Midday Comments: 11/3/2020

Grains rallied along with outside financial markets on Monday night & into Tuesday as global investors bet that US election results would bring more stimulus, regardless who takes power.  Polls give Joe Biden a decisive nationally lead & modest leads in most industrial states that Trump barely won in 2016. With interest rates climbing & the US dollar plunging, global equity markets surged higher, crude oil extended the recovery it started on Monday morning, & grains followed higher.  We doubt much of the rally was attributable to either Monday afternoon’s USDA Crop Progress data or to USDA’s monthly corn & soybean processing reports for September.  USDA indicated that the 18-state US corn harvest advanced 10% in the week ended Nov. 1 to 82% completed, 13% ahead of the 2015-2019 average. Farmers in the 18 major reporting states only harvested 4% of the bean crop last week, bringing that harvest to 87% completed, +4% above the 5-year pace.  Winter wheat planting also rose 4% to 89% finished during the week, 3% ahead of average.  USDA indicated that 71% of the winter wheat crop had emerged, up 9% for the week & 1% ahead of average. USDA pegged wheat conditions at just 43% good or excellent.  That was a 2% improvement on the week, but well below the 57% G-E rating last year.  In its monthly grain & oilseed processing reports, USDA indicated that 400.869 mb of corn was crushed for fuel ethanol in September. That was down 10.240 mb from August crush & 4.816 mb below the Sept. 2019 total. Beverage & industrial non-fuel ethanol & wet mill corn processing usage was reported at 49.020 mb in September, down 1.835 mb from August & 0.710 mb more than last year.  September soybean crush was 171.056 mb, 8.721 mb above last year’s pace & record-high for that month. Despite the strong crush, end-September soymeal of stocks declined to 312,944 short tons, down 75,982 tons vs. Aug. 31 & 47,443 tons (-13.2%) below last year.  Sept. 30 soyoil stocks were pegged at 1,848.530 mil.lbs., down 109.656 mil.lbs. for the month, but 73.214 mil.lbs. (+4.1%) above last year.  Argentine exports of soy products have been limited by slack farmer sales, boosting export demand for US soymeal & soyoil.  At the 7:45 am pause in electronic trading, Dec, corn was up 2.75c, March corn was 2.5c higher, Jan. beans were up 12.25c, March beans was 11.5c higher, Dec. soymeal was up $3.10/ton, Dec. soyoil was 0.54c/lb. higher, Dec. SRW wheat was 5.5c higher & March SRW wheat was up 4.25c.
 
Corn & soybeans largely maintained their overnight rallies thru Tuesday’s regular trading session, but wheat pared its gains as outside markets extended overnight trends. Gains were sustained as private production estimates trended lower ahead of USDA’s Nov. 10 crop production & supply-demand revisions.  Overnight, brokerage firm StoneX trimmed its 2020 US corn production forecast to 14,762 mb (down 180 mb) on yield of 178.9 bu/ac. (down 0.1 bu/ac,.).  StoneX also lowered its soybean output projection to 4,291 mb (down 60 mb) on yield of 52.1 bu/ac. (down 0.3 bu/ac.).  At midmorning, analytics firm IHS Markit (formerly Informa Economics) lowered its corn production estimate by 310 mb to 14,502 mb on a 2.1 bu/ac. reduction to 175.7 bu/ac. yield. The firm also decreased its soybean production estimate by 101 mb to 4,183 mb on a 1.1 bu/ac. drop to 50.8 bu/ac. yield.  In October, USDA projected corn output at 14,722 mb on 178.4 bu/ac. & soybean production at 4,268 mb on 51.9 bu/ac.  If realized, today’s lower private production forecasts give Aug. 31, 2021 corn ending stocks a shot at falling below 2,000 mb & bean stocks the potential to decline below 220 mb. At Tuesday’s close, Dec. corn futures gained 3.5c, March corn rose 4.25c, Jan. beans jumped 12c higher, March beans gained 12.5c, Dec. soymeal worked $2.10/ton higher, Dec. soyoil rebounded 0.59c/lb., Dec. soft red winter wheat edged 1/2c higher & March SRW wheat was up 2c.
 
Recapping Monday’s price action, grains opened lower on Sunday night as traders pared long positions ahead of Tuesday’s election & energy prices came under renewed pressure.  Soybeans led corn & wheat lower as soyoil succumbed to crude oil’s dive below $34/barrel for the first time since May on news that Great Britain would join France, Germany, Belgium & Italy in partial economic lockdowns to contain rapidly rising cases of COVID-19.  Economic uncertainty combined with Friday afternoon’s CFTC Commitments of Traders data to spur follow-thru selling.  The Disaggregated Combined Futures & Options CoT report indicated that managed trading funds continued to add ownership of corn, soybeans, soymeal, soyoil, hard red winter & hard red spring wheat & were only minor sellers of soft red winter wheat in the weekly period ended Oct. 27.  Being so heavily long, funds were vulnerable to changing sentiment or fundamentals.  Long liquidation by 7:45 am sent Dec. & March corn futures each 5.5c lower, Jan. beans down 9.25c, March beans 7.5c lower, Dec. soymeal down $0.10/ton lower, Dec. soyoil down 0.31c/lb., & Dec. & March SRW wheat each 4.5c lower.  Grains pared overnight losses in the opening moments of Monday’s regular trading session after USDA reported 8.031 mb of 2020/21 US corn were sold to unknown destinations & crude oil retraced losses.  USDA’s Weekly Grain Export Inspections report for the week ended Oct. 29 took some of the steam out of the rebound, however.  Inspections of corn (28.409 mb), milo (3.718 mb) & wheat (10.548 mb) were well below the 47.2 mb, 5.4 mb & 17.9 mb of inspections, respectively, needed weekly to reach USDA’s current export forecasts for those commodities.  Although soybean inspections (76.528 mb) were still robust, they were the least in four weeks, & total inspections of the four major grains reached a 5-week low.  The fact that USDA upwardly revised the previous week’s inspections totals by 1.753 mb on corn, 0.336 mb on milo, 5.673 mb on beans & 1.316 mb on wheat offered some support.  China was again the major player in last week’s grain exports.  It was the top corn (13.005 mb) & soybean (54.796 mb) & the only milo (3.718 mb) destination.  Wheat inspections were low in part because China took no US wheat last week.  With wheat taking the lead, traders shook off the modest export data by late in the morning. At Monday’s close, Dec. corn futures eased 1c lower, March corn declined 1.5c, Jan. beans dropped 4c, March beans lost 2.75c, Dec. soymeal was down $3.50/ton, Dec. soyoil tumbled 0.42c/lb. lower, Dec. soft red winter wheat surged 9c higher & March SRW wheat rallied 8c.
 
In export news, USDA did not report any daily export sales on Tuesday.
On Monday, the farm agency announced that 8.031 mb of 2020/21 US corn were sold to unknown destinations. Grain merchants reported on Tuesday that Tunisia purchased 2.021 mb of optional-origin milling wheat.  US soybeans are currently being loaded at the Gulf for export to Brazil.  The ship being loaded only holds about 1.4 mb.  To put that sale into perspective, Brazil reportedly exported 91.601 mb of soybeans & 203.020 mb of corn in October.  Brazil is suffering domestic food inflation as overly aggressive corn & soybean exports have depleted stockpiles & caused excessive feed costs for its livestock producers.  Brazil has approved reduced tariffs for non-Mercosur trading partners like the US to alleviate some of those shortages.  Australian exporters say Chinese buyers have been told to stop their purchases of Aussie goods like wine, coal & sugar at the direction of Chinese officials.  Beijing officials deny the charge, claiming buyers’ made the decision on their own.  The fact that Chinese officials indicated they expected to block Australian imports probably made buyers’ decision easier. 
 
Locally, corn & wheat basis levels were steady, & soybean basis edged 1/2c higher on Monday. Basis is often wobbly the first few days of any month, & the reopening of the Illinois River on Oct. 31 to barge traffic has made that especially true this year.
 
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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.