu. for the week.
 
Would you like CBOT futures prices reported to your phone? Top Ag can send you nearby & harvest futures prices for corn, soybeans & wheat at 9:45 am, 11:15 am & 1:45 pm each day.  We provide the service for free, but you may have to pay for text messages--depending upon your phone plan. Call Scott or Jacob at Okawville at 243-5293 or Mike at Trenton at 224-7332 & we'll get you set up!  
 
"Closing Comments" are written by David Marshall, First Choice Commodities LLC, Nashville, IL.  To learn more about his farm marketing advisory or commodity brokerage services, contact him at dmarshall@firstchoicecommodities.com or call (618) 327-4370 (voice/fax) or (618) 314-0918 (cell). This commentary is not intended for specific trading strategies. We strive to insure this information is reliable, but we cannot guarantee its accuracy or completeness.  Commodity trading involves risks. You should fully understand those risks before trading.
 


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