Midday Comments: 12/11/2020

Corn futures reversed modest overnight losses to small gains & soybeans & wheat have extended overnight rallies on Friday.  Grains found support from reports that Russia is considering a nearly 75c/bu. export tax on Feb, 15-June 30 wheat exports as well as a price cap & export quotas on sunflower oil & sugar.  That calls into question Thursday’s USDA projection for a 0.5 mmt increase in 2020/21 Russian wheat exports.  Grains were also bolstered by an Ukraine ag ministry estimate that pegged 2020 grain harvest at 65 mmt, down 10.1 mmt from last year’s record output.  Ukraine corn harvest is said 98% completed with 28.8 mmt collected, & total grain harvest stands at 64.3 mmt with 99% of the acreage harvested. Soyoil has again fueled soybean strength as reduced competition from Russian oilseed exports would support US crush & soyoil exports.  Midday GFS weather models for the next week see near-normal rainfall across much of Brazil’s production area, but below-normal rainfall for all but extreme northeastern Argentina.  At 1:04 pm, March corn futures were up 2.25c, July corn was 2c higher, Jan. beans were up 6.5c, March beans were 5.75c higher, Jan. soymeal was up $2.50/ton, Jan. soyoil was 0.21c/lb. higher, March soft red winter wheat had soared 20.75c & July SRW wheat was 14.75c higher. SRW wheat has been particularly strong to end the week as funds cover a portion of the only net short grain position they owned. Weekly continuation charts were headed for about a 7c gain in corn, a 4c loss in beans & a nearly 40c rise in wheat near Friday’s close.  This week’s price action leaves overall chart action still choppy & within November-December ranges.
 
Grain traders positioned for bullish USDA revisions ahead of Thursday’s supply-demand data, but the farm agency disappointed corn & soybean markets with larger than expected South American crops & no change in US corn or soybean export forecasts.  Just ahead of the 11 am release of the WASDE report, traders had propelled March corn futures up 3c & Jan. soybeans 17.5c higher in reaction to Brazil’s crop agency lowering their corn & soybean forecast & USDA’s 7:30 am report of solid weekly export sales.  When USDA left its 2020/21 Brazilian corn forecast (110.0 mmt) far above CONAB’s (102.6 mmt) reduced estimate, traders erased the corn rally, disillusioned by USDA’s projection that US corn exports & carryover stocks would not change.  Soybeans faltered after USDA failed to project higher export demand that was expected.  While USDA increased global soybean exports by 0.66 mmt, it assigned those extra bushels elsewhere.  Thursday’s USDA Weekly Export Sales report indicated that 2020/21 US soybean sales commitments are 358.0 mb higher than ever before 14 weeks into the marketing year.  Although USDA did boost its 2020/21 soybean crush forecast & reduce end-August carryover stocks by 15 mb to a 7-year-low 175 mb, soybean exports were left unchanged at a 2,200 mb. That’s only 34 mb above the previous record set in 2016/17. Although USDA left its Brazil soybean production estimate at 133.0 mmt—1.451 mmt below Thursday’s CONAB forecast but 1.6 mmt above some private estimates--traders found an excuse to sell when USDA failed to lower carryover to the pre-report consensus of 165 mb.  Wheat maintained its pre-report double-digit gains after USDA lowered US end-May stockpiles by 15 mb to 862 mb—12 mb more than traders expected--due to 5 mb lower imports & 10 mb higher exports.  Even more surprising, global 2020/21 wheat ending stocks were reduced by 3.95 mmt rather than the 1 mmt increase traders had expected.  Stronger usage in domestic feed usage in China (+3.0 mmt) & the EU (+0.5 mmt) were the main driver of that change.  Global 2020/21 wheat carryover of 316.5 mmt is still expected to be 15.82 mmt above last year’s record.  At Thursday’s close, March corn futures declined 2.5c, July corn lost 1.75c, Jan. beans dropped 5.75c, March beans lost 4.75c, Jan. soymeal reversed to a $1.90/ton loss, Jan. soyoil rose 0.20c/lb., March soft red winter wheat surged 13.25c higher & July SRW wheat rallied 11.25c.  
 
By not changing corn or soybean exports on Thursday, USDA’s gave itself leeway to adjust usage if the final January Crop Production report yields a surprise.  Thursday’s inability to rally once again proves that South American weather & its impact on yields remains the key to corn & bean price direction into spring. USDA left its 2020/21 US average farm gate corn price at $4.00 & wheat price at $4.70, but raised its average farm gate bean price by 15c to $10.55.
 
 
In export news, USDA announced on Friday morning that 130,000 mt of 2020/21 US soymeal were sold to the Philippines.  On Thursday, the farm agency reported that 13.560 mb of 2020/21 US corn were sold to Mexico.  Philippine feed mills also bought 3.674 mb of feed wheat from Australia.  Jordan bought 2.205 mb of optional-origin wheat on Thursday & South Korea reportedly purchased about 2.716 mb of US corn.
 
Locally, corn basis was 2c weaker, but soybean & wheat basis levels were steady on Thursday. Barge freight costs are attempting to find a near-term low.  
 
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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.