News > Top Ag News > Closing Comments: 1/25/2021

Closing Comments: 1/25/2021

Jan 25, 2021

Grains rebounded from Sunday night losses on Monday morning & eventually retraced about half of Friday’s swoon.  The bounce from overnight lows sparked short-covering that swelled after the 10 am release of USDA’s Weekly Grain Export Inspections report.  Following the massive fund liquidation seen Wednesday-Friday, the Friday-Monday export news gave traders a sense that some recovery was warranted given that lower prices were unlikely to ration usage, especially in soybeans.  Friday’s CFTC Commitments of Traders data had shown that funds were net sellers of corn, beans, soymeal & soyoil in the weekly period ended Jan. 19.  That was somewhat surprising, & also fueled ideas that late-week selling may have extended too far.  Friday afternoon’s USDA Cattle on Feed report had indicated Jan. 1 on-feed numbers & December feeder cattle placements that exceeded trade expectations, also a good side for demand.  The combination of still strong demand & overly aggressive selling on Friday left the market ripe for at least a short-covering bounce.  At Monday’s close, March corn futures recovered 11c, July corn rose 11.25c, March beans surged 31.75c higher, July beans soared up 30c, March soymeal rebounded $8.00/ton, March soyoil rebounded 0.67c/lb., March SRW wheat rallied 14c & July SRW wheat gained 9.75c.
 
Grain prices continued under pressure as Sunday night trading resumed as traders took aim at pre-report levels in corn & wheat & end-2020 prices in soybeans.  Weekend weather was as expected with southern Brazil receiving good rainfall but Argentina & eastern Brazil staying dry.  Markets absorbed the latest forecasts thru Feb. 2 which call for below-normal rain for southern Argentina & eastern Brazil, but normal to above-normal rain in northern Argentina & southern Brazil. Traders were wary for a “dead cat bounce” following the enormous sell-off seen following the MLK Holiday.  At the 7:45 am pause in electronic trading, March corn futures were down 1.75c, July corn was 2c lower, March beans were down 3.5c, July beans were 4c lower, March soymeal was down $1.60/ton, March soyoil was up 0.08c/lb., March SRW wheat was 3/4c lower & July SRW wheat down 3.25c. New-crop wheat was especially weak as relatively mild temperatures & rainfall from the southern Plains thru the eastern Corn Belt bolstered winter wheat yield potential. At their overnight lows, March contracts of corn were down 8c, beans were 13.75c lower & wheat was 10.25c weaker. 
 
Monday’s USDA Weekly Grain Export Inspections data for the week ended Jan. 21 showed that corn, soybean, grain sorghum & wheat shipments mostly exceeded trade expectations as well as the average inspections needed to reach USDA’s 2020/21 export projections. 
 
Corn inspections (54.779 mb) were the highest since May 7, 2020 & well above trade guesses that ranged 35.4-45.3 mb.  Japan (20.3984 mb) & Mexico (8.445 mb) topped the list of 15 nations that took at least 0.823 mb of US corn last week. China took 2.785 mb of US corn, & was the fifth-largest destination.  Corn inspections need to average 55.0 mb weekly to reach USDA’s 2020/21 export projection. It remains to be seen whether current corn prices will slow sales & shipments in the back half of the marketing year. One would think that is a higher than normal probability.
 
Soybean export inspections slipped to 72.715 mb, but were at the top of trade estimates that ranged 36.7-77.2 mb & far above 11.731 mb of shipments needed weekly to reach USDA’s 2020/21 export forecast.  Same-week inspections have been larger only once, 73.965 mb in 2013/14.  USDA upwardly revised the previous week’s inspections by 7.886 mb to 83.519 mb.  A similar adjustment next week to this week’s report would not be a surprise.  China (44.831 mb) far exceeded Mexico (6.601 mb), Spain (5.106 mb), Brazil (4.174 mb) & the 9 other nations that took at least 0.454 mb of US beans last week.  Cumulative bean inspections have reached 1,663.8 mb.  That’s 297.3 mb above the previous record pace set in 2016-17! Soybean shipments must go from the best ever to among the worst ever if USDA’s export forecast is to be met.
 
Grain sorghum exports improved to a 4-week-high 7.054 mb, all for China, & were above inspections that need to average 5.3 mb weekly.  Cumulative milo inspections stand at 110.9 mb, the fastest week #21 total since 2015/16.
 
Weekly wheat inspections improved to a 7-week-high 19.250 mb, but that was just shy of the 20.2 mb average needed to reach USDA’s 2020/21 export forecast.  Cumulative 2020/21 wheat inspections at week #34 stand at 591.7 mb, 4.2 mb below last year but still within 14 mb of the fastest pace since 2013/14.  Wheat must show more export momentum in coming months to reach expectations, but the absence of Russia as a wheat exporter should help. 
 
Recapping Friday’s price action, grains continued their post-holiday selling purge on Friday despite friendly export sales & solid ethanol production & stocks data.  As Monday morning’s CME Group open interest report confirmed, chart-based liquidation was the dominant feature after corn & wheat futures fell below steep uptrending support lines drawn from early December & soybeans sagged below 20-day average & congestion support that developed ahead of the Jan. 12 USDA reports.  Adding insult to injury, St. Louis terminal Jan. delivery corn & soybean cash basis levels lost 1.5c & 8c, respectively, on Friday as producers feared & end-users hoped the bloodbath would continue. At Friday’s close, March corn futures were crashed 23.75c lower, July corn dropped 23.5c, March beans collapsed 58.5c, July beans careened 56c lower, March soymeal plunged $16.60/ton, March soyoil plummeted $1.16/lb., March soft red winter wheat dived 26.25c & July SRW wheat slumped 23.75c. For the week, continuation charts of corn slid 31c lower, beans hurtled $1.05 lower to its worst weekly loss since 2014, & wheat tumbled 41c lower. St. Louis spot delivery cash bids sagged 34c on corn, $1.17 on beans & 51c on wheat during the holiday-shortened week.
 
Friday’s downdraft flew in the face of positive fundamental data.  Holiday-delayed USDA Weekly Export Sales for the week ended Jan. 14 & weekly ethanol production & ethanol stockpile data for the week ended Jan. 15 exceeded trade expectations, but failed to elicit a positive trade reaction. 
 
Weekly corn export sales (56.596 mb of old- & 1.827 mb of new-crop) were 2.5 times the weekly average needed to reach USDA’s 2,550 mb 2020/21 export forecast & above trade expectations that ranged 23.6-47.2 mb.  Cumulative corn sales have reached 1,843.2 mb, still the fastest corn sales pace since at least mid-Jan. 1979.  Based on 25- & 40-year averages, corn sales are on track to reach 2,670-2,718 mb.  Weekly old-crop soybean sales of 62.152 were the highest in 13 weeks & 16.3 times the 3.8 mb/week average sales needed to reach USDA’s 2,230 mb 202/21 export forecast. An additional 30.534 mb of 2021/22 beans were also sold.  Cumulative 2020/21 bean sales stand at 2,107.9 mb, 296.4 mb larger than ever before for market week #20.  Based on 25- & 40-year averages, soybean  sales are on pace to reach an unsustainably high 2,414-2,440 mb.  All other demand remaining unchanged, such exports would more than exhaust the current US bean supply!  Weekly grain sorghum were a 5-week- high 11.555 mb, 5-times the 2.2 mb/week average needed to reach USDA’s 290 mb export forecast for 2020/21. Soymeal sales reached a market-year-high 468,500 mt—3 times the weekly average needed. Soyoil sales were a 3-week-high 52,300 mt, also about  3-times the needed weekly pace. Despite the week’s solid results, cumulative soymeal & soyoil sales are still running below the historical pace needed to reach USDA’s current export projections.  Wheat sales were reported at a 3-week-high 12.111 mb, slightly above the 10.3 mb/week pace needed to reach USDA’s 985 mb export forecast for 2020/21.  Cumulative wheat sales now total 785.9 mb, the most for week #33 in four years & 72.6 mb above the 5-year average by that date.  China was again a major force in weekly export commitments. Although it canceled 0.020 mb corn & 22,300 running bales of upland cotton last week, it purchased 31.750 mb of old- & 11.721 mb of new-crop beans, 10.570 mb of milo, 2.388 mb of wheat, 9,700 mt (21.5%) of the total 45,200 mt of pork, 4,300 mt (17.6%) of the total 24,500 mt of beef & 232,200 (63.1%) of the total 367,900 hides that were sold during the week. Chinese cumulative 2021/21 US corn commitments now total 463.313 mb, beans at 1,264.4 mb, grain sorghum at 177.2 mb & wheat at 90.0 mb.
 
Friday’s EIA Weekly Petroleum Status data reported that ethanol output for the week ended Jan. 15 rose to a 4-week-high 277.830 mil. gal. That was up 1.176 mil.gal. (+0.43%) from the previous week, but 30.576 mil.gal. (-9.91%) below the previous year.  Same-week ethanol output was still the least since 2013/14, & cumulative ethanol production since Sept. 1 is the lowest since 2014/15.  Ethanol stocks edged 2.688 mil.gal (-0.27%) lower to 992.376 mil.gal. for the week, & were down 16.930 mil.gal. (-1.68%) from last year.  Year-on-year ethanol production comparisons are likely to remain subdued for another 9 weeks, but then 2020/21 output will begin to far exceed last year if the coronavirus doesn’t cause unforeseen commerce restrictions. 
 
Friday’s USDA Cattle on Feed report indicated that 1000+ head US feedlots had 11,965,000 head on feed on Jan. 1, up 7,000 head (+0.06%) compared to last year but 71,000 fewer animals than were on feed on Dec. 1.  Feedlot managers placed 1,842,000 feeder cattle into lots during December, 61,000 fewer than in November, but 14,000 head (+0.77%) more than last year.  The largest lots marketed 1,853,000 cattle for slaughter during December, up 19,000 (+1.04%) compared to 2019 & 74,000 more than in November. Another 60,000 head either went back to pasture or experienced other forms of “disappearance” during December.  That was 7,000 head fewer than last year.  Overall, the report was constructive for feed demand since traders have on average expected a 0.7% decline in feedlots inventory, a 3.0% reduction in placements & a 0.7% increase in marketings. 
 
Friday’s CFTC Disaggregated Combined Futures & Options Commitments of Traders report indicated that trading funds were net sellers of corn (25,219 contracts net sold), soybeans (-14,587), soymeal (-6,777) & soyoil (-2,837), but net buyers of SRW wheat (+3,631), HRW wheat (+3,031) & hard red spring wheat (+1,525) in the weekly period ended Jan. 19.  Funds remained heavily net long in corn (+349,495 contracts), soybeans (+151,898), soymeal (+77,631), soyoil (+90,699), SRW wheat (+20,618), HRW wheat (+58,093) & HRS wheat (+13,322) & that set the stage for the Wednesday-Friday rout in grain futures when prices showed an inability to rally on “good” news.  For markets to retest or exceed recent highs, funds must continue to buy in to the idea that global grain supplies are dwindling amid demand recovery & production struggles. 
 
In daily export news, USDA did not report any daily export sales on Monday.
On Friday, the farm agency announced that China had purchased 4.997 mb of 2020/21 US soybeans as well as 2.362 mb of 2020/21 & 2.480 mb of 2021/22 US grain sorghum. USDA has also reported on Thursday that 13.247 mb 2020/21 US corn were sold to unknown destinations, that 4.997 mb 2020/21 US beans were sold to China, that 6.000 mb of 2020/21 US beans sold to Mexico & that 5.071 mb of 2021/22 US hard red winter wheat had been sold to Nigeria.  The daily sales reported on Thursday & Friday set the stage for another solid weekly export sales report this coming Thursday.  In other export news, Taiwan will seek 3.136 mb of US wheat on Friday.  Saudi Arabia also reported this weekend it had bought 27.558 mb of feed barley for March-April delivery.  Russian wheat prices fell about 5.5c last week as the reality of export tariffs that will start in mid-February shifted business to other nations.  Russian farmers complain the coming round of export barriers will raise doubts about Russia’s reliability as an export provider in the future. The Ukraine ag ministry boosted their 2020/21 grain export forecast by 1.24 mmt to 45.42 mmt, citing an expected increase of 1.20 mmt to 23.5 mmt in corn shipments.  Ukraine officials also boosted their 2020 corn harvest by 1 mmt to 30.3 mmt.  Ukraine harvest 35.9 mmt of corn in 2019. Ukraine has been forced to reduce its 2020-21 grain exports as production fell far short of the record 75.0 mmt output seen in 2019.
 
In production news, analysts surveyed by Thomson-Reuters now expect Brazil to harvest 132.2 mmt of soybeans this spring. That’s up from the 131.79 mmt consensus guess seen in December.  USDA left its Brazilian bean harvest forecast at 133.0 mmt on Jan. 12.
 
Locally, corn basis declined 1c, soybean basis dropped 2c & wheat basis was steady on Friday. For the holiday—shortened week ended Friday, cash bids for Jan. delivery corn tumbled 32c, beans plunged $1.15 & wheat lost 41c as both futures & basis levels deteriorated.  On Monday, corn & bean basis each improved a penny as wheat basis was steady.
 
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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