Closing Comments: 10/12/2020

After two-sided trading on Sunday night that saw corn exceed Friday’s post-report highs but soybeans unable to do the same, soybean futures led corn sharply lower during Monday’s regular trading session as speculators liquidated long positions following weekend rainfall in central Brazil. Friday afternoon’s CFTC Commitments of Traders report reported that managed trading funds again added to already hefty ownership of soybeans & corn in the most recent week, making those commodities vulnerable to profit-taking when chart resistance in beans at $10.80 & corn at $4.00 could not be surpassed. Even though weekend rain in Mato Grosso was relatively light, traders were wary that the frontal system finally marked the start of a weather trend change that would allow planting progress to rapidly accelerate. Wheat largely avoided the corn & soybeans meltdown as dry weather in Russia & indications that Ukraine crop output will be smaller than earlier forecast underpinned expectations for better US wheat exports.  One private analyst suggested that Russian winter wheat acreage would slide 10-15% & that poor growing conditions make the crop more vulnerable to colder weather in November.  Monday was a federal holiday for Columbus Day, & that muddied the demand picture. USDA did not report any daily export sales on Monday, & several USDA daily grain market reports were not released.  USDA Weekly Grain Export Inspections & Crop Progress reports were also delayed until Tuesday by the holiday.  At Monday’s close, Dec. corn futures dropped 6c, March corn lost 5.5c, Nov. beans plummeted 31.75c lower, Jan. beans crashed down 29c, Dec. soymeal plunged $9.60/ton lower, Dec. soyoil careened to a .85c/lb. loss, Dec. soft red winter wheat edged 1/2c higher & March SRW wheat was unchanged.
 
Grains attempted to rebound on Monday night as ongoing dry weather in Russia & crop estimate reductions in Ukraine & France supported potential demand for US crops.  The French ag ministry cut its crop forecasts for corn (13.5 mmt, -0.6 mmt) & soft wheat (29.2 mmt, -0.3 mmt), & also reduced its oilseed & sugar beet projections on Tuesday, citing adverse weather & lower yields.  Echoing predictions by others, private Ukraine analyst APK-Inform lowered its 2020/21 Ukraine grain production estimate by 2% to 70 mmt & lowered its export forecast by 0.5% to 50.9 mmt.  On Monday, Ukraine’s grain traders union, UGA, cut its wheat production estimate by 1.3 mmt to 25.3 mmt, slashed its corn output projection by 2.8 mmt to 32.5 mmt, & lowered its barley crop forecast by 0.3 mmt to 8.0 mmt.  UGA lowered its corn export projection by 1.8 ,mmt to 27.2 mmt. Grains retreated from overnight highs about the time elevator managers hit their desks at 7 am to hedge Monday’s overflow purchases. After seeing gains of 3.75c in corn, 9.75c in beans & 10c in wheat at their overnight peaks, Dec. corn futures were 1/4c lower, March corn was down 1/2, Nov. beans were up 2.75c, Jan. beans were 3c higher, Dec. soymeal was down $0.40/ton, Dec. soyoil was 0.44c/lb. higher, Dec. SRW wheat was up 4.75c & March SRW wheat was 3.25c higher at the 7:45 am pause in electronic trading.
 
In export news, USDA announced on Tuesday morning that 4.330 mb of 2020/21 US corn were sold to Mexico.  The farm agency did not report any daily export sales on Monday. Algeria was seeking milling wheat on Monday, & Japan’s ag ministry is seeking a total of 3.223 mb of milling wheat from the US & Canada in a regular weekly tender.  Pakistan will tendered for 11.023 mb of optional-origin milling wheat on Wednesday. Chinese customs data indicates that 9.79 mmt of soybeans were imported in September , well above that previous month’s record of 8.197 mmt set in 2019.. China also imported record-high monthly totals in July, August this year. Quarterly imports of 29.480 mmt were also record-high, exceeding the previous record of 26.639 mmt in 2016/17. Total 2019/20 market year imports totaled 98.542 mmt, above USDA’s 97.4 mmt estimate.  Chinese soybean imports in the final 6 months reached 56.740 mmt, nearly 9 mmt (+18.6%) above last year & about 5 mmt more than in 2016/17. Customs data also reported China imported 834,000 mt of meat in September, bringing January-September meat imports to 7.41 mmt—up 72% from 2019.  The nation imported 380,000 mt of pork, up 30,000 mt vs. August.  Beef imports during the first 9 months of 2020 totaled 1.57 mmt, up 38.8% from last year.
 
Locally, corn basis was 2c lower, & soybean & wheat basis levels were steady on Monday.  The late September-early October surge in barge freight costs has created strong market carries for those who have the ability to delay grain deliveries until at least Nov. 1.
 
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"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.