Midday Comments: 12/30/2020

News that the 20-day port worker strike in Argentine that delayed the loading of 162 ships & backlogged $1.458 billion in grain shipments had been settled initially weighed on grain prices in Tuesday night trading. Like a good bull market, however, grains then shrugged off that bearish news as traders used the break to add ownership as weathercasters predicted dry weather in Argentina & northern & southern Brazil for the next couple weeks. Central Brazil is expected to record normal precipitation during that period. Although corn & wheat were down about 4c & beans nearly 16c lower at their overnight lows, corn & wheat were mixed & beans just 6c lower by the 7:45 am pause in trading. Wheat led corn & soybeans higher by mid-morning, bringing all three grains to levels last seen in 2014.  Wheat burst to its highest continuation chart price since late-Dec. 2014 before the noon hour. The Ukraine ag ministry reported that July-December grain exports are down 14.7% from 2019, supporting both corn & wheat prices.  Corn traders largely dismissed yet another disappointing US ethanol report, rallying instead on news that Argentina was suspending any new-crop corn export licenses that would be shipped before March 1.  Traders looked past the short-term supply-demand situation, taking heart that India’s cabinet approved targets for 10% ethanol blends by 2022 & a 20% ethanol blends by 2030 for their fuel supply on Wednesday.  That plan expects to use excess Indian sugar, rice & wheat stockpiles, bolstering domestic farm prices. India’s urban air pollution tops the world. The grain was in full bull mode just ahead of Wednesday’s close with corn, beans & wheat all at new contract highs.  At 1:12 pm, March corn futures were up 9.25c, July corn was 8.25c higher, Jan. beans were up 11.25c, March beans were 8.25c higher, Jan. soymeal was up $5.60/ton, Jan. soyoil was 0.21c/lb. higher, March soft red winter wheat was up 22.25c & July SRW wheat was 16c higher.  Thursday is first notice day for January soy complex futures, & traders apparently look for few deliveries.
 
Recapping Tuesday’s grain activity, soybeans soared their highest level since mid-July 2014 as the unresolved Argentine port strike & dry Argentine weather fueled ideas that US bean exports could rise enough to wipe out 2020/21 US soybean supply.  With prospects that bean stocks would reach zero unless the current rate of usage is curtailed, traders have seeking the value of “the last bushel” soybean’s demand-driven rally.  The bean rally is a “rising tide that lifts all boats” right now as traders believe corn & wheat must compete with soybeans for acres in 2021.  March corn futures rallied to the highest continuation chart price since early-June 2014 & closed higher for the thirteenth straight session, lifted by news that 14% of intended Argentine corn acres are still unplanted due to drought with hot/dry weather still forecast for the next week or more. Corn & soybeans have returned to summer 2014 prices as projected ending stocks of those crops dive to 2013/14 levels. A slide in the US dollar that makes US exports more affordable along with global trends for massive deficit spending, enormous monetary stimulus & zero interest rates have unleashed speculative fervor across global markets that are unlikely to reverse soon. Since investors like to buy items that are getting scarce, improved weather that boosts South American yields is the main force that could reduce tight supply worries. That’s not currently on the horizon.  At Tuesday’s close, March & July corn futures each surged 9.5c higher, Jan. beans soared 40.25c, March beans rocketed up 38.75c, Jan. soymeal blasted $11.70/ton higher, Jan. soyoil leapt up 0.76c/lb., March soft red winter wheat rose 4.25c & July SRW wheat gained 4.75c.
 
Wednesday’s 9:30 am release of the EIA Weekly Petroleum Status report indicated that ethanol production declined 12.348 mil.gal. (4.30%) to 10-week-low 274.596 mil.gal. in the week ended Dec. 25.  Weekly output was 38.808 mil.gal. (-12.38%) below last year & the lowest same-week total since 2013. Despite the drop in production, ethanol stockpiles still increased 14.070 mil.gal. (+1.45%) to 987.168 mil.gal.--the highest total since May 15 & 103.740 mil.gal. (+11.74%) more than last year. EIA weekly data reports US ethanol output since Sept. 1 has run 7.22% below last year.  That is a stark contrast to the 4.02% rise in corn ethanol crush that USDA still forecasts for 2020/21.
 
In export news, USDA announced did not report any daily export sales on either Tuesday or Wednesday. Taiwan flour millers purchased 3.025 mb of US milling wheat on Wednesday for February-March shipment. China indicated its current 5-year plan will stabilize grain production at over 650 mmt by steadily increasing production during 2021-2025.  
 
Locally, corn & wheat basis levels were steady & soybean basis rose 1c on Tuesday.  Corn & soybean basis levels at the Gulf declined 3c & 1c, respectively, on Wednesday morning.
 
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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.