Closing Comments: 12/31/2020

Grains opened 2021 trading on Sunday night in rally mode, bolstered by still unfavorable weather forecasts for key production areas in southern Brazil & most of Argentina & from reports that Argentine exports remained stalled.  Argentine grain inspectors have yet not settled their labor strike even though the port workers union had separately agreed to a settlement on Tuesday.  By 8:30 pm on Sunday evening, corn futures were trading about 9c higher, beans were up about 21c & wheat was about 8c higher.  Grains appear to be headed for at least a test of round number chart resistance with corn near $5, beans near $13.50 & wheat near $6.50.  The Sunday night gains extended the 2020 rally that at Thursday’s highs had pushed continuation corn charts $1.8450 & beans $5.1325 above their COVID lows set in April, & wheat $1.7625/bu. above its June harvest low. The combination of cheap & plentiful money & tightening grain supplies has launched a speculative fervor not seen in a decade. The scramble to lock in supplies will eventually end, but there are two weather cycles—one in South America & the other in the Northern Hemisphere—that must still be good enough to provide the crops the world believes it needs. For now, grains are in demand-rationing mode that seeks to destroy usage to preserve stockpiles & insure that farmers plant more acreage this spring.
Soybeans are still the key market to watch as traders focus on what increasingly looks to be smaller South American output. 
 
Sunday night gains built on strong Thursday results.  Fueled by solid weekly export sales, record-high Chinese soymeal futures, an Argentine corn export halt & 7-14 day forecasts for hotter- & drier-than-normal weather across much of Brazil & Argentina, corn & soybeans leapt to fresh 6.5-year highs on the last trading day of 2020.  Wheat traded on both sides of unchanged to end the holiday-shortened week, consolidating its mid-week gains. At Thursday’s close, March corn futures surged 9.5c higher, July corn jumped up 8.25c, Jan. beans soared 11.5c, March beans rallied 10.5c, Jan. soymeal rose $2.00/ton, Jan. soyoil gained 0.66c/lb., March soft red winter wheat ticked 1/4c lower & July SRW wheat was up 1c. For the holiday-shortened week, continuation charts of corn surged 33c higher to post its weekly close since May 9, 2014 & highest monthly settlement since April 2014.  Soybeans soared 51.75c higher to its best weekly close since July 4, 2014 & highest end-month close since June 2014. And SRW wheat gained 13.5c to close at the highest weekly close since May 23, 2014 & highest monthly close since April 2014. Capping an all too memorable year, corn, soybeans & wheat each closed with their highest end-December settlements since 2012.  For the year, corn gained 97.5c, beans rocketed $3.8475 & SRW wheat blasted 86c higher compared to Dec. 31, 2019.
 
Thursday’s USDA Weekly Export Sales data for the week ended Dec. 24 did little to discourage traders that feel prices have not yet halted crop demand.  USDA reported corn (37.971 mb), soybean (37.155 mb), wheat (19.129 mb) & soyoil (60,800 mt) sales that were all at the top or above trade estimates & above the average weekly sales needed to reach USDA’s current 2020/21 export forecasts for those crops. Soymeal sales (76,300 mt vs. 100,000-350,000 mt expected) were a disappointment, falling well below trade guesses & the 171,900 mt average weekly sales rate needed.   China was again a significant force in the week’s grain export program, retaining their billing as largest US corn & soybean & third-largest wheat customer so far in 2020/21.  They also purchased 58,400 of 318,300 running bales of total cotton, 24,300 mt of 54,000 mt total pork, 3,400 mt of 29,300 mt total beef & 114,100 of 166,900 total beef hides that were sold during the weekly period.
 
Weekly old-crop corn sales reached 37.971 mb, about 1.4 times the average sales needed, but still the second-lowest weekly total since Oct. 8. Cumulative corn sales since Sept. 1 stand at 1,700.5 mb--the highest sales by late December since at least 1978. Corn sales have reached 64.2% of USDA’s 2,650 mb export forecast, significantly above the 46.6% 5-year sales vs. final shipments average & the 51.6% sales vs. final exports sales pace seen since 1995/96.  If weekly sales thru the end of August average the same as seen since 1995/96, 2020/21 corn exports would total 2,642 mb. In other words, corn remains on track to rival USDA’s export expectations.  Grain sorghum faltered a bit in the week ended Christmas Eve with old-crop weekly sales of 1.744 mb the least since Oct. 8. & slightly below needed 2.1 mb weekly sales average needed.  An additional 2.087 mb of 2021/22 milo was sold.  China bought 1.031 mb US corn to bring their 2020/21 total to 456.286 mb.  All of last week’s old- & new-crop milo sales were also attributed to China.
 
Soybean sales of 25.552 mb recovered to a 2-week high & were 5 times the weekly average needed thru the end of August. With 17 weeks completed in the marketing year, cumulative soybean sales of 2,015.5 mb are the highest ever by 256.0 mb & 91.6% of USDA’s 2,200 mb 2020/21 export forecast.  That’s also the highest sales-to-final-shipments ratio at week #17 since at least 1978, hinting exports can increase.  USDA also reported that 11.064 mb of 2021/22 soybeans were sold during the week.  China purchased 22.770 mb of old-crop beans last week, including 21.899 mb switched from unknown destinations.  That brought their 2020/21 commitments to 1,191.234 mb, 59.1% of total sales.  They also purchased 4.630 mb of the week’s new-crop bean sales.
 
Wheat sales also stretched to a 2-week high of 19.129 mb, nearly twice the weekly pace needed. Cumulative wheat sales since June 1 now stand at a 4-year-high 755.6 mb, 76.0 mb above the 5-year average pace for market week #30.  Wheat commitments have reached 76.7% of USDA’s 985 mb 2020/21 export forecast. That’s above the 72.7% 5-year & 72.1% 25-year average-sales-to-final-shipments pace.  China added 4.894 mb of US wheat last week, bringing their 2020/21 total to YTD 85.664 mb.
 
In export news, USDA did not report any daily export sales on either Wednesday or Thursday. Algeria bought at least 11 mb of wheat ahead of the Christmas holiday after having issued a nominal tender for 1.837 mb. 
 
The holiday period continues to alter the normal release of data.  CFTC Commitments of Traders reports usually released on Friday are delayed until Monday afternoon.  Corn processing & soybean crush data normally released on the first day of the month will also be released on Monday afternoon.  I don’t know if USDA Weekly Grain Export Inspections data for the week ended Dec. 31 will be released at its regular 10 am CT release date on Monday or be delayed until Tuesday by Friday’s holiday. 
 
After corn basis eased 2c on Wednesday as soybean & wheat basis levels were steady, corn basis eased a penny lower, soybean basis declined 2c & wheat basis was steady on Thursday. For the holiday-shortened week, cash corn bids surged 32c higher, soybeans roared 52c higher & wheat rallied 14c.  As with futures, cash bids have reached levels last seen in 2014. 
 
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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.