Closing Comments: 3/25/2021

With crude oil futures getting pummeled $3+/barrel lower for the second time in three trading days & the US dollar index rising to a 4-month high, soyoil prices dove to lead soybeans to double-digit losses on Thursday.  Corn rebounded from early session lows as prices were bolstered by strong weekly export sales, but corn could not overcome a second straight double-digit daily slide in wheat prices. Traders largely ignored Thursday morning’s strong weekly export sales report as “old” news even though corn, soybean & wheat sales each exceeded the levels needed to reach USDA forecasts.  Crop size expectations—not current demand trends—are the main focus right now. As normally occurs at this time of year, analysts are in the process of predicting the size of the 2021 harvest.  As they assume “normal” weather, “trendline” improvement in yields & bet that farmers will increase plantings around the world in response to 7-year-price highs, it’s not surprising that markets can believe global supply deficits will soon be resolved. Markets assumed record-high Brazilian corn output since January despite planting delays. With winter wheat still emerging from dormancy & the most important yield determination period still 60 days away, Black Sea & EU wheat output are both forecast to rebound strongly, too.  Pre-report guesstimates for next Wednesday’s USDA Prospective Planting report already assume 182+ mil.ac. of corn & soybeans—the most ever. Fact is, Mother Nature always has the last laugh. But with warmer, drier weather seen into early April that could improve Corn Belt planting prospects, bearish traders have the upper hand on Thursday.  Overnight, May corn futures were down 5.25c, Dec. corn was 2.75c lower, May beans were down 9.75c, Nov. beans were 7.5c lower, May soymeal was down $0.60/ton, May soyoil was 0.68c/lb. lower, May SRW wheat was down 8.5c & July SRW wheat was 7c weaker at the 7:45 am pause in electronic trading. May WTI crude oil futures were down $1.92/brl & the June US dollar index was up 0.115 ahead of the 8:30 am reopen of grain trading.  As crude oil plunged as much as $3.78/brl & the dollar rose as much as 0.410 by midmorning, May corn crashed as much as 11.75c lower, May beans plummeted up to 21.25c lower & May SRW wheat tumbled up to 15.75c lower as the sell-off peaked.  Rally attempts were muted as markets headed into the noon hour even though equity markets turned 1%+ losses into small noon hour gains.  At Thursday’s close, May corn futures were were down 6.75c, July corn was 4.75c lower, Dec. corn was down 3.5c, May beans tumbled 18.5c lower, July beans lost 16.5c, Nov. beans declined 13.5c, May soymeal rallied $3.60/ton, May soyoil crashed 2.50c/lb. lower, May SRW wheat plunged 12.25c lower & July SRW wheat declined 10.25c. Shortly before the New York close of those markets, May WTI crude oil was down $2.55/brl & the June dollar index was up 0.295 to its highest close since mid-November.
 
Recapping Wednesday’s price activity, soybean futures extended Tuesday’s recovery & corn ended mixed as a late session rally lifted both commodities to top-range settlements. Old-crop contracts of both grains outperformed new-crop months as traders recognize that usage of last year’s output remains robust, but farmers have the best incentives in years to boost acreage in 2021. Soybeans were yesterday’s price leader, bouncing as soyoil futures resumed its uptrend, soymeal firmed & soy product values underpinned board crush margins.  Corn traders eventually shrugged off Wednesday morning’s EIA Petroleum Status report that indicated last week’s ethanol output slipped to a 3-week-low 271.0368 mil.gal. (-5.05% for the week) & ethanol stocks rose to a 2-week high 915.978 mil.gal. (+2.20% for the week). Pre-report analyst surveys had forecast ethanol production would rise & stockpiles decline.  Weekly ethanol production was down 8.26% from last year, but stocks were 9.66% below March 20, 2020 levels. Traders could take solace from the fact that 2021 vs. 2020 ethanol production & stockpile comparisons will look fabulous for the rest of the 2020/21 marketing year starting with next week’s report.  With rainfall moving into the panhandles of Texas & Oklahoma on Wednesday, wheat gave back Tuesday’s rally as global wheat prospects continue to look much improved for 2021.  Unlike world corn & soybean stockpiles that are at 6+ year lows, global wheat carryover is record-large & Northern Hemisphere weather is currently conducive for good winter wheat yields.  Traders are pushing wheat prices closer to corn prices to force more wheat into livestock rations. At Wednesday’s close, May corn futures gained 2c, July corn rose 3c, Dec. corn edged 3/4c lower, May beans jumped up 9.5c, July beans rallied 9.75c, Nov. beans were up 4.75c, May soymeal was $2.20/ton higher, May soyoil rebounded 0.46c/lb., May SRW wheat tumbled 10c lower & July SRW wheat declined 7.5c.
 
In export news, USDA announced on Thursday that 4.370 mb of 2020/21 US corn were sold to Japan. The farm agency did not report any daily export sales earlier in the week. Brazil reports that 15.464 mmt of soybeans are ready for shipment right now, up 0.992 mmt from last week & the 12.0 mmt export line-up that existed at this time last year.  Russia’s ag ministry on Thursday indicated they will propose restrictive tariffs on sunflower seeds starting July 1.  A formula-based export tax would then be instituted on Sept. 1. 
 
Thursday’s USDA Weekly Export Sales data were near the top of trade expectations for corn, solidly within forecasts for wheat & soy products & at the low end of projections for soybeans.  Fueled by previously reported sales of 152.591 mb to China, weekly corn sales jumped to a 7-week-high 176.445 mb in the weekly period ended March 18. While the China sales captured the most attention, sales to other destinations were still 23.278 MB, about thirteen-times higher than the average sales needed weekly thru the end of August to reach USDA’s current 2,600 mb export forecast for 2020/21. An additional 5.693 mb of 2021/22 corn was also sold last week.  Cumulative old-crop corn sales now stand at 2,558.4 mb, 503.8 mb larger than previous record pace set in 2007/08 at week #29.  Soybean sales slipped to a 4-week-low 3.744 mb, but that was still four-times the needed weekly sales pace to reach USDA’s 2,250 mb export forecast. Exporters also reported the sales of 2.388 mb of new-crop beans last week.  Cumulate 2020/21 soybean sales now total 2,231.7 mb, 240.2 mb above the previous market week #29 record set in 2016/17. Last week’s grain sorghum sales were reported at 2.394 mb, slightly above the 2.1 mb needed weekly to reach USDA’s 295 mb export projection for 2020/21.  Cumulative milo sales now stand at 246.7 mb, the fastest export sales pace since 2015/16’s 256.3 mb for this time of year.  Although weekly soymeal sales slipped to a 4-week-low 167,847 mt for 2020/21 & 17,211 mt for 2021/22, meal sales still exceeded the 147,500 mt needed weekly to reach USDA’s export projection.  Soyoil sales of 13,153 mt were the second-highest in 8 weeks, but still below the 19,400 mt needed weekly to reach USDA’s export estimates.  Wheat sales eased to a 2-week-low 12.621, but that was still 1.8-times the needed average weekly sales rate.  USDA also reported 2.590 mb of 2021/22 wheat was sold last week.  With 42 weeks now completed in its old-crop marketing year, wheat sales total 913.2 mb, the fastest pace since 2061/17.  China was again a compelling force last week, buying 153.166 mb corn (year-to-date total: 915.473 mb), 0.022 mb of old-crop beans (YTD: 1319.992 mb), 2.804 mb of 2020/21 wheat (including 2.388 mb switched from unknown destinations, YTD 114.894 mb), 2.382 mb of milo (YTD 213.396), 39,600 running bales of cotton (14.2% of total global sales), 10,500 mt of pork (27.1% of total sales), 3,600 mt of beef (19.0% of total sales) & 418,600 cattle hides (74.6% of total sales).
 
Production news mostly featured higher estimates on Thursday.  The London-based International Grains Council sees total global grain output at a record 2,287 mmt in 2021/22, up 63 mmt from last year.  But the IGC also expects consumption to increase a like amount, keeping ending stockpiles little changed from the 609 mmt of 2020/21.  The European Commission forecast 2021/22 EU wheat output at 126.7 mmt on Thursday, up 9.5 mmt (+18.0%) from last year.  The EC sees wheat exports rising 3 mmt to 30 mmt in the coming year. EU corn production is projected at 71.2 mmt in 2021/22, up 6.3 mmt (+9.7%) from last year.  EU 2021/22 corn imports were forecast at 16.5 mmt, unchanged from last year.  In South Africa, their Crop Estimates Committee pegged 2021 corn output at 15.922 mmt, up 0.073 mmt from last month’s forecast & 4% above last year’s results. Private pre-report estimates had expected production at 16.289 mmt. The CEC sees 8.796 mmt of white (food) & 7.126 mmt of yellow (feed) corn.  Citing good weather in southern Russia, private analyst IKAR boosted by 1.8 mmt to 79.8 mmt its estimate of the 2021/22 Russian wheat crop. Wheat exports were raised by 1 mmt to 39.5 mmt for 2021/22.  An exception to the higher grain output projections came from Mexico.  The head of one of Mexico’s farm associations forecast that Mexican corn production would be no more than 24.0 mmt this year, 3 mmt below official forecasts.
 
Locally, corn & wheat basis levels were steady, & soybean basis eased a penny lower on Wednesday.
 
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"Top Ag Comments" are written by David Marshall, AgTraderTalk LLC, Nashville, IL.  To learn more about his farm marketing advisory or commodity brokerage services, contact him at dmarshall@agtradertalk.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.