Midday Comments: 10/29/2020

Grains traded lower in Wednesday night’s electronic session, as they did on Tuesday night extending losses once Europe’s markets opened about 2 am.  Markets bottomed by about 7 am with Dec. corn down 8.5c, Nov beans down 6.25c lower & Dec. soft red winter wheat 10.25c lower.  Grains trimmed those losses after the 7:30 am release of USDA’s Weekly Export Sales data that showed better than expected corn (887.331 mb) & wheat (29.513 mb) sales, & still solid soybean (59.547 mb) sales.  Soymeal (199,400 mt), soyoil (6,000 mt) & grain sorghum (2.677 mb) sales were by contrast at the low-end of trade forecasts.  Cumulative 2020/21 corn export sales (1.203.8 mb) are the highest since at least 1979 at the third week of October, & cumulative soybean sales (1,725.9 mb) at market-week #8 are the best ever by 472.9 mb!  Cumulative wheat (593.8 mb) sales at week #21 are the highest since 2013/14. Whether due to fears of La Nina crop losses in South America or worries that US crops are smaller than forecast, export sales of each of the major grains are running well ahead of the average pace needed to reach USDA’s export forecasts. China was once again a significant influence on weekly activity.  They bought 0.063 mb corn, bringing total commitments to 415.370 mb.  China purchased 39.459 mb of beans last week, bringing their total to 955.197 mb.  China was last week’s dominant milo buyer, adding 4.677 mb ( about half switched from unknown destinations) to bring their 2020/21 total to 91.933 mb. China also returned to the US wheat market, buying 2.205 mb to bring their market-year total to 58.705 mb.  China also bought 28.6% of total IS cotton, 8.6% of all US pork, 22.8% of all US beef & 80.1% of all US cattle hides that the US sold for export in the week ended Oct. 22.  Grains turned mixed by mid-morning, but eased by the noon hour as follow-thru selling weighed on values.  At 1:08 pmm Dec. corn futures were down 2.75c, March corn was 2.25c lower, Nov. beans was down 3.5c, Jan. beans was 2.75c lower, Dec. soymeal was $0.20/ton higher, Dec. soyoil was 0.30c/lb. lower, & Dec. & March SRW wheat were each down 4.50c.
 
Recapping yesterday’s price action, grains losses accelerated after 2 am on Tuesday after France announced COVID-fighting stay-at-home orders & shutdowns of restaurants, bars & non-essential shops for at least 30 days starting Friday & Germany ordered a 1-month lockdown of restaurants, bars, fitness studios, concert halls & theaters that will start on Monday. While both nations said factories & schools would remain open, the restrictions were seen as shock treatment to prevent the spread of the coronavirus. Global financial markets hit the skids & grains were caught in the maelstrom.  Speculators sold to protect the profits from the recent 8-week grain rally.  Traders mostly ignored Wednesday’s 9:30 am release of the EIA Weekly Petroleum Status report that was bullish for ethanol.  That data indicated that ethanol output rose 8.232 mil.gal. to a 7-week-high 276.654 mil.gal. last week, up 3.07% for the week & only 6.27% below last year.  Despite the rising production, ethanol stockpiles still declined by 5.460 mil.gal. (-0.66%) to 823.242 mil.gal., the lowest level since Dec. 30, 2016.  With crude down more than $2/barrel, corn traders found little reason to be bullish about the energy complex.  By the 7:45 am pause in Tuesday night electronic trading, Dec. corn was down 10.5c, Nov. beans were 19.75c lower, Dec. soymeal was down $11.90/ton, Dec. soyoil was .74c/lb. lower & Dec. soft red winter wheat was 12.5c lower.  Grains traded on both sides of those price levels thru Wednesday’s regular trading session, but sagged to fresh lows late in the noon hour. Chart action was awful on Wednesday.  Dec. corn futures gapped lower & challenged its 20-day moving average.  March corn didn’t gap lower, but settled at its 20-day average.  Nov. beans settled just below its 20-day moving average & uptrending chart support drawn from the August lows.  Jan. bean gapped lower & also settled below Aug.-Oct. trendline support. Dec. wheat gapped lower, & barely settled above its 20-day average after piecing that target early in the session.  US equity markets traded 2.9% lower as grain trading ended, but eventually tumbled 3.43-3.73% lower by 3 pm.  With memories of the March financial market meltdown that took no prisoners in any market, traders were keen to pare risk asset exposures.  At Wednesday’s close, Dec. corn futures tumbled 14.5c lower, March corn dropped 12.25c, Nov. beans plummeted 25c, Jan. beans plunged 21.75c, Dec. soymeal lost $7.30/ton, Dec. soyoil careened 0.69c/lb. lower, Dec. soft red winter wheat declined 7c & March SRW wheat sagged 8c lower. When coupled with Tuesday’s reversals from early session strength, Wednesday’s grain price action was a strong signal that at least short-term tops had formed.
 
In export news, USDA announced on Thursday morning that 35.098 mb of 2020/21 & 21.298 mb of 2021/22 US corn were sold to Mexico & 5.551 mb of 2020/21 US corn were sold to unknown destinations.  On Wednesday, the farm agency reported 8.149 mb of 2020/21 US corn were sold to South Korea, 4.042 mb of 2020/21 US beans were sold to Egypt & 4.409 mb 2020/21 US beans were sold to unknown destinations.
 
Locally, corn & soybean basis levels each slid 5c lower, but wheat basis was steady on Wednesday. Jan. corn delivery basis declined 2c, but bean basis was steady yesterday.  Oct-Nov.-delivery grain basis is coming under pressure as the reopening of the Illinois River to barge traffic promises to add backlogged supply to the export channel.  St. Louis basis has been historically strong thru harvest as lock and dam repairs prevented movement down the Illinois River.  Those restrictions were due to be lifted Oct. 31.
 
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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.