Midday Comments: 8/10/2020

Traders pushed grain lower ahead of the weekend, anticipating bearish data from Wednesday’ USDA supply-demand revision & worried that Pres. Trump’s decision to ban the Chinese-owned popular Tik Tok social media platform from the US would give China an excuse to walk away from the Phase One trade deal.  Following disappointing purchases of US grains during the first half of 2020, Chinese export demand has been the one bright spot for US grain demand in the past month.  The last thing the US farm economy needs is for long-delayed Chinese demand to unravel, further cratering usage with another big crop just weeks away from harvest.  At Friday’s close, Sept. corn futures dropped 3.5c, Dec. corn lost 3c, Sept. beans tumbled 9c, Nov. beans plunged 10.5c lower, Sept. soymeal declined $1.70/ton, Sept. soyoil sagged 0.37c/lb. lower, & Sept. soft red winter wheat dropped 5.75c & Dec. SRW wheat slid 4.75c lower. For the week, continuation charts of corn declined 8.25c to its lowest end-week close since Sept. 4, 2009, beans crashed 27.25c to a 6-week low & SRW wheat plummeted 35.75c lower to its worst weekly close since July 2.
 
Grains traded on both sides of unchanged on Sunday night with corn ending mixed, soybeans trading slightly lower & wheat turning moderately lower by the end of the overnight session.  Promises of rainfall for dry areas of Iowa limited corn & soybean gains on Sunday night, while reports of a recovery in feed protein demand & strong soybean crushing profits in China underpinned export hopes.  As pork production has begun to rebound in China & combined with increased poultry & farm-raised fish output, soymeal usage has jumped & bolstered demand for soybeans at a time that Brazil has started to run low on exportable soybean supplies.  Wheat was under pressure from rising wheat production estimates in Russia.  Private analyst IKAR noted that Russian wheat prices fell last week as the winter wheat harvest moved to market & yield reports remained stable.  IKAR boosted its Russian wheat output projection by 1.5 mmt to 81.0 mmt & bumped up its total 2020/21 grain exports prediction by 0.5 mmt to 48 mmt, including 37 mmt of wheat.  (USDA forecast Russian wheat output at 76.5 mmt & exports at 36.0 mmt in July.)  At the 7:45 am pause in electronic trading, Sept. corn futures were up 1.5c, Dec. corn was 1/4c higher, Sept. beans were down 1.5c, Nov. beans were 1/2c lower, Sept. soymeal was up $0.40/ton, Sept. soyoil was down 0.19c/lb., Sept. SRW wheat was 2c lower, & Dec. SRW wheat was down 2.25c.
 
Impacted by an 8 am USDA daily export report that nearly 25.7 mb of soybeans had been sold to either China or unknown destinations & by the 10 am results of weekly US grain inspections, corn & soybeans reversed to solid gains, but wheat extended its losses by midday on Monday.  USDA reported that corn export inspections rose to a 3-week-high 45.312  mb in the week ended August 6.  China was the top destination, taking 10.393 mb, followed by Mexico (9.456 mb), Japan (6.647 mb), Colombia (6.045 mb) & South Korea (4.922 mb).  Last week’s total was 16.527 mb above same-week shipments in 2019 & brought cumulative 2019/20 inspections since Sept. 1 to 1540.8 mb.  With 48 weeks now completed in the marketing year, that’s still the slowest export pace since 2012/13 for this juncture of the season.  Adjusted for Census Bureau export data, corn inspections need to average 41.9 mb/week thru the end of August to reach USDA’s 1,775 mb export forecast.  Grain sorghum inspections, by contrast, slid to an 18-week-low 1.534 mb with Somalia (1.504 mb) & China (0.030 mb) the only shippers.  Cumulative milo inspections have reached 179.9 mb, up 103 mb from last year, but still the second-worst pace since 2013/13. Grain sorghum inspections need to average about 6 mb/week to reach USDA’s 210 mb old-crop export projection.  Soybeans inspections rebounded to a 23-week-high 23.357 mb last week, but inspections were still 11.361 mb below last year’s same-week result.  The Netherlands (5.301 mb), China (5.157 mb) & Mexico (3.679 mb) led the list of nine nations that took at least .0.376 mb of US beans last week.  That brought cumulative soybean inspections since Sept. 1 to 1,470.3 mb, still the slowest week #48 export pace since 2012/13. Adjusted for Census Bureau data, USDA soybean inspections need to average 34.6 mb per week thru the end of August to reach the farm agency’s 1,650 mb export forecast.  The last time weekly inspections were that high was Feb. 23.   Wheat inspections fell to a 5-week-low 13.961 mb last week, down 12.153 mb from last year’s week #10 shipments. Japan (3.159 mb), China (2.315 mb), the Philippines (2.049 mb), Brazil (1.541 mb), South Korea (1.299 mb) & Mexico (1.011 mb) were the only shippers taking at least 1 mb of US wheat last week.  Cumulative 2020/21 wheat inspections since June 1 now stand at 186.2 mb.  That’s 4.1 mb above last year’s total & the highest week #10 LY in 3 years. While the market year is still young, the pace has exceeded weekly averages needed to exceed USDA’s 950 mb export forecast thus far.  Expectations that Russia would soon dominate as the primary wheat exporter kept wheat on the defensive even as corn & beans strengthened into the noon hour. Traders seem to believe that Monday afternoon’s USDA Weekly Crop Progress report will show slight deterioration in corn & soybean conditions.  Intense “derecho” winds reaching up to 85 mph are also slashing across Iowa into northern Illinois this afternoon, threatening crops & buildings in its path. Storm worries & short-covering ahead of Wednesday’s 11 am WASDE report are creating the potential for upward reversals on daily corn & beans charts if gains can be extended into the close.  At 1:05 pm, Sept. corn futures were up 2.5c, Dec. corn was 2c higher, Sept. beans were up 4.75c, Nov. beans were 6.25c higher, Sept. soymeal was up $3.10/ton, Sept. soyoil was 0.13c/lb. weaker, Sept. SRW wheat was down 4.5c, & Dec. SRW wheat was 4c lower.
 
In export news, USDA announced on Monday morning that 21.605 mb of 2020/21 US soybeans were sold to China & 4.079 mb of 2020/21 US beans were sold to unknown destinations.  The farm agency also reported on Friday that 16.755 mb of US new-crop beans were sold to China. The new-crop corn & marketing years will start with their highest Sept. 1 commitments in years as aggressive buying by China bolsters starting totals.
 
Locally, corn, soybean & wheat basis levels were all steady on Friday. For the week, corn lost 11c, beans plunged 27c lower & wheat crashed down 35c.
 
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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.