News > Top Ag News > Morning Comments: 10/14/2020

Morning Comments: 10/14/2020

Oct 14, 2020

Corn & beans recovered about one-third of Monday’s losses on Tuesday as speculators bet that dry weather in the US Plains, southwestern Russia & South America could reduce global grain output even as demand from China boosts world corn, soybean & wheat export trade.  Dry weather kept US farmers in the field & prices near $4 for corn & above $10 in soybeans continued to attract sales off the combines.  Hedge pressure has thus far stalled the post-harvest rally as soybeans & wheat approached 6-year highs & corn retested its winter chart price resistance. After not making any daily export sales announcements on either Friday or Monday, USDA reported that Mexico bought US corn on Tuesday. USDA’s holiday-delayed Weekly Grain Export Inspections data offered mixed trends. Soybean shipments in the week ended Oct. 8 were the highest in nearly three years, but corn inspections slid to a 6-week low, grain sorghum to a 5-week low & wheat to an 8-week low as exporters concentrated their efforts on shipping beans to China. At Tuesday’s close, Dec. corn futures rose 2.25c, March corn gained 2.5c, Nov. & Jan. soybeans each rebounded 10.25c, Dec. soymeal rallied $1.70/ton, Dec. soyoil jumped 0.46c/lb. higher, Dec. soft red winter wheat ticked down 1/4c & March SRW wheat edged 1/2c lower.
 
Grains traded on both sides of unchanged on Tuesday night, supported by record-high corn prices in China’s Dalian Commodity Exchange & limited by expectations for continued rapid harvest in the US. Chinese corn futures for the most actively traded Jan. contract settled at $9.6950/bu on Wednesday, up 7.15c, as expectations that Chinese corn output in their key northeastern production region was damaged by 3 typhoons that hit late in the growing season.  Dalian-traded Jan. soybeans edged 0.81c lower at $18.2739/bu. on Wednesday. As was the case on Tuesday morning, corn futures extended losses & beans trimmed their gains after 7 am as elevator managers added hedge pressure.  Tuesday afternoon’s holiday-delayed USDA Weekly Crop Progress report indicated rapid harvest & winter wheat planting occurred last week, & weather forecasts are favorable for that to continue.  In the week ended Oct. 11, USDA reported that 94% of the US 18-state corn crop was not mature, up 7% for the week & +7% faster than the 2015-19 average. Corn harvest in the major states advanced 16% for the week to 41% completed, +9% above the 5-year pace.  USDA lowered its corn crop rating to 61% good or excellent, down 1% from the previous week, but 6% above last year’s same-week rating. USDA estimated that 93% of the soybeans in its 18-state survey have now dropped leaves & are considered mature.  That was up 8% for the week % 3% above the 5-year average pace.  Harvest advanced 23% last week to be 61% completed, 19% ahead of the 5-year average rate. As in corn, USDA also lowered its soybean rating by 1% to 63% G-E.  Last year, beans were rated only 54% G-E LW. Dry soil conditions allowed producers to rapidly catch up on wheat sowing.  Farmers advanced winter wheat seeding by 16% last week to 68% planted, 7% ahead of the 2015-19 pace.  USDA indicated that 41% of 18-state winter wheat planting intentions have already emerged, up 17% for the week & 6% ahead of the 5-year average.
At the 7:45 am pause in electronic trading, Dec. corn futures were down 1.75c, March corn was 2.25c lower, Nov. beans were up 5.75c, Jan. beans were 4.75c higher, Dec. soymeal was up $3.30/ton, Dec. soyoil had ticked 0.01c/lb. lower, & Dec. & March SRW wheat were each down 3.5c.
 
Today is last trading day for October soymeal, soyoil & lean hog futures.
 
In export news, USDA announced on Wednesday morning that 16.534 mb of 2020/21 US corn & 9.700 mb of 25020/21 US soybeans were sold to China.  On Tuesday, the farm agency reported that Mexico bought 4.330 mb of 2020/21 US corn. Algeria bought 18.739 mb of optional-origin wheat, & were seeking 1.181 mb of corn & 1.148 mb of feed barley.  Taiwan purchased 2.559 mb of Brazilian corn for 2021 delivery, & South Korea bought 2.362 mb of South American corn for Jan. arrival overnight. Export customers around the world are stockpiling food to overcome COVID-19 disruptions.  That front-loading of demand is great for prices right now.  If history is a guide, that will create a void in demand later in the marketing year, especially if effective vaccines or cures for the virus become widely available.
 
Corn reversed overnight losses, & soybeans extended gains as Wednesday’s regular trading resumed at 8:30 am.  USDA’s report of additional sales of corn & soybeans to China gave markets a boost even as lower weekly corn & soybean ratings gave rise to worries that late-season yield reports won’t match up to early harvest reports.  With a La Nina weather pattern increasingly in place, traders are wary that current dry conditions will worsen. AFter all, who can forget 2012???  At 9:01 am, Dec. corn futures were up 1.25c, March corn was unchanged, Nov. beans were up 12.0c, Jan. beans were 10.75c higher, Dec. soymeal was up $5.30/ton, Dec. soyoil had gained 0.31c/lb. lower, & Dec. & March SRW wheat were each still down 3.5c.
 
Last week’s USDA Weekly Grain Export Inspections data was superlative for soybeans (79.257 mb), supportive for wheat (18.889 mb), disappointing for corn (24.888 mb) & downright awful for grain sorghum (8,000 bu.). Traders had forecast exports of corn at 25.6-35.4 mb, beans at 44.1-80.8 mb, & wheat at 14.23.9 mb.  Corn inspections fell to a 6-week low, & were far below the 46.3 mb average weekly pace needed to reach USDA’s current 2,325 mb export projection.  Mexico (10.693 mb), South Korea (4.745 mb) & China (2.613 mb) topped the list of 9 nations that shipped at least 0.284 mb of US corn last week.  Cumulative corn inspections now stand at 170.1 mb, up 71.4 mb (+72.4%) from last year’s dismal week #6 total, but 102.4 mb below the 2018/19 pace. Exporters are obviously concentrating on soybean exports for China. Bean inspections were the highest since Nov. 9, 2017 with China taking 59.763 mb (75.4%) of the weekly total.  Six other nations also took at least 1.297 mb last week.  Cumulative soybean inspections stand at a record-high 334.2 mb at week #6, 67.8 mb above the previous record set in 2017/18.  Grain sorghum inspections were among the lowest weeks on record last week, & the least in five weeks with Mexico the destination for the equivalent of eight trucks. Cumulative milo inspections have reached 18.2 mb at week #6, the fastest pace since 2015/16.  Wheat inspections were again solid last week, & above the 17.3 mb weekly pace needed to reach USDA’s 975 mb 2020/21 export projection.  China (6.701 mb), Nigeria (3.560 mb) & Ecuador (2.082 mb) led the 8 nations that shipped at least 0.111 mb of US wheat last week.  Cumulative wheat inspections now stand at 383.5 mb, a 3-year high at week #19.  The fact that China was the top destination for soybean & wheat & the third-best corn destination reiterates their importance as a customer of US farm products.
 
Corn prices will be particularly attuned to Chinese demand in coming months.  It is thought that China has aggressively cut into its massive state-owned corn stockpiles the over the past several years. The size of those reserves remain a tightly controlled state secret, but USDA still believes they will account for 188.9 mmt (62.9%!) of the entire 300.45 mmt world corn supply at the end of 2020/21!  The fact that Chinese authorities reduced sales & multi-year-old supplies were snapped up by their domestic feed dealers strongly hints those stockpiles have tightened.  China limits corn imports to “tariff rate quotas” (TRQs) that are issued on a calendar-year basis.  Based on the fact that China left TRQs for corn at 7 mmt for both 2020 & 2021, USDA kept its Chinese corn import forecast at 7 mmt on Friday even though China has already booked nearly 10 mmt of 2020/21 corn from the US & also have trade deal obligations to take about 3.5 mmt of Ukraine corn each year.  Some private analysts believe China needs to import at least 25 mmt of corn from all sources in the coming year.  If realized, that would expand global corn trade by nearly 10% & require US corn exports to rise well beyond USDA’s current 2,325 mb forecast.  China has been rightfully accused of exporting “deflation” in the past decade as the low-cost “Manufacturer to the World.”  It would be enormously ironic now if a sharply improved appetite for meat & grain now causes China to export “food inflation” around the world. 
 
 
Locally, corn basis was 2c higher, & soybean & wheat basis levels were steady on Tuesday.
 
Would you like CBOT futures prices reported to your phone? Top Ag can send you nearby & harvest futures prices for corn, soybeans & wheat at 9:45 am, 11:15 am & 1:45 pm each day.  We provide the service for free, but you may have to pay for text messages--depending upon your phone plan. Call Scott or Jacob at Okawville at 243-5293 or Mike at Trenton at 224-7332 & we'll get you set up! 
 
"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.
 


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