Midday Comments: 3/2/2021

Grains are rebounding from Monday’s losses on Tuesday, led by wheat. Traders reversed corn & soybean losses & added to the overnight wheat rally shortly after the regular trading session resumed at 8:30 am on Tuesday as US equity markets struggled following their 2%+ upsurge on Monday. Money appeared to flow out of commodities as the new month started, but energy & grains seem to have attracted some bottom-picking today following the March 1 selloff.  While traders ignored ongoing South American weather problems to start the week, hot/dry forecasts for Argentina & excessively wet projections for central & northern Brazil have regained some traction on Tuesday morning.  The fact that USDA announced a new-crop corn sale to Japan, the first daily announcement in three week, also relieved some demand worries.  At 10:19 am, May corn futures were up 5.75c, July & Dec. corn were each 4.75c higher, May beans were up 10.25c, July beans was 8.5c higher, Nov. beans was up 4.25c, May soymeal was $1.40/ton higher, May soyoil was up 0.26c/lb., May SRW wheat was 14.25c higher & July SRW wheat was up 11c.
 
Grains initially extended Monday’s losses early in last night’s overnight session, but buying developed later in the session that trimmed losses.  Wheat was the overnight leader, turning solidly higher on news that winter wheat ratings in Kansas (37% good-excellent, -3%), Texas (28%, -2%) & Oklahoma (46% G-E, -2%) decreased in the week ended Feb. 28.  Kansas reported that 42% of its topsoil was short or very-short of moisture. Chinese corn futures declined 5c to $10.90/bu., but Chinese bean futures rose 22c to $25.42/bu. overnight. Beans also found support from USDA’s monthly oilseed crushing report released on Monday afternoon that indicated US soybean processors crushed 196.512 mb of soybeans in January.  That was 7.732 mb above last year, the highest Jan. crush ever & only slightly below the 196.569 mb all-time high crush set in October.  Cumulative Sept. 1-Jan. 31 soybean crush stands at 948.318 mb, 50.625 mb above last year’s rate & 50.162 mb above the previous record crush pace of 2018/19.  By contrast, USDA’s corn crush for ethanol data was again disappointing.  The farm agency reported that only 415.804 mb of corn were processed into fuel in January, 53.659 mb less than in 2020 & the least since at least 2013 for that month.  Cumulative Sept. 1-Jan. 31 corn crush for ethanol stands at 2,114.895 mb, down 135.243 mb (-6.01%) from last year & the slowest marketing year fuel crush pace since the USDA corn crush data series started in 2014/15.  Whereas soybean crush has set new record highs each month during 2020/21, corn crush has set new record lows in each of the past three months & four of the previous five months.  At the 7:45 am pause in electronic trading, May corn futures were down 2c, Dec. corn was 1.5c lower, May beans were down 3.25c, Nov. beans were 5.25c weaker, May soymeal was down $2.20/ton, May soyoil 0.03c/lb. higher, May SRW wheat was up 6.75c & July SRW wheat was 5c higher.  
 
Recapping Monday’s markets, managed funds dove out of grain futures on Monday’s first day of March, using sharply higher Sunday night opening prices as a chance to reduce some of the immense long positions that Friday afternoon’s CFTC Commitments of Traders data had divulged.  That report showed that in the weekly reporting period ended Feb. 23, managed trading funds were small net sellers of corn (-4634 contracts), hard red winter wheat (-3925) & hard red spring wheat (-59), but modest net buyers of soybeans (+10,954), soymeal (+65), soyoil (+2249) & soft red winter wheat (+5625). In the six major non-HRS wheat commodities, funds owned 926,016 long futures or options positions & only 130,251 short positions.  The resulting 7.1095:1 long/short ratio was last that high on Sept. 11, 2012 & had been higher only 4.84% of the time since the data series started in June 2006.  With US equity markets soaring higher, funds bailed out of grains & other commodities & moved into other asset classes on Monday. Little changed in either South American weather or US demand.  Traders dismissed forecasts for too dry weather in Argentina & too wet conditions in central Brazil & ignored yet another unsustainably strong weekly soybean export inspections & a 2.5-year-high corn inspections report. Grains opened on their highs, settled near their lows, but remained within recent trading ranges.  At Monday’s close, May corn futures dropped 9.25, July corn declined 8c, Dec. corn was down 2c, May beans plunged 13c, July beans broke 10.5c lower, Nov. beans lost 3.75c, May soymeal was $3.10/ton lower, May soyoil declined 0.71c/lb., May soft red winter wheat tumbled 10c lower & July SRW wheat lost 7.5c.  
 
Monday morning’s USDA Weekly Grain Export Inspections data for the week ended Feb. 25 reported corn shipments at their highest since July 26, 2018 & soybean inspections that were again unsustainably strong.  By contrast, wheat & grain sorghum inspections were below the average pace needed to reach USDA’s current 2020/21 forecasts. China was the largest soybean & milo & second-largest corn destination last week, but it took no US wheat.
 
USDA reported corn inspections at 64.441 mb, up 29.2% from the previous week’s upwardly revised 49.862 mb (+1.368 mb) & well above the 56.9 mb needed weekly to reach USDA’s current 2,600 mb 2020/21 export projection.  Japan (13.840 mb), China (13.649 mb), Mexico (9.140 mb) & South Korea (6.887 mb) topped the list of 15 nations that took at least 0.802 mb of US corn last week.  Same-week shipments were the highest since at least 2003/04, & continued the pattern of seasonally increasing inspections.  Cumulative corn inspections since Sept. 1 have reached 1,010.560 mb, only the fifth-highest pace since 2003/04.  USDA ultimately expects US corn exports will be record-high.
 
Soybean inspections improved to 32.319 mb last week, up 9.5% from the previous week’s upwardly revised 29.525 mb (+3.002 mb).  Weekly shipments were five-times the 6.4 mb needed weekly to reach USDA’s current 2,250 mb 2020/21 export forecast.  China (12.258 mb), Japan (3.451 mb) & Taiwan (3.364 mb) led the 10 nations that shipped at least 0.609 mb of US beans last week.  Cumulative soybean inspections now stand at 1,906.230 mb, up 76.3% from last year & 310.449 mb above the previous record pace set in 2016/17.  USDA eventually expects this year’s exports to be record-high by only 86 mb.  Can that be accomplished with lower prices?
 
Grain sorghum inspections eased slightly to 4.755 mb, down 2.7% from the previous week’s unrevised 4.886 mb & a bit below the 5.4 mb needed weekly ot reach USEDA’s 295 mb 2020/21 export estimate.   China (2.812 mb), Afghanistan (1.372 mb) & Kenya (0.571 mb) were last week’s destinations.  Cumulative milo inspections now total 141.071 mb, up 85.890 mb (+156%) from last year & the best export pace since 2015/16.
 
Wheat inspections continued to disappoint last week, slumping to an 11-week-low 10.024 mb.  That the worst same-week export inspections since at least 2003/04 & less than half the 21.8 mb needed weekly thru the end of May to reach USDA’s 985 mb 2020/21 export forecast.  Mexico (3.527 mb), Indonesia (2.732 mb), Thailand (2.127 mb) & Taiwan (0.967 mb) were the main destinations last week & only 7 nations took any US wheat. Cumulative wheat inspections since June 1 have reached 662.776 mb, the sixth-slowest shipping pace by marketing week #39 since 2003/04.  Russian & Ukraine export restrictions have not yet translated into higher US wheat exports. Canadian grain movement is likely taking market share from the US.  Canadian National Railway Co. reported on Tuesday that February marked the twelfth consecutive month of record-high Canadian grain shipments.  So far in 2020/21, Canadian grain shipments of 19.7 mmt are 24% above the 15.9 mmt 3-year average & 17% higher than the previous record of 16.9 mmt set in 2018-19.
 
In daily export news, USDA reported on Tuesday morning that 6.889 of 2021/22 US corn was sold to Japan, That was the first daily export sale reported by the farm agency since Feb. 12.  Grain merchants reported that Taiwanese feed mills bought 2.559 mb of Argentine corn on Tuesday morning. Algeria is seeking at least 1.837 mb of optional-origin durum wheat, & Egypt’s state grain buyer has tendered for soyoil & sunflower oil for May 1-15 arrival. Pakistan has received offers for 11.023 mb of Russian, Ukrainian or EU wheat, & Iran is seeking 18.372 mb of feed barley. The Philippines has also tendered for 5.328 mb of milling & feed wheat for April-June delivery. 
 
In production news, trade focus continues to concentrate on South America.  Trade analyst estimates of Brazil’s soybean crop are edging higher with AgRural boosting its bean production estimate by 1.3 mmt to 133.0 mmt, & brokerage house StoneX Group raising their bean forecast by 0.7 mmt to 133.5 mmt.  The Mato Grosso state department of agriculture, IMEA, also increased its bean output forecast by 0.21 mmt to 35.7 mmt on Monday. With soybean harvest & thus Safrinha corn planting each delayed by wet conditions, analysts are reducing their Brazilian corn production estimates.  StoneX dropped its corn forecast by 1.7 mmt to 108.5 mmt on Monday, & IMEA eased its Mato Grosso corn estimate by 0.03 mmt to 36.27 mmt. AgRural reports that a decade-low 25% of the Brazilian soybean crop has been harvested & just 39% of the Safrinha corn has been planted, down from 67% planted at this time last year.  IMEA reports Mato Grosso farmers planted 20% of their second-crop corn last week, but this year’s 55% planting pace is far behind last year’s 92% completion rate.  Central Brazil can expect 4-9” of rainfall during the next week to keep bean harvest & corn planting slowed. The longer that corn planting is delayed, the greater the risk to their main double-crop corn when their dry season arrives in May-June.  Argentina looks mostly hot & dry for the next ten days, adding stress to filling crops.  Traders started the week trying to dismiss South American weather, but that changed by Tuesday’s regular trading session.  
 
Grain terminals & local elevators have switched their nearby bids to the May contracts now that March grain futures are in delivery. Locally, corn basis dropped 2c as the calendar rolled to March, but soybean & wheat basis levels were steady.
 
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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.