News > Top Ag News > Closing Comments: 2/22/2021

Closing Comments: 2/22/2021

Feb 23, 2021

Grains extended Sunday night gains during Monday’s regular trading session to reversed Friday’s losses on Monday. Dry weather forecasts for Argentina, wet weather in central Brazil & talk of hot/dry weather in the US during May-July spurred renewed buying of both old- & new-crop grains.  Corn got an additional boost from news that the Biden Administration’s EPA would support at the US Supreme Court a Jan. 2020 decision by the Denver-based 10th US Circuit Court of Appeals that favored lawsuits filed by the Renewable Fuels Association & farm groups. The suit contended the Trump Administration’s EPA had improperly granted waivers to refiners that effectively cut ethanol use by 4 billion gallons in the 2016-2018 compliance years. Traders largely shrugged off weekly grain export inspections for the week ended Feb. 18 that reported multi-week- low shipments for corn, soybeans & wheat.  Reports that China had washed out some Brazilian soybean purchases & bought more beans from the US were a reminder that growing & shipping crops are two different issues.  Brazilian analyst AgRural reported on Monday that Brazilian farmers have harvested only 15% of their bean acreage, less than half last year’s 31% pace & the slowest rate in 15 years.  The analyst reported rain delays are expected thru at least early March & warned the risk of crop loss is growing. At the 7:45 am pause in electronic trading, March corn futures were up 2.25c, Dec. corn was 3c higher, March beans were up 1/4c, Nov. beans were 4.25c higher, & March & July SRW wheat were each up 3.25c. At Monday’s close, March corn futures gained 8.25c, July corn rose 8.5c, Dec. corn jumped 9.75c, March beans rallied 6.5c, July beans were up 9.25c, Nov. beans surged 15.5c higher, March soymeal eased $1.20/ton lower, March soyoil rebounded 0.35c/lb., March SRW wheat recovered 13.25c & July SRW wheat soared 13.75c higher.
Recapping Friday’s price activity, old- & new-crop prices diverged on Friday as long liquidation on the last trading day for options on March futures spurred selling of old-crop & reaction to USDA Ag Forum 2021/21 crop projection lent support to new-crop contracts.  Open interest declined solidly in corn (-31,458 contracts), beans (-19,571), SRW wheat (-7,708) soymeal
(-4,853) & soyoil (-16,080) over the weekend as traders liquidated March contracts of options & futures ahead of Friday first notice day on futures. Traders largely shrugged off another week of unsustainably strong soybean & solidly anticipated corn & wheat export sales, focusing instead on USDA’s failure to announce any daily export sales during the 4-day Presidents’ Holiday trading week. USDA Ag Forum forecasts for demand were friendly for corn & soybeans as the farm agency tempered acreage & yield expectations with record-high corn export & soybean crush & near-record soybean exports. Led by strong recovery in ethanol crush & higher exports, USDA forecast usage would offset all but 50 mb of higher 972 mb of extra corn supply.  Expectations for continued strong Chinese soybean imports led USDA to keep its soybean carryover forecast near pipeline levels despite a projected 390 mb increase in output.  Wheat was the weak leg on Friday despite forecasts for 8-year-low carryover stocks as traders were disappointed USDA economists look for declining wheat exports & lower total wheat usage.  Friday’s muted reaction to USDA’s bullish corn & bean forecasts is perhaps rooted in skepticism that the farm agency may have “drunk the Kool-Aid” on post-COVID recovery.  After all, USDA was overly bearish at last year’s Ag Forum after substantially missing China’s aggressive return to US markets. At its Feb. 2020 conference, USDA projected 2020/21 corn carryover would be 1,135 mb above, bean ending stocks would be 200 mb greater & wheat carryover would be 59 mb larger than was seen in the Feb. 9, 2021 WASDE report.  At Friday’s close, March corn futures sagged 7.5c lower, July corn dropped 6c, Dec. corn edged 3/4c higher, March beans gained 2.25c, July beans rallied 3c, Nov. beans surged 9.75c higher, March soymeal declined $1.60/ton, March soyoil jumped 064.c/lb., March soft red winter wheat plunged 11.75c & July SRW wheat declined 6.5c.  For holiday-shortened trading week, continuation charts of corn rose 4c & wheat gained 14c despite Friday’s weak performance & soybeans gained 5.25c.
USDA’s Ag Forum projections for 2021/22 corn saw 92.0 of plantings & 15,150 mb of production, the result of 179.5 bu/ac. on 84.4 harvested.  If realized, yield would be record-high & harvested percentage would be about
0.4% above both the 5- & 10-year averages. Bearish traders said the output forecast was still too conservative, pointing to pre-report trade consensus had expected corn plantings at 92.4 planted & trendline yields at 180.5 bu/ac.  On the other hand, bulls can argue that the 2016-2020 average US corn yield was only 173.4 bu/ac., the 2010-2020 10-year corn average that excludes the 2012 drought year was only 166.4 bu/ac., & soil moisture in the northern Plains & western Corn Belt are well below normal ahead of the growing season. USDA’s corn usage forecast did have a bullish bent.  Compared to USDA’s current 2020/21 supply-demand estimates, feed/residual use was increased 200 mb to 5,850 mb, exports raised 50 mb to 2,650 mb, & corn crush for ethanol boosted 250 mb to 5,200 mb.  At 15,125 mb, total corn usage would be 327 mb above the previous record of 14,798 mb set in 2017/18 when farm prices averaged $3.36/bu.  USDA obviously expects China to continue as huge grain & meat export buyers & for US consumers to return to the highway as commuters & travelers.  Average farm gate corn price was lowered 10c from this year’s current forecast to $4.20/bu.  USDA noted that weather uncertainty was a big risk factor to their new projections.
For soybeans, USDA forecast 90.0 to be seeded, 89.1 to be harvested & a 50.8 bu/ac. yield resulting in 4,525 mb of output.  If realized, yield would be second only to 2016/17’s 51.949 bu/ac. & production would exceed 2017/18’s previous record-high by 113 mb.  As in corn, projected soybean usage was aggressive.  Compared to the Feb. 9 WASDE 2020/21 forecast, soybean crush was increased 10 mb to a record 2,210 mb, exports were lowered 50 mb to a second-highest-ever 2,200 mb, seed/residual was down 1 mb to 124 mb, & imports were steady at 35 mb.  August 31, 2022 soybean carryover was increased by 25 mb to 145 mb, the second-least stockpile since 2013/14’s bottom-of-the-barrel 92 mb.  Average farm-gate soybean price was raised 10c to $11.25/bu., the highest since 2013/14’s $13.00.  Friday’s Ag Forum demand projections count on China to remain a very aggressive buyer of US beans. 
USDA ag economists foresee 45.0 of all types of US in 2021/22, barely above the 110-year-low 44.3 mil. sowed last year.  Recent harsh cold in Kansas & continued dry weather across most of Plains prompted USDA to expect only 37.2 (82.7%, slightly above the 82.4% prior 4-year average) to be harvested for grain.  Assigning a 4-year-low 49.1 bu/ac. yield, USDA forecast 2021/22 wheat output at 1,827 mb, just 1 mb above last year.  If realized, US wheat output would be the 3rd smallest since 2006/07.  Imports were boosted to a 3-year-high 130 mb. Although feed/residual use was increased 15 mb to 140 mb & food/seed use edged 2 mb higher to 1030 mb, a 60 mb drop to 925 mb in exports dominated demand sentiment. If USDA proves correct, US net wheat exports would fall to a 4-year-low 795 mb.  USDA assumes that Black Sea & EU export competition will mar US wheat shipment potential in the coming year. End-May 2022 wheat stockpiles were projected to fall 138 mb year-on-year to 698 mb, the lowest since 2013/14’s 590 mb, & the average farm-gate wheat price was forecast to jump 50c to $5.50/bu., the highest since 2014/15’s $5.99/bu.  At 33.3% of use, USDA projections would result in a wheat ending stocks/use ratio that would be the smallest since 2013/14’s 24.2%.  Traders were unimpressed with export demand expectations, & rode wheat down on Friday.
Friday’s USDA Weekly Export Sales data for the week ended Feb. 11 were at the upper-end of trade expectations for corn, wheat & soymeal, in the middle of trade forecasts for soybeans, but slightly below trade guesses for soyoil.  Old-crop corn sales (39.333 mb) were a 6-week low, but four-times the weekly average needed to reach USDA’s 2,600 mb export forecast. Cumulative 2020/21 corn sales have reached 2,305.2 mb, the largest ever for mid-February by 311.5 mb!  USDA also reported that 7.189 mb of 2021/22 corn were sold in the week ended Feb. 11.  Old-crop milo sales (0.004 mb) similarly fell to a 6-week low, but new-crop milo sales (4.291 mb) were the highest 2021/22 sales since Sept. 24.  Cumulative 2020/21 milo commitments stand at 233.5 mb, the highest week #24 total since 2015/16.  Old-crop soybean sales (14.642 mb) also slid to a 6-week low, but still 8-times the weekly sales average needed to reach USDA’s 2,250 mb export forecast for 2020/21. With 24 weeks now completed in the marketing year, cumulative bean commitments have reached 2,199.5 mb, 298.4 mb above the previous record pace set in 2016/17.  USDA also reported 6.713 mb of new-crop bean sales last week.  Soymeal sales (322,300 mt) were a 4-week high & twice the pace needed. Soyoil sales (4,400 mt) were a 2-week high, but only 22% of the average weekly sales needed. Cumulative soy product sales still remain below their 5- & 25-year average sales percentages thru week #20 of the marketing year. Old-crop wheat sales (14.664 mb) eased to a 3-week low, but were still 1.8-times the average pace needed.  USDA also reported that 7.878 mb of new-crop wheat was booked.  Cumulative 2020/21 wheat sales now total 859.9 mb.  That is a 4-year high for mid-February, but the wheat shipment rate remains suspect.  During the reporting week, China bought 0.039 mb US corn, 0.713 mb of US old-crop beans, 2.315 mb of new-crop beans, 4.839 mb wheat, 0.004 mb milo (including 2.165 mb cancelled) & 2.165 mb of new-crop milo. Last week’s activity brought total 2020/21 Chinese total commitments to 697.664 mb on corn, 1317.971 mb on beans, 104.650 on wheat & 199.345 mb on grain sorghum.  China also purchased 53,300 running bales of cotton (39.7% of total sales),  2,500 mt (7.5% of the total) pork, 2,400 mt (10.5% of the total) beef & 253,500 (71.4% of the total) cattle hides sales last week.
Monday morning’s USDA Weekly Grain Export Inspections data were similarly muted for the week ended Feb. 18.  Corn inspections eased to a 3-week-low 48.494 mb, below the previous week’s downwardly revised 51.768 mb (-0.293 mb) & well below the 57.1 mb inspections needed weekly to reach USDA’s 2020/21 export projection.  Mexico (13.081 mb), Japan (8.963 mb), Vietnam (5.756 mb) & China (5.663 mb) led the 12 nations that took at least 0.285 mb of US corn last week.  Cumulative corn inspections stand at 944.751 mb, only the fifth largest total since 2003/04. Soybean inspections declined to a 30-week-low 26.523 mb, down from the previous week’s upwardly revised 33.884 mb (+4.138 mb), but over 3.6-times the average inspections pace needed to reach USDA’s export forecast.  China (5.729 mb), the Netherlands (5.111 mb) & Egypt (3.861 mb) topped the list of 13 nations that shipped at least 0.293 mb of US beans last week.  Cumulative soybean inspections with 25 weeks now concluded in 2020/21 total 1,870.858 mb, 301.092 mb above the previous record pace of 2016/17. Grain sorghum inspections rose to a 2-week-high 4.886 mb, above the previous week’s upwardly adjusted 2.798 mb (+0.037 mb) but below the 5.4 mb average weekly inspections needed to reach USDA’s 295 mb old-crop export estimate. China (4.884 mb) dominated last week’s shipping total.  Cumulative milo inspections have reached 136.292 mb, the fastest week #24 total since 21015/16.  Wheat inspections again lagged to a 5-week-low 11.927 mb.  That was down from the previous week’s upwardly revised 15.389 mb (+0.965 mb) & well below the 21.0 mb of needed inspections needed weekly thru the end of May to reach USDA’s 985 mb export forecast.  China (2.471 mb) topped the 8 nations that shipped at least 0.288 mb of US wheat last week.  With 38 weeks now passed in the 2020/21 wheat marketing year, cumulative wheat inspections total 652.523 mb, the fifth-slowest pace since 2007/08.
Friday’s monthly USDA Cattle on Feed report was positive for feed demand, but the data modestly weighed on cattle futures on Monday.  The farm agency pegged Feb. 1 cattle on feed inventory in 1000+ head capacity feedlots at 12,106,000, up 178,000 head (+1.49%) from last year.  Total feedlot numbers were just shy of the 12,110,000 head record set in 2006.  January feeder placements were a
robust 2,017,000 head, up 62,000 head (+3.17%) from Jan. 2020.  Cattle marketings from the nation’s biggest lots slipped to 1,822,000 head, down 109,000 head (-6.64%) from January 2020. With consumer income expected to improve thru the summer, traders were reluctant to sell off cattle futures on Monday despite the somewhat bearish data.  Soon-to-expire Feb. live cattle lost 20c/cwt, April cattle dropped 62.5c/cwt & June cattle edged 27.5c lower.
Friday’s CFTC Disaggregated Combined Futures & Options Commitments of Traders report indicated that managed trading funds made mostly modest changes to their grain portfolios in the weekly period ended Feb. 16.  Funds were modest net buyers of corn (+6978 contracts), soyoil (+4), SRW wheat (+1979) & were modest net sellers of soybeans (-10,360), soymeal (-203), HRW wheat (-2959) & HRS wheat (-721).  Funds remain massively net long the major grains.  In the six major non-HRS wheat commodities, funds owned 920,385 long futures/options contracts & were short only 134,954 futures/options at the close of last Tuesday’s business. The resulting 6.8200:1 long/short ratio has been higher only 5.65% of the time since the June 2006 start of the data series.  With Brazilian farmers struggling to harvest their soybean crop & plant their Safrinha corn, Argentine weather looking mostly dry & some forecasters calling for hot/dry conditions in the US from May-July, funds can still reasonably bet on declining grain stockpiles amid a potentially inflationary global economy.
In export news, USDA did not report any daily export sales on Monday & has not done so since Latin American corn sales were announced on Feb. 12.  In what are likely to be non-US business transactions, Tunisia reportedly bought 3.674 mb of soft milling wheat & 3.380 mb of durum wheat for March 15-April 25 shipment in a tender that closed on Friday.  Saudi Arabia’s state grain buyer purchased 13.044 mb of milling wheat from Australia, Canada & Ukraine for May-December shipment. Algeria procured 6.889 mb of optional-origin feed barley, but South Korean feed mills passed on all offers for 2.716 mb of feed corn over the weekend. Ukraine grain exports since July 1 now total 30.9 mmt, down 21% year-on-year. Exports have thus far included 13.3 mmt of wheat & 13.1 mmt of corn.  According to a Thomson-Reuters newswire report, Ukraine corn exports could improve to 2.8 mmt in Feb. & 2.85 mmt in March compared to the 1.99 mmt of corn shipped in January. Argentine barley exports to China are set to nearly quadruple to a record-high 1 mmt in 2021 as Beijing shifts business from Australia due to a diplomatic tiff.  Much of the barley will be rerouted from the previous main buyer, Saudi Arabia.   
After gaining a penny on Friday, local soybean basis jumped another 2c higher on Monday. Corn & wheat basis levels were unchanged on both days.  Ice continues to complicate movement of barges along the Illinois River & thru lock & dams along the route.  St. Louis terminal bids remain variable for Feb. corn delivery with some facilities as much as 6c/bu. higher than others. 
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 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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