News > Top Ag News > Closing Comments: 1/20/2021

Closing Comments: 1/20/2021

Jan 20, 2021

Following a steep, speculator-led sell-off on Monday that continued into Tuesday night, grains pared their losses as prices retested & bounced off price chart support that had developed ahead of last Tuesday’s USDA crop production, grain stocks & supply-demand revisions. Following ample rainfall that fell in Argentina’s northern corn belt & key parts of central Brazil, fund managers turned heavy sellers in post-holiday trading in an effort to trim a part of the massive ownership they had accumulated since September. Weather trends in South America still suggest anything but perfect conditions, however.  While some private analysts believe Brazil will produce up to 136 mmt of soybeans & 109 mmt of corn this year, others see output as low as 127 mmt & 100 mmt, respectively. Early season harvest in Mato Grosso has just barely begun as soybean planting was initially delayed by lack of rainfall in September-October.  The cumulative rainfall maps & soil moisture maps that we review continue to show a persistent drier-than-normal growing season so far.  Timely, ample rainfall will be needed in the next 30-60 days to allow crop output to improve on current USDA forecast for South America.  In the meantime, US grain markets remain highly competitive & more plentiful with other grain sources.  At Tuesday’s close, March corn futures were down 5.5c, July corn were 7c lower, March beans tumbled 31c lower, July beans plunged 31.75c, March soymeal dropped $12.70/ton, March soyoil sagged 0.15c/lb., March soft red winter wheat eased 3.25c & July SRW wheat edged 1/2c higher. At Wednesday’s close, March corn declined 4c, July corn lost 5.75c, March beans tumbled 16.25c lower, July beans dropped 17.5c, March soymeal was down $8.10/ton, March soyoil jumped 0.84c/lb. higher, & March SRW wheat was 4.5c & July SRW wheat was 7.75c lower. At their overnight lows, March corn was down 13.25c, March beans were 33.75c lower & March wheat was down 15.75c. 
 
Markets have likely posted a trading cycle peak, but weather events in coming weeks will dictate whether market-year highs have been set.  Markets have done something during the past couple days they haven’t for weeks.  They failed to rally on “good” news.  We suspect soybeans still remain the key to corn & wheat price direction.  Current US soybean demand trends are unsustainable. Unless South American production proves better than expected, demand won’t be rationed with lower prices.   
 
Monday’s USDA Weekly Grain Export Inspections data was again superb for soybeans, but disappointing for corn & wheat.  Corn inspections (34.517 mb) slid to a 4-week low & were far below the 55.0 mb of shipments needed to reach USDA’s downwardly revised 2,550 mb export forecast. Cumulative corn inspections (680.111 mb) are only the sixth largest since 2002/03 even though USDA still foresees a record final result  USDA did upwardly adjust the previous week’s inspections by 7.206 mb to 51.721 mb, taking some of the sting out of the inspections for the week ended Jan. 7.  First week of January soybean inspections (75.633 mb) were the largest ever for that week.  The prior week’s inspections were also revised higher (67.894 mb, +2.542 mb).  That brought cumulative 2020/21 soybean inspects since Sept. 1 to 1,578.395 mb, the largest ever for week #20 by 259.490 mb! Weekly soybean inspections must average only 13.8 mb to reach USDA’s current export forecast of 2,230 mb.  That estimate is only 64 mb above the previous record set in 2016/17.  Both sales & shipments argue that the current pace far exceeds USDA’s forecast, & that a massive slow down is required by summer. Weekly grain sorghum inspections were again robust at 6.279 mb. That was above the 5.3 mb needed weekly to reach USDA’s upwardly revised 290 mb (+15 mb) 2020/21 export projection. Cumulative milo inspections stand at 103.884 mb, the fourth best since 2002/03. Wheat inspections (10.174 mb) were the second-lowest for the same week since 2002/03, & they were far short of the 20.1 mb needed weekly to reach USDA’s 985 mb 2020/21 export forecast. Cumulative wheat inspections since June 1 now stand at 572.058 mb, the fourth-slowest pace since 2009/10.  China was by far the largest destination for soybeans (46.849 mb) & milo (6.260 mb) for the week, but they were just the fifth-best corn (2.831 mb) customer & they took no US wheat during the week.
 
In daily export news, USDA did not report any export sales on Wednesday.
On Tuesday, the farm agency announced that 3.937 mb of 2020/21 US corn had been sold to Israel, that 5.039 mb of 2020/21 US corn had been sold to Japan & that 4.850 mb of 2021/22 US beans were sold to China.  Grain merchants reported that Taiwan feed mills purchased 2.559 mb of 2020/21 corn on Wednesday.  US corn still is the most inexpensive in the world, & Argentine or Brazilian corn were not offered for the Taiwan tender.  Friday’s holiday-delayed USDA Weekly Export Sales report should once again show that soybean sales continue at a record-high, unsustainably large pace. 
 
China’s General Administration of Customs data reported this week that 5.84 mmt of US & 1.18 mmt of Brazilian beans were imported in December. Of the 100.3 mmt of soybeans that China imported in calendar 2020, 64.3 mmt came from Brazil & 25.89 mmt were from the US.  When the trade war in full force in 2019, China imported only 16.94 mmt of US beans.  China also imported a record 11.3 mmt of corn from all sources in 2020, far more than the 7.2 mmt annual import quota they to which they agreed as part of their ascension to the World Trade Organization in 2002.  China has trade agreements with others, Ukraine is an example, that also require corn purchases. China imported a record 8.38 mmt of wheat last year, but that was well shy of their agreed upon import quota of 9.64 mmt.  Even with the late year improvement in imports of US agricultural products, China almost certainly fell short of their Phase One commitments to import $36.5 billion of such goods in 2020. 
 
Locally, corn basis rose 3c, soybean basis was 2c higher & wheat basis was steady on Tuesday. 
 
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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