Midday Comments: 8/19/2020

Wheat led corn lower & beans to a mixed close in “Takeback Tuesday” price action as indications from USDA’s Weekly Crop Progress report & the ProFarmer Midwest Crop fueled skepticism that crop supplies would tighten in 2020/21. Grains started lower on Monday night after USDA’s Weekly Crop Progress report slightly downgraded 18-state US corn & soybean condition ratings to still-high 69% & 72% good-excellent levels, respectively.  That was 2% lower for the week for each crop, but still far above last year’s same-week 56% G-E corn & 53% G-E bean ratings.  Crop tour participants also kept yield expectations firm.  Pro-Farmer crop tour scouts estimated corn yield in Ohio at 167.69 bu/ac. & South Dakota at 179.24 bu/ac., up sharply from last year’s tour projection of 140.85 & 142.98 bu/ac., respectively, for those states.  USDA’s Aug. 12 Crop Production report pegged corn yield in Ohio at 175.0 bu/ac. & in South Dakota at 167.0 bu/ac.  Soybean pod counts measured by scouts from 9-square-foot plots averaged 1,155.68 in Ohio & 1,250.86 in South Dakota. That was far better than the 764.01 & 603.17 pod counts for Ohio & South Dakota measured on the 2019 tour.  USDA forecast bean yields at 58.0 & 50.0 bu/ac., respectively, vs. 49.0 & 42.5 bu/ac. in 2019.  The PF tour reports pod counts, not bean yields, on a daily basis, but PF analysts will make bean yield estimates when they release a final report on Friday.  USDA reported that corn & soybean development continues to run above the 5-year average, while PF tour participants noted rainfall will be needed for the crops they surveyed to reach full potential.  Wheat prices floundered on Tuesday as traders took profits from Monday’s run-up.  USDA reported that the 18-state US winter wheat crop was 93% harvested & the 6-state spring wheat harvest was 30% completed as of Sunday, 3% & 13% behind 2015-19 averages, respectively.  USDA boosted its spring wheat crop rating by 1% to 70% G-E, equal to the Aug. 18, 2019 rating. Yields appear to holding up well as hard red spring wheat harvest progresses. Grains struggled even though the value of the US dollar slumped to its lowest in more than two years.  At Tuesday’s close, Sept. corn futures declined 4c, Dec. corn lost 3c, Sept. beans edged 1/2c lower, Nov. beans was down 15c, Sept. soymeal eased $2.10/ton, Sept. soyoil gained 0.28c/lb., & Sept. soft red winter wheat tumbled 9c & Dec. SRW wheat dropped 8.75c.
 
Corn was under renewed pressure on Tuesday night as the PF crop tour reported strong yield potential in Nebraska & Indiana, but soybean futures rebounded from early session lows as dry weather forecasts offset news of above average pod counts in Nebraska & Indiana.  Corn slid lower to fill the daily chart up-gaps that were created on Sunday night, but soybeans continued to stay well above its gaps that start at $8.975 in the Sept. contract & $8.9950 in the November contract. Wheat rebounded as a flurry of export tenders from Algeria, Japan, Turkey, Pakistan & Jordan were a reminder that global wheat demand has not disappeared during the pandemic.  Day Two results for the ProFarmer Midwest Crop Tour pressured corn futures after the 8 pm Tuesday release of that data pegged corn yields in Nebraska at 175.15 bu/ac. & Indiana at 179.84 bu/ac., up 1.5% & 11.4% from last year’s tour results, respectively. Tour scouts counted 1297.93 pods in 3 foot-by-3 foot soybean plots in Nebraska & 128.12 pods per plot in Indiana, up 7% & 3%, respectively, from last year’s tour.  USDA’s Aug. 12 crop production report forecast corn yield in Nebraska at 191.0 bu/ac. & Indiana at 188.0 bu/ac. & bean yields at 62.0 & 61.0 bu/ac. for those states.   ProFarmer analysts noted that its tour has historically under-estimated both states.  In Nebraska, for instance, the tour typically samples more dryland than irrigated corn fields in a state where 70% of the corn is grown under irrigation. That introduces a downward yield bias to the tour. (Some traders diminish tour findings by noting its sponsor is “ProFarmer”--not “AntiFarmer.” That’s a stretch.)  Crop scouts noted that both Nebraska & Indiana need rain to finish out yields. The tour proceeds thru Illinois & Iowa on Wednesday where good crops are expected in the former & derecho damage will be seen in the latter.  At the 7:45 am pause in electronic trading, Sept. corn futures were down 2.25c, Dec. corn was 2c lower, Sept. beans were up 1.5c, Nov. beans were 1.25c higher, Sept. soymeal was down $0.90/ton, Sept. soyoil was 0.27c/lb. higher, Sept. SRW wheat was up 3.5c, & Dec. SRW wheat was 3.25c higher.
 
Grains maintained their overnight trends during Wednesday’s regular trading session.  Corn traders saw the PF crop tour results as confirmation that USDA yields were reasonable, but soybeans held on slim gains as traders assumed that late-August dry weather was a more serious threat to pod-fill than ear-fill. Wednesday’s EIA Weekly Petroleum Status data reported that ethanol production rose 2.352 mil.gal. (+0.87%) to 272.244 mil.gal. in the week ended Aug. 14, but same-week output was still 28.518 mil.gal. (-9.48%) below last year & the lowest since 2013.  Ethanol stockpiles rose 21.840 mil.gal. (+2.63%) to 851.340 mil.gal.  That was still 130.074 mil.gal. (-13.25%) below last year & the third-lowest stocks since Nov. 15, 2019.  Stocks increased in the Midwest, the East Coast & the Rocky Mountain regions last week, but were well below last year in all regions except the Rocky Mountain regions.  The EIA data provided little hope of any strong ethanol crush improvement anytime soon & allowed traders to continue to focus on expectations for plentiful supplies.  Bullish-leaning traders continued to count on crop damage in Iowa for hopes of a short-term rebound in corn, while dry weather & strong Chinese buying continued to underpin soybeans even as cash prices came within 10c of their January 2020 highs.  At 12:36 pm, Sept. corn futures were down 2.25c, Dec. corn was 2c lower, Sept. & Nov. beans were each up 1.25c, Sept. soymeal was down $0.20/ton, Sept. soyoil was 0.16c/lb. higher, Sept. SRW wheat was up 3.75c, & Dec. SRW wheat was 4.25c higher.
 
In export news, USDA announced on Wednesday morning that 7.055 mb of 2020/21 US soybeans were sold to China.  On Tuesday, the farm agency reported that 7.677 mb of 2020/21 US corn were sold to China, & that 5.118 mb of 2020/21 US corn & 4.777 mb of 2020/21 US soybeans were sold to unknown destinations.  Algeria reportedly bought 20.576 mb of optional-origin milling wheat on Wednesday, & Japan’s ag ministry is seeking 4.301 mb of milling wheat from the US, Canada & Australia & 2.939 mb of feed wheat & 4.593 mb of feed barley from optional origins. Ukraine traders report that nation’s total grain exports since July 1 were 5.10 mmt—down from 6.36 mmt during the same period last year.  Reduced corn exports--0.502 mmt in 2020 vs. 1.68 mmt last year—account for the difference. 
 
Locally, corn basis declined 2c, soybean basis was 2c higher & wheat basis was steady on Tuesday.  Chinese buying of soybeans has helped support Midwest bean basis in August even though the beans won’t be shipped until after Sept. 1.
 
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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.