Midday Comments: 3/19/2021

Corn & soybeans have recovered most of Thursday’s losses on Friday as interest rates & crude oil stabilized & USDA announced another old-crop corn sale to China, but wheat futures have faltered as prospects for strong wheat output in the Northern Hemisphere has limited buying interest. Thursday’s risk-off selling activity moderated as bottom-pickers emerged overnight in most equity & commodity markets.  By late Thursday, EU regulators reasserted the safety of the COVID vaccine produced by AstraZeneca that some EU nations had halted its use, but added language to safety labels that said potential problems such as blood clots should be reported. EU regulators acknowledged that 30 patients (out of millions vaccinated) had reported blood clots, but noted that is less than one-third the clots that would normally occur during the survey period in the absence of vaccination efforts.  Interest rates cooled overnight & that supported high-growth technology equities that led Thursday’s stock market malaise.  With outside markets finding calm, grain traders were able to better evaluate the export news they dismissed on Thursday. At the 7:45 am pause in electronic trading, May corn futures were up 1.75c, July corn was 2c higher, Dec. corn was up 1.75c, May beans were 4.75c higher, July beans were up 5.25c, Nov. beans were 3.25c higher, May soymeal rebounded $1.70/ton, May soyoil was 0.23c/lb. lower, May SRW wheat was down 1.5c & July SRW wheat was 1/2c weaker.
 
After the overnight session ended, USDA reported another 31.495 mb 2020/21 US corn sale to China on Friday morning.  That brings this week’s corn sales to that nation to 152.590 mb.  Even before this weeks’ massive new sales to China, cumulative 2020/21 export commitments were record-high by 356.8 mb.  Assuming that this week’s  new sales were not switched from previously announced unknown destinations sales, next week’s weekly export sales report will have about 100 mb more corn export sales on the books for 2020/21 at week #29 that were previously shipped in **any** full year ever!  USDA has resisted lowering its 2020/21 corn & soybean ending stocks forecasts since January to await prospective domestic usage that can be derived from the March 1 stocks report that will be released on March 31.  If stocks data verifies the size of the 2020 corn & soybean crops & implies continued robust feed usage, pressure to lower end-August corn & bean stockpiles will intensify.  We suspect that reality fueled bargain hunters Friday morning. At 11:01 am, May corn futures were up 9.25c, July corn was 6c higher, Dec. corn was up 1.5c, May beans were 21.75c higher, July beans were up 20.75c, Nov. beans were 13.25c higher, May soymeal had rebounded $8.80/ton, May soyoil was up 0.26c/lb., May SRW wheat was down 6.25c & July SRW wheat was 5.25c lower. If this morning’s rally holds into the close, , continuation charts of corn will gain about 6c, soybeans will be little-changed, & wheat will decline about 8c for the week.
 
Recapping Thursday’s price activity, an upsurge in 10-year US government bond interest rates to pre-pandemic levels above 1.7%, continuing problems with Europe’s vaccine rollout & a return to pandemic-driven economic lockdowns in the EU combined to fuel massive selling across the global equity & commodity markets on Thursday.  April crude oil plunged $6.40 (-9.9%) at its intraday lows, pummeling energy-sensitive corn & soyoil futures. With COVID events causing traders to question previously held expectations for economic growth, corn traders shrugged off USDA’s report of additional corn sales to China & ignored 4-week-high weekly export sales in the week ended March 11.  With soyoil under pressure & Argentine & Brazilian weather forecasts each showing improvement, soybeans were gutted despite another solid, unsustainable weekly US export sales report of 7.433 mb. Wheat stumbled along with the other grains as rainfall in the southern Plains & the Black Sea production regions more than offset concerns about continued dry weather in the spring wheat areas of northern Plains & Canada. Solid wheat exports of 14.334 mb were double the needed pace, but traders remain wary that final shipments will live up to USDA’s forecasts.  At Thursday’s close, May corn futures tumbled 11.5c lower, July corn sagged 12.25c, Dec. corn dropped 7.5c, May & July soybeans each crashed 25.5c lower, Nov. beans careened down 29.25c, May soymeal lost $6.70/ton, May soyoil blasted 1.08c/lb. lower, May soft red winter wheat declined 9.5c & July SRW wheat fell 8.5c.  
 
Belying the weakness that grain futures suffered during the trading session, Thursday’s USDA Weekly Export Sales data were again quite strong for the week ended March 11. Old-crop corn sales were a 4-week-high 38.809 mb, 4-times the 9.0 mb needed weekly to reach USDA’s current record-high 2020/21 export forecast of 2,600 mb. When coupled with 9.484 mb of new-crop corn sales, total corn sales reached a 5-week high.  At 2,382.0 mb, cumulative old-crop corn commitments are the highest-ever for mid-March, exceeding the previous record of 2007/08 by 356.8 mb.  Current corn commitments are equal to 91.6% of USDA’s export forecast. That exceeds the previous high sales-vs.-final shipments at market week #29 of 89.0% set in 1995/96.  (Final corn exports were 2,225 mb that season). As mentioned earlier, next week’s corn export sales report will be even more record-setting due to this week’s Chinese purchases.
 
Grain sorghum sales of 10.519 mb were the highest in 8 weeks & 5-times above the 2.1 mb needed weekly to reach USDA’s current 295 mb export projection. Cumulative 2020/21 milo sales of 244.3 mb are the highest since 2015/16 at market week #29.
 
Although old-crop soybean sales declined to a 3-week-low 7.433 mb, that was still 8-times above the 0.9 mb needed weekly to reach USDA’s 2,250 mb export forecast. With 23 weeks still left in the marketing year, cumulative soybean commitments stand at 2,227.9 mb, 99.0% of USDA’s 2,250 mb export forecast & 263.6 mb above the previous record pace set in 2016/17.  USDA’s March 9 WASDE estimate left soybean exports unchanged at just 86 mb above the record-setting 2016/17 final exports. That said, soybean commitments were 99.3% of final exports in 2012/13 & 99.7% of final shipments in 2013/14 at market week #28. In 2012/13, only 11.6% of bean commitments still needed to ship. In 2013/14, 13.6% of total sales still needed to be exported.   As of March 11, 12.6% of US soybean export commitments remained unshipped. With South American soybean output still forecast to be record-high this year & US projected carryover stocks pegged at a record-low-equaling 3.4% of use 140 mb, USDA will be reluctant to lower US ending stocks based on export trends. Last week’s soymeal sales of 234,700 mt were twice the needed sales rate. Soyoil sales improved to a 7-week-high 19,000 mt, but that was still slightly below the 19,200 mt needed weekly to reach USDA’s downwardly revised export forecast. 
 
Old-crop wheat sales improved to at 4-week-high 14.334 mb, about twice the 7.5 mb needed weekly to reach USDA’s 2020/21 985 mb export projection. USDA also reported that 5.107 mb of new-crop wheat was booked last week. Cumulative old-crop wheat sales of 900.6 mb are the highest since 2016/17 at market week #41.
While China was again listed as a solid buyer of US grains last week, most of those announced sales were shifted from previously reported sales to unknown destinations. USDA reported that China bought  24.597 mb of corn, 24.093 mb switched from unknown. Weekly soybean sales to China were 2.627 mb, 2.425 mb switched from unknown. Weekly milo sales to China were 11.267 mb, 4.724 mb of which were switched from unknown. And of 4.861 mb of wheat USDA reported for the week to China, 4.777 mb were switched from unknown. Cumulative 2020/21 US sales to China stand at 762.303 mb of corn, 1,319.966 mb of soybeans, 211.014 mb of milo, & 112.090 mb of wheat.  China also made its first purchase of 2021/22 US wheat last week, locking in 2.388 mb. USDA reported that China also bought 119,500 running bales of old- & new-crop cotton (20.3% of total sales), 5,800 mt of 2021 pork (14.6% of total sales), 5,300 mt of 2021 beef (20.5% of total sales) & 412,200 cattle hides (73.9% of total sales). None of those sales were switched from unknown destinations.
 
In export news, USDA announced on Friday morning that 31.495 mb of 2020/21 US corn were sold to China. Combined with Chinese sales of 45.509 mb reported on Tuesday, 48.186 mb announced on Wednesday & 27.400 mb reported on Thursday, that brought this week’s Chinese purchases to 152.590 mb.  If one adds this known week’s sales to the 2,382.0 mb of total US corn sales commitments to all known & unknown nations that were on the books as of March 11, next week’s Weekly Export Sales report for the week ended March 18 could show US 2020/21 corn export commitments above 2,535 mb at market week #29.  For perspective, US corn exports peaked at 2,438 mb in 2017/18 & 2,437 mb in 2007/08.  USDA currently forecasts 2020/21 US corn exports at 2,600 mb.  Next week’s report should show that we have 97.5% or more of those sales on the books & 23 weeks still left in the year.  In other export news, South Korean flour mills bought 1.837 mb of Australian & 1.3.96 mb of US milling wheat for July arrival on Friday.  Dockworkers in the key Argentine grain port of Rosario are staging a 24-hour strike on Friday to protest layoffs at one of the companies in that area.  About 80% of Argentine farm exports are shipped from Rosario.  Today’s strike is a reminder that South American shipping logistics cannot assumed to be always reliable.
 
Locally, corn & wheat basis levels were unchanged, but soybean basis edged a penny higher on Thursday. That follows a penny gain in corn basis & 2c loss in soybean basis on Wednesday. St. Louis cash corn bids reached $6.02 Wednesday, a new closing high for the marketing year. As was the case following the Feb. 8 previous high of $6.01, prices then sold off sharply on the following day. For now, it would appear that cash market resistance is stiff at that level.
 
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"Top Ag Comments" are written by David Marshall, AgTraderTalk LLC, Nashville, IL.  To learn more about his farm marketing advisory or commodity brokerage services, contact him at dmarshall@agtradertalk.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.