Midday Comments: 3/16/2021

Old-crop corn futures trimmed overnight gains & new-crop corn, soybean & wheat futures suffered Takeback-Tuesday losses on Tuesday morning as traders reacted to news that Russia may be wavering on its export tariff restrictions.  May & July corn futures halved overnight strength as traders “sold the news” following this morning’s USDA announcement that China had bought 45.509 mb of 2020/21 US corn.  Today’s report explains the strength that old-crop grains exhibited versus new-crop contracts on Monday.  Soybeans were initially under pressure & US hog futures were higher as newswires highlighted a Rabobank research reports that indicated African swine fever outbreaks have led to a 3-5% monthly reduction in Chinese sow herd numbers since December.  The renewed ASF problems are curbing hog expansion efforts in China, but also sustaining Chinese demand for pork imports.  Rabobank analysts postulated that hog herd size may not recover to pre-disease levels until 2023—not the 2021 timeline Chinese officials expect.  While ASF rumors have floated for months, the overnight reports gave traders an excuse to take profits from Monday’s gains in beans & losses in hog futures.  At the 7:45 am pause in electronic trading, May corn futures were 4c higher, July corn was up 3.25c, Dec. corn was down 1.75c, May beans were 3c lower, July beans were down 3.5c, Nov. beans 4.5c weaker, May soymeal was up $0.60/ton, May soyoil was 0.36c/lb. lower, & May & July soft red winter wheat were each down 6c. The early sell-off pushed prices to bottom by 9 am with May corn down 2.75c, Dec. corn 7.25c lower, May beans down 6.75c, Nov. beans 7c lower, May SRW wheat down 13.25c & July SRW wheat 13.5c lower. With US & Chinese trade official due to meet later this week, traders bet that China would continue to buy dips in the market & grains began recovery that lasted well into the noon hour.  At 12:32 pm, May corn futures were up 3.25, July corn was 2.25c higher, Dec. corn was down 1.75c, May beans were up 2.25c, July beans was 2c higher, Nov. beans edged 1/2c higher, May soymeal was down $0.50/ton, May soyoil was 0.05c/lb. lower, May SRW wheat was 2c weaker & July SRW wheat was down 3.25c.
 
Recapping Monday’s market activity, old-crop corn futures blasted higher after USDA reported that last week’s corn export inspections were the highest since Nov. 1989, but new-crop corn struggled on a planting estimate from broker/ advisor Allendale, Inc. that pegged 2021 US corn planting intentions at 92.828 mil.ac., 828,000 ac. larger than USDA predicted in February.  Although USDA once again did not report any 2020/21 daily export sales, strong gains in nearby futures hinted of commercial corn buying.  Old-crop soybeans & wheat futures also saw old-crop contracts generally outperform new-crop months. Solid weekly soybean & wheat export inspections provided support, while Allendale’s 2021 planting forecasts for 90.317 mil.ac. of soybeans & 46.409 mil.ac. of wheat limited new-crop values.  For perspective, USDA’s Ag Forum in February had projected 90.0 mil.ac. of beans & 45.0 mil.ac. of wheat. Old-crop beans were also restrained by Monday’s National Oilseed Processors Association data that reported NOPA members crushed a two-year-low 155.158 mb of soybeans in February. That was 11.130 mb below last year  The same cold snap that disrupted US oil & natural gas production & ethanol crush prompted bean processors to scale back activity. The energy & agricultural sectors were not the industries impacted by the Polar Vortex. The Federal Reserve reported on Tuesday that overall US industrial activity slipped 2.2% in February versus January, marred by a 3.1% deep-freeze decline in manufacturing output. Analysts expected a 0.3% rise.  The Commerce Dept. also reported today that US retail sales slipped 3% during February as icy weather forced some stores to close & kept consumers homebound. At Monday’s close, May corn futures surged 10.5c higher, July corn gained 9.25c, Dec. corn was unchanged, May beans rose 6.25c, July beans rallied 7.75c, Nov. beans ticked 1/4c higher, May soymeal rebounded $6.70/ton, May soyoil lost 0.27c/lb., May soft red winter wheat jumped up 6.5c & July SRW wheat was 5c higher.  
 
In daily export news, USDA announced on Tuesday that 45.509 mb of 2020/21 US corn were sold to China. Although USDA reported a new-crop corn sale to Japan on March 2, today’s old-crop sale announcement was the first of any commodity since Feb. 12.  Taiwanese feed mills are seeking 2.559 mb of optional-origin feed corn on Wednesday.  Citing information the agriculture ministry presented to the State Duma parliament, the Russian news agency Interfax reported on Tuesday that Russia is prepared to stop interfering the regulation of grain exports once markets stabilize.  Russian officials are getting hints that farmers will cut 2021 plantings in response to February-March tariff increases that sharply cut farm gate prices but not consumer prices.  As Argentina ag policy has amply proven in the past couple years, higher export tariffs lead to lower producer prices, declining acreage, reduced production & more domestic food uncertainty.
 
Monday’s grain usage reports were a mixed bag.  Weekly export inspections met or exceeded trade expectations, but monthly soybean crush was disappointing.
 
USDA corn inspections for the week ended March 11 were 86.766 mb, the highest same-week inspections ever & the largest weekly corn shipment since 94.220 mb were exported in the week ended Nov. 30, 1989.  Inspections were up 31.8% from previous week’s upwardly adjusted 65.851 mb (+5.048 mb), exceeded trade forecasts of 47.2-74.8 mb, & were far above the 53.8 mb needed weekly to reach USDA’s 2,600 mb 2020/21 export forecast.  During the past three weeks, corn inspections have averaged 77.731 mb/week.  That exceeds the previous weekly inspection high of 76.378 mb set between Jan. 2, 2003 to Feb. 18, 2021!  Japan (20.331 mb) & China (14.049 mb) topped the list of 16 nations taking at least 0.980 mb last week.  Cumulative 2020/21 corn inspections have reached 1,179.3 mb, the highest week #28 total since 2007/08’s 1,381.2 mb.  
 
Last week’s soybean inspections slid to 19.062 mb, the lowest weekly total since the week ended July 23. While bean shipments were 12.9% below the  previous week’s slightly revised 20.874 mb (+0.284 mb), they were still nearly three-times above the 6.6 mb needed weekly to reach USDA’s 2,250 mb 2020/21 export projection.  China (5.855 mb) & Egypt (3.314 mb) headed the list of 9 nations that shipped at least 0.566 mb of US beans last week.  Cumulative beans inspections stand at 1,951.8 mb, 296.3 mb above the previous record pace set in 2016/17.  
 
Grain sorghum inspections rose to 9.196 mb last week, the highest in 6 weeks, up 22.2% from the previous week’s unrevised 7.523 mb & nearly double the 5.0 mb needed weekly to reach USDA’s 295 mb 2020/21 export forecast.  China was the sole milo destination last week.  Cumulative grain sorghum inspections now total 157.8 mb, the largest since 2015/16’s 213.1 mb at market week #28. 
Wheat inspections for the week ended March 11 also were a bullish surprise.  USDA reported 25.114 mb were inspected last week, the largest weekly total since Sept. 10.  That was 41.0% above the previous week’s slightly adjusted 17.808 mb (+0.093 mb), & exceeded trade forecasts that ranged 11.0-18.4 mb as well as the 20.9 mb of inspections needed weekly to reach USDA’s 2020/21 985 mb export estimate.  The Philippines (6.540 mb), South Korea (3.679 mb) & China (2.471 mb) led the list of 12 nations that shipped at least 0.525 mb last week.  With 41 weeks now completed in the marketing year, cumulative wheat inspections total 708.3 mb, the second-least since 2015/16. 
 
Monday’s NOPA soybean crush for February was a big disappointment.  The association reported that its members crushed only 155.158 mb of bean last month, about 10 mb less than analysts had expected & 11.130 mb below last year’s crush that benefitted from an extra Leap Year calendar day.  Daily crush slid to 5.350 mb, down from Jan. daily crush average of 5.957 mb & last year’s 5.734 mb daily crush.  Cumulative 2020/21 NOPA crush since Sept. 1 is still record-high thru the end of February at 1,050.725 mb, 39.813 mb above the previous best pace set last year.  End-February soyoil stockpiles eased 41.565 mil.lbs. below Jan. 31 levels to 1,757 mil.lbs., down 164.799 mil.lbs. from last year. Soymeal exports declined to 837,815 short tons in February, down 131,538 tons from Jan. but 75,070 tons above 2020 results.  Traders shrugged off the NOPA report as a one-off event, instead taking their price direction from expectations that Argentine crushers will have to stretch to acquire soybeans from a drought-reduced crop.    
 
Locally, corn basis was a penny higher, soybean basis declined 5c & wheat basis was steady on Monday.
 
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"Closing Comments" are written by David Marshall, AgTradeTalk LLC, Nashville, IL.  To learn more about his farm marketing advisory or commodity brokerage services, contact him at dmarshall@agtradetalk.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.