Midday Comments: 2/26/2021

For the second straight trading session, grain futures came under pressure in the overnight trading session on Friday as worries about Chinese soymeal demand emerged amid that nation’s ongoing problems with African swine fever.  News has circulated this week that variants of ASF have developed in Chinese hog herds that are not as lethal but more widespread that earlier reported. The altered virus is making control of the outbreak difficult. Chinese soymeal futures dove nearly 5% & Chinese soybean futures cratered 34c/bu. lower overnight in reaction to the news.  That weakness spilled over to US soybean prices as trader speculated soybean & corn import demand could waver.  Wheat was pressured by a forecast from the London-based International Grains Council. IGC analysts expect global wheat production to reach 773 mmt in 2021/22 & world wheat ending stocks to rise 2% to a new record.  Grains found some minor support from lack of any first notice day deliveries on March corn, soybean, soyoil & SRW wheat futures. Firm cash prices encouraged commercial firms to retain ownership on the first opportunity to transfer grain to holders of long March futures positions.  There were some small to moderate deliveries made against soymeal (7 contracts), hard red winter wheat (89 contracts) & hard red spring wheat (652 contracts).  At the 7:45 am pause in overnight trading March corn futures were down 5.25c, March beans were 18.5c weaker & March SRW wheat was down 12c.  By the noon hour, corn & soybean futures had pared their losses, but wheat still faced double-digit weakness. At 1:06 pm, March corn futures were down 2c, July corn was 4.5c weaker, Dec. corn was down 3.5c, March beans were 3.25c lower, July beans was down 8c, Nov. beans were 8.75c lower, March soymeal was down $2.00/ton, March soyoil was 0.28c/lb. higher, March SRW wheat was 18.75c lower & July SRW wheat was down 14.75c.  Despite late week losses, continuation charts of corn & soybeans are solidly higher for the week & wheat is slightly higher.
 
Recapping Thursday’s price activity, outside market weakness & end-month positioning ahead of Friday’s first notice day for deliveries on March futures combined with disappointing weekly export sales to pummel grain futures late in the overnight session.  Prices were hit hard in the wake of the 7:30 am release of USDA’s Weekly Export Sales data for the week ended Feb. 18 that reported soybean sales were the lowest in 7 weeks, soymeal sales were at 18-week lows & that weekly corn, wheat & grain sorghum sales fell to market-year lows. Grains bottomed by about 9 am as traders gave the data a mulligan due to the fact that China & other Asian buyers were on vacation for Lunar New Year during the reporting week & other sales were impaired by Tuesday’s holiday for Carnival. Grains trimmed overnight losses into the close, but soybean charts still flashed a caution signal after setting new contract highs on Wednesday night & then closing below Wednesday’s low—a potential key day downward chart reversal.  At Thursday’s close, March corn futures declined 4.5c, July corn lost 7.5c, Dec. corn eased 2.75c, March beans tumbled 17.75c, July beans dropped 14.75c, Nov. beans were down 7.5c, March soymeal was $4.10/ton lower, March soyoil lost 0.18c/lb., March soft red winter wheat declined 8.5c & July SRW wheat was 7c lower.  
 
In export news, USDA still has not reported any daily export sales since Feb. 12. South Korean feed mills bought two cargoes totaling 5.393 mb of optional-origin feed corn for July arrival on Friday.  Taiwan flour mills will seek 3.689 mb of US wheat on March 4. 
 
Thursday’s USDA Weekly Export Sales report was sobering for the bulls.  Corn suffered its lowest 2020/21 sales (17.846 mb) since June 25/20 & total multi-year sales were the least since June 18.  The absence of Asian buyers were a big factor in the sluggish pace.  Cumulative old-crop corn sales have reached 2,323.0 mb, still largest ever for mid-February by 300.9 mb. Buyers also booked 5.744 mb of 2021/22 corn last week.  Grain sorghum sales (0.028 mb net cancelled) were also a market-year low weekl, & no new-crop was sold, either.  Cumulative 2020/21 milo sales (233.5 mb) at market week #25 remain the highest since 2015/16.  Old-crop soybean sales (3.388 mb) were a 7-week low. New-crop bean sales (2.601 mb) were reduced as well, leaving multi-season sales also at a 7-week low.  Cumulative 2020/21 beans sales (2,202.9 mb) still exceed the previous record pace of 2016/17 by an unsustainably large 286.6 mb. Soymeal sales slipped to an 18-week-low 160,200 mt & soyoil sales (4,400 mt) were one-fifth average pace needed to reach USDA’s projections. Old-crop wheat sales (6.162 mb) were the lowest since April 30. New-crop wheat sales (0.544 mb) were minimal.  Total wheat sales were the least since Dec. 27, 2018.  China grain buyers were on holiday last week, & US grain sales suffered.  China cancelled 1.815 mb corn with the cargo switched to Vietnam. It also cancelled 1.679 mb of old-crop, but bought 2.425 mb of 2021/22 beans. China booked an additional 0.620 mb of old-crop wheat last week, but cancelled 0.028 mb of old-crop milo.  In other commodities, China bought 64,000 running bales of cotton (17.4% of total weekly sales), 3,700 mt (14.5% of total sales) of pork,  cancelled 1,000 mt of previous beef purchases & bought 119,200 (56.8% of total sales) of cattle hides.
 
Foreign crop condition ratings released this week are a mixed bag.  The French farm ministry estimated French winter wheat conditions at 87% good-excellent, up 1% for the week.  Winter barley was rated steady at 83% G-E with spring barley seeding progress up 3% for the week to 20% completed.  In Argentina, the Buenos Aires Grains Exchange rated soybean conditions down 4% for the week to just 15% excellent.  Soybeans rated good were left at 70% & 4% more of the crop was rated poor or very poor. Last year, 64% of the bean crop rated excellent.  Corn conditions were increased by 6% to 30% excellent, down from 59% excellent at this time last year.  Corn rated good declined by 6% to 58% good, & acreage rated poor or very poor was unchanged at 12%. Only 2% of last year’s corn rated P/VP.  Dry weather over the past couple weeks & forecasts for another week of widespread moisture deficits are hurting Argentine crops.  The Brazilian soybean harvest & Safrinha corn planting remain slowed by excessive rainfall in Mato Grosso.  More rain delays likely during the next week.
 
Locally, corn basis was 2c lower, & soybean & wheat basis levels were steady on Thursday. Spot premiums have disappeared along with river ice this week.
 
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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.