Closing Comments: 3/11/2021

Corn & soybeans bounced back modestly from Wednesday’s sharp, speculator-driven sell-off, but wheat extended its mid-week post-report losses on Thursday.  With 0.25-0.50” of rainfall forecast for the western half of Kansas, the Texas panhandle & most of Oklahoma into Saturday, wheat played catch-up today with the more severe weakness other grains suffered on Wednesday.  Wheat traders were also disappointed that Egypt bought 13.228 mb of milling wheat for mid-April shipment from Romania in an optional-origin tender priced nearly 28c/bu. lower than Egypt paid in February.  USDA’s 7:30 am release of its Weekly Export Sales report did the heavy lifting to support grains on Thursday morning.  Data for the week ended March 4 reiterated that cumulative 2020/21 corn & soybean export commitments remain far higher than ever before at this time of year.  Corn & soybean rallies were tempered by Brazil’s farm agency forecasts that boosted corn output by 2.6 mmt to 108.1 mmt & & soybean production by 1.3 mmt to 135.1 mmt due to higher planted acreage & higher yields than seen in February. At Thursday’s close, May corn futures rebounded 4.5c, July corn gained 4c, Dec. corn rose 3.25c, May beans recovered 3.75c, July beans rallied 5.5c, Nov. beans jumped up 5c, May soymeal declined $2.00/ton, May soyoil surged 1.10c/lb. higher, May soft red winter wheat tumbled 10c lower & July SRW wheat lost 7.75c.  
 
Thursday’s two-sided trading was a stark contrast to Wednesday’s price movement.  Weakness started in Tuesday’s overnight session & gained downward momentum during the regular session.  Forecasts for 1-2” of rainfall by late next week in Argentina were the major talking point for the sell-off, but price action was eerily similar to reaction to the February WASDE report when USDA also failed to increase usage & lower ending stocks to the extent that traders had expected.  USDA’s decision to leave 2020/21 US ending stocks of corn, soybeans & wheat unchanged led to the same kind of negative reaction this month, this time with a day delay.  On Wednesday, May corn futures dropped 11.75c, Dec. corn declined 4.5c, May beans plunged 30.25c lower, Nov. beans tumbled 23.25c, May soymeal crashed $9.80/ton, May soyoil eased 0.04c/lb. lower, May SRW wheat declined 4c & July SRW wheat decline 4.75c. 
 
US farmers were aggressive sellers to equally assertive speculative & commercial buyers during the first half of the marketing year.  With harvest underway, South American farmers are now selling into the rally. As speculative fervor has waned, its commercial demand that must offset farmer sales.  The adage that “bulls need to fed daily” is especially true when rallies have been as long lasting as the current trend. 
 
Wednesday’s EIA Weekly Petroleum Status report for the week ended March 5 was not enough fuel for the bulls.  The energy agency reported that ethanol output rose to a 7-week-high 275.772 mil.gal. last week, up 10.48% from the previous week. But weekly production was still 10.15% below last year & same-week output was still the least since 2014.  In the good news column, ethanol use exceeded production by 14.910 mil.gal. last week.  Ethanol stockpiles declined 1.58% & were 95.09 mil.gal. (-9.30%) below last year.  While weekly ethanol stocks rose in the Midwest (+4.536 mil.gal.) & at the East Coast (6.048 mil.gal.), they dropped at the Gulf (down 13.86 mil.gal.) & the West Coast (down 10.794 mil.gal.).  Ethanol exports to China & India are rumored &  a ramp up in summer driving demand is also on the horizon. Corn processors need improved demand to keep paying more than $5.00/bu for corn. 
 
While Thursday’s USDA Weekly Export Sales data were within trade expectations, weekly sales of corn, soybeans, wheat & soymeal exceeded the averages needed to reach USDA export projections.
 
Old-crop corn sales were a two-week-high 15.570 mb in the week ended March 4, well above the 10.2 mb needed weekly to reach USDA’s 2600 mb export forecast.  Cumulative corn sales now stand at 2,343.2 mb, 253 mb above the previous record pace set in 1979/80 & 348.3 mb above the second-highest pace of 2007/08. Exporters also reported 11.310 mb of 2021/22 US corn was sold last week.  
 
Old-crop grain sorghum sales were a 4-week-high 2.374 mb last week, equal to the average pace needed to reach USDA’s 295 mb export projection.  Cumulative milo commitments now stand at 233.8 mb. An additional 2.087 mb of new-crop milo was also reported.
 
Old-crop soybean sales were a 3-week-high 10.380 mb, 8.7-times the 1.2 mb needed weekly to reach USDA’s 2,250 mb export forecast.  Cumulative bean sales now total 2,220.5 mb, 273.5 mb more at market week #27 than the previous record set in 2016/17.  Current soybean commitments stand at 98.7% of USDA’s expectations, but that’s not the highest percentage on record for this time of year.  In 2013/13, bean sales were 99.0% of final shipments at week #27.  And in 2013/14, commitments were 99.3% of final shipments in early March.  In both of those previous years, prices remained high into summer in order to ration usage.  Exporters also reported sales of 7.834 mb of new-crop beans last week.
 
Wheat sales also improved to a 3-week-high 12.111 mb, above the 8.0 mb average needed to reach USDA’s 985 mb 2020/21 export estimate. Cumulative wheat commitments stand at a 4-year-high 886.3 mb with 40 weeks now completed in the marketing year. 
 
China was again a significant influence in the US market last week.  It bought 0.331 mb of old-crop corn, 3.314 mb of old-crop beans (including 2.388 mb switched from unknown destinations), 2.315 mb of 2021/22 beans, 0.096 mb of old-crop wheat, 2.370 mb of old- & 2.087 mb of new-crop milo, 72,500 running bales (22.9% of total purchases) of cotton, 10,700 mt (33.0% of total sales) of pork, 1,800 mt (8.6% of total sales) of beef, & 390,500 cattle hides (75.3% of total sales).  Cumulative 2020/21 Chinese purchases now total 737.7 mb of corn, 1317.3 mb of soybeans, 107.2 mb of wheat, & 199.6 mb of grain sorghum.
 
In daily export news, USDA has not reported any daily export sales so far this week. Egypt’s state grain buyer GASC launched a snap tender for optional-origin wheat for mid-April shipment on Wednesday afternoon & bought 13.228 mb of Romanian wheat on Thursday.  Traders were disappointed that GASC was able to price the wheat at a delivered price of $7.66/bu., down from $7.94/bu. paid in their last tender in February. Traders are nervous about reports that African swine fever is regaining a foothold in China.  The new variant is not as lethal as the first bout of the virus, but worries that feed demand may be reduced are circulating.    
 
After each slipped 3c lower on Wednesday, corn basis was steady but soybean basis declined another 2c on Thursday.  Wheat basis was unchanged on each day. Barge freight costs ticked higher on Thursday as river operators get ready for the reopening of the mid-Mississippi River later this month.
 
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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.