Midday Comments: 10/6/2020

Grains rallied in Monday night trading, building on Monday’s late-session rally. Wheat prices paused their upward momentum overnight, finding selling resistance as chart resistance at $5.90-$6.00 loomed.  USDA indicated that 15-state wheat planting advanced 17% to 52% finished last week, & 24% of wheat intentions are now emerged. Planting is 5% ahead of the previous 5-year average, & emergence is 3% ahead of the 2015-19 pace.  With forecasters calling for limited rainfall across the US Plains thru at least Oct. 19, traders could expect continued rapid wheat planting, but potential delays in emergence.   At the 7:45 am pause in electronic trading, Dec. corn futures were 2.5c higher, March corn was up 2.25c, Nov. beans surged 12.25c higher, Jan. beans jumped 11.75c, Dec. soymeal was up $3.30/ton, Dec. soyoil gained 0.59c/lb., Dec. SRW wheat gained 2.5c & March SRW wheat was up 1.5c on Tuesday morning. Grains extended their overnight rally as Tuesday’s regular trading session resumed.  Buy-stops were hit above last week’s highs, propelling corn to a test of #3.90 chart resistance, soybeans to a challenge of $10.50, & wheat to a test of $6.00.  By 9:53 am, Dec. corn futures were 8c higher, March corn was up 7c, Nov. beans had soared 24.5c higher, Jan. beans surged up 23c, Dec. soymeal was up $9.40/ton, Dec. soyoil gained 0.65c/lb., Dec. SRW wheat ripped 14.5c higher & March SRW wheat was up 13.7c on Tuesday morning. These are the kind of markets one gets when central bankers cast monetary caution to the wind & governments pour on fiscal stimulus that encourages speculation. 
 
Monday night gains came despite Monday afternoon’s USDA Weekly Crop Progress data that confirmed US corn & soybean crop maturity & harvest & winter wheat planting & emergence are advancing at above-average rates. USDA pegged 18-state US corn maturity at 87%, 9% above the 2015-2019 average.  Corn harvest advanced 10% last week to 25% completed, 1% ahead of the 5-year average.  And corn conditions improved 1% to 62% good-excellent, 1% above trade expectation.   Similarly, USDA indicated that 85% of the 18-state US soybean crop had dropped leaves, 3% above average.  Farmers advanced soybean harvest by 18% last week to 38% completed, 10% ahead of the 5-year average pace.  And soybean conditions were left at 64% G-E with a 1% shift from good to excellent for the weekly period ended Oct. 4.  
 
US crop progress data were more than offset in the overnight session by dry weather in Brazil that has delayed soybean planting, boosting the potential for US exports.  Brazilian analyst Safras e Mercado reports 1.5% of Brazilian farmers’ soybean intentions were planted by October 1, down from the 4.2% average.  Summer corn plantings are estimated at 36.5% completed, 3.0% ahead of average with the best progress seen in Rio Grande do Sul (69% finished), Parana (45% done) & Santa Catarina (51% completed).  Soybean planting delays are especially important for US exports.  If planting is slow & fewer Brazilian beans can be harvested in January, that also delays the planting of second-crop corn.  Both US corn & beans would potentially thus benefit from planting delays.  Weather forecasters indicate a pattern change may start by this coming weekend.  Central Brazil is typically drier thru September & starts getting more regular rainfall in October.  Southern Brazil has recently seen 0.50-2” rainfall, but top producing corn & soybean state Mato Grosso has remained dry.  Rainfall in central Brazil is expected to be erratic initially before improving by next week. 
 
Recapping Monday’s activity, corn & soybeans set their highs about 3:30 am, pushed to their lows by 11:30 am, & then rallied thru the noon hour to settle fractionally mixed on Monday. Weekend harvest activity was hampered in much of the Midwest by light showers that limited hedge pressure & Monday’s 10 am release of USDA Weekly Grain Export Inspections were also solid.  Corn & soyoil also were supported by a short-covering surge in crude oil futures.  With weather forecasters warning of a direct hit on Gulf oil platforms from what is expected to be a Category 2 Hurricane Delta, crude oil recovered about half of last week’s 8% loss on Monday.  Wheat futures were higher all session as weathercasters called for continued dry weather in southern Russia.  Traders bet winter wheat planting will be reduced & yield potential lowered in the Black Sea production region, making Russian export restrictions more likely after Jan. 1.  At  Monday’s close, Dec. corn futures ticked 1/4c lower, March corn was unchanged, Nov. beans were up 3/4c, Jan. beans edged 1/4c higher, Dec. soymeal dropped $5.90/ton, Dec. soyoil jumped 0.90c/lb., Dec. soft red winter wheat surged 11c higher & March SRW wheat rallied 10.75c.
 
The Commerce Dept’s. Census Bureau released “official” export-import data for August this morning, indicating that the US trade deficit balance widened 5.9% from July to $67.1 billion in August.  That was the largest since Aug. 2006.  Imports rose 3.2% to $239 billion in August as consumer demand for imported goods was bolstered by $1 trillion in fiscal stimulus to counter COVID job layoffs, but exports increased a less robust 2.2% higher to $171.9 billion as exports of services and manufacturing products stalled. Census data indicated that the US exported 178.696 mb of corn in August.  That brought final 2019/20 US corn exports to 1,772.212 mb, above the 1,765 mb USDA’s Sept. 11 WASDE report had predicted, but the lowest yearly total since 2012/13’s 728.285 mb.  August grain sorghum exports totaled  20.680 mb, bringing final old-crop milo exports to 203.715 mb.  That was just a bit shy of the 205 mb that USDA foresaw in Sept., but still the best since 2016/17’s 239.155 mb  Soybean exports more than doubled from July to 167.217 mb in August.  Final 2019/20 bean exports came to 1,681.275 mb—slightly above the 1,680 mb Sept. 11 USDA forecast, but still the least since 2013/14’s 1.635.977 mb.  Today’s better than expected August corn & bean exports counter about half the lower-than-expected ethanol corn crush & soybean processing reports that USDA released on Oct. 1.  Census data pegged US wheat exports at 94.671 mb, the best August total since 2016’s 100.246 mb shipments.  With 3 months now completed in its 2020/21 marketing year, wheat exports have reached 265.565 mb—a 3-year high. 
 
Monday’s USDA’s Weekly Grain Export Inspections data were solidly within trade expectations for corn--a 3-week-high 34.014 mb versus 25.6-43.3 mb expected. China (13.671 mb), Mexico (9.030 mb), Colombia (5.372 mb), Japan (2.644 mb) & Costa Rica (1.817 mb) were the only nations that shipped at least 0.387 mb last week of US corn last week.  Weekly corn inspections exceeded last year’s same week total by 15.377 mb, & brought cumulative shipments to 144.387 mb.  That’s 64.6 mb (+81.1%) ahead of last year’s pace & the fastest week #5 total since 1016/17’s 227.3 mb rate. Weekly corn inspections need to average about 45.8 mb to reach USDA’s 2,325 mb export projection.  Grain sorghum inspections rose to a 5-week high 6.206 mb, all for China.  Weekly shipments exceeded the 5.1 mb average pace needed to reach USDA’s 260 mb export projection for 2020821.  Cumulative milo inspections now stand at 18.178 mb, 10.724 mb (+244%) above last year.  That’s the fastest start to milo inspections at week #5 since 2015/16’s 40.987 mb pace.  Soybean inspections jumped to 61.254 mb, 22.590 mb above last year’s same-week results & the highest weekly total since Nov, 21, 2019.  Pre-report surveys expected bean shipments at 38.6-57.0 mb.  China (44.921 mb), Mexico (3.787 mb), South Korea (2.206 mb), the Netherlands (2.082 mb), Portugal (1.653 mb),  Algeria (1.288 mb) & Japan (1.177 mb) were last week’s million bushel destinations, but 18 nations took at least some US soybeans.  With 5 weeks now completed in the 2020/21 marketing year, cumulative soybean shipments total 242.535 mb, up 87.961 mb (+56.9%) from last year & nearly 42 mb above the previous record pace set in 2017/18. Soybean inspections must average about 39.6 mb per week to reach USDA’s current 2,125 mb export forecast for 2020/21.  Wheat inspections rose to a 3-week-high 23.651 mb, 6.038 mb above last year’s same-week total. Results were at the top of trade guesses that ranged 14.7-23.9 mb. The Philippines (6.438 mb), Nigeria (2.945 mb), Vietnam (2.425 mb), Mexico (2.087 mb) & South Korea (2.018 mb) topped the list of 11 nations that shipped at least 0.438 mb of US wheat last week. With 17 weeks now completed in its 2020/21 marketing year, cumulative wheat inspections stand at 363.321 mb, 32.595 mb (+9.9%) above last year & the fastest pace since 2017/18’s 379.373 mb.  To reach USDA’s current 975 mb export projection, weekly wheat inspections need to average about 18.2 mb.  China was the top corn & soybean shipper, the only milo destination, & the eighth-best wheat shipper last week. 
 
In daily export news, USDA announced on Tuesday morning that 5.673 mb of 2020/21 US soybeans were sold to unknown destinations.  On Monday, the farm agency reported that that 6.300 mb of 2020/21 US corn were sold to Mexico.  USDA has now made a daily export sales announcement in 28 of the most recent 30 business days since August 25.  Tunisia reportedly purchased 3.380 mb of soft wheat on Tuesday, & Egypt’s state commodity buyer GASC is seeking 30,000 mt of soyoil as well as 10,000 mt of sunflower oil.  In pending tenders, Jordan & Turkey are seeking wheat on Thursday & Ethiopia is looking for milling wheat next week. 
 
Locally, corn basis was a penny higher, soybean basis was 1c lower & wheat basis was steady on Monday.  St. Louis barge freight continued to climb to start the week, & is now equal to the highest level since Aug. 16, 2019.
 
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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.