Closing Comments: 2/4/2021

After posting new contract highs ahead of Thursday’s 7:30 am release of USDA’s Weekly Export Sales report, March corn futures quickly reversed overnight gains once the regular trading session resumed at 8:30 am.  Although USDA confirmed expectations that last week’s corn export sales were the highest ever & cumulative end-January corn sales 314 mb larger than ever before, reaction was muted by the fact that 251.962 mb of the 292.762 mb weekly total had been previously reported under USDA’s daily reporting system.  Soybeans traded on both sides of unchanged during the regular session, drifting to midmorning high on news weekly sales remained unsustainably strong at 30.277 mb.  Forecasts for benign weather in South America limited the rallies of both beans & corn.  Wheat sales came under pressure despite 10-week-high weekly export sales of 23.630 mb.  The US dollar burst above chart resistance to a 2-month high on Thursday, weighing on grains in general & wheat in particular.  Liquidation of old-/new-crop spread trades in grains supported deferred contracts at the expense of nearby months, while reversals of long meal/short soyoil spreads moderated soybean price movement.  At Thursday’s close, March corn futures declined 2c, July corn ticked 1/4c lower, Dec. corn rose 3/4c, March beans edged 1.25c higher, July beans were up 1c, March soymeal lost $2.40/ton, March soyoil rallied 0.46c/lb., March soft red winter wheat tumbled 10.75c lower & July SRW wheat lost 5c. At their overnight session highs, March contracts of corn were 6c higher & SRW wheat was up 2.25c. March beans closed 9c below its midmorning peak.
 
Thursday morning’s USDA Weekly Export Sales data were strong, but mostly within already high trade expectations.  As mentioned, corn sales (292.762 mb old- & 3.299 mb new-crop) were record-high for any single week, spurred by massive, previously announced sales to China.  The trade had expected sales at 255.9-314.9 mb.  Cumulative 2020/21 corn sales for the last week of January have reached 2,208.8 mb, a whopping 314.0 mb above the previous record set in 1980.  (By mid-March 1980, corn commitments were officially lowered 323.8 mb because of the trade embargo that had been imposed on Russia on Jan. 4). This year’s corn commitments stand at 86.6% of final projected 2020/21 exports.  The previous record sales percentage by market week #22 was 77.9% of final exports set in 1995/96. Today’s report sets the stage for USDA to boost its current 2,550 mb export forecast by 150-200 mb in next Tuesday’s monthly WASDE report revision.
 
Soybean sales  were also solidly within the trade’s 22.0-73.5 mb expectations with 30.277 mb reported for 2020/21 & 23.273 mb for 2021/22.  Old-crop bean sales were 12-times the 2.5 mb needed weekly to reach USDA’s current 2,230 mb export forecast.  Cumulative soybean export commitments stand at 2,155.3 mb, 301.0 mb above the previous record set in 2016/17 & 96.6% of expected exports, the highest percentage ever. (2012/13 sales were at 95.5% & 2013/14 at 96.5% of final exports at market week #22).  Both sales & shipments continue to run about 300 mb above the record-setting 2016/17, yet USDA only sees final 2020/21 exports being 64 mb above the previous 2,166 mb record. Also look for an upward soybean export adjustment in next Tuesday’s WASDE revision.
 
Soymeal export sales were again strong at 310,100 mt last week, & an additional 45,000 mt of 2021/22 meal was also sold.  Old-crop sales need to average 163,700 mt weekly to reach USDA’s current soymeal export projection. Old-crop soyoil sales again lagged last week at just 10,400 mt.  That’s about half the 19,000 mt weekly pace needed to reach USDA’s soyoil export estimate. Both soymeal & soyoil export sales are running about 5% below the average sales paces of the past 5- & 25-years.
 
Grain sorghum sales slipped to a 4-week-low 2.508 mb for 2020/21, but 2.087 mb of new-crop milo were also sold.  Last week’s old-crop milo sales were still 1.25-times the 2.0 mb needed weekly thru the end of August.  Cumulative 2020/21 grain sorghum export commitments stand at 229.2 mb, 79.0% of USDA’s 290 mb export forecast.  Chinese purchases currently account for 98.7% of known milo export sales!
 
Wheat traders shrugged off strong weekly export commitments, worried that Russian wheat would continue to capture February-May demand from the US.  USDA reported that a 10-week-high 23.630 mb of US 2020/21 wheat was sold last week, about 2.5-times the 9.3 mb average sales needed weekly to reach UDSA’s 985 mb export projection.  An additional 3.436 mb of new-crop wheat was also booked last week.  Cumulative old-crop wheat sales now total 823.6 mb, the fastest sales pace since 2016/17 at market week #35. At 83.6% of projected exports, wheat sales continue to run about 4% above average for this time of year.
 
In daily export news, USDA did not report any daily export sales on either Wednesday or Thursday. South Korean feed mills bought two cargoes of corn totaling about 5.393 mb for May-June arrival, one from South America & the other optional-origin.  South Korean flour mills also purchased 1.183 mb of US wheat on Thursday.  Turkey’s state grain buyer also tendered for 9.252 mb of corn today. Russia officially announced a new permanent export tariff regime that will impose a 70% export tax on the difference between the port sales price & $200/mt starting April 1.  Under the plan, grain sold at $300/mt would face an export tax of $70/mt.  Considering that the export tax is designed to keep Russian consumer prices suppresses, Russian President Putin reportedly said that a farmer-support program needs to be instituted to offset the pain of the export tax plan.  Putin should ask Argentine farmers how well they like to fund their government via export tariffs.  They simply produce less.
 
The United Nations’ Food and Agriculture Organization reported on Thursday that its global food price index rose for the eighth straight month in January to its highest level since July 2014.  The FAO food index, which measures the cost of various cereals, oilseeds, dairy products, meat & sugar, rose from December’s upwardly revised 108.6 (+1.1) to 113.3 last month.  Several nations, such as China, have tried to curb price increases by stockpiling imports, further pushing up global prices.  
 
Locally, corn & wheat basis levels were steady on Thursday, but soybean basis slipped 2c lower.  Thru Thursday’s closing bids, cash corn & beans were each up 7c but wheat was down 25c for the week.
 
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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.