Soy bounces back after bearish report, corn struggles
- Corn down 1-2 cents
- Soybeans up 1-2 cents, soyoil up $0.06/lb, soymeal down $0.4/ton
- Wheat up 2-10 cents
*Prices as of 7:00am CST.
Editor’s Note: Our January 2021 survey is live! Click here to share harvest results and answer a few questions about the top-trending issues in agriculture right now. Our results will be released January 5, 2021 to allow farmers enough time to recalibrate their marketing plans ahead of the January 12 WASDE and Crop Production reports, which will feature final crop estimates for 2020 corn and soybean harvests.
Corn
WASDE helped slow the bleeding in the corn futures market somewhat yesterday, but futures still edged lower overnight as no adjustments to domestic ending stocks left the corn complex susceptible to losses on higher supplies. Chinese export loading paces helped cap losses somewhat, though weather conditions in South America will likely play a larger factor into price determination going forward.
Ethanol production concerns also plagued the industry as rising coronavirus cases threaten fuel demand. March futures traded $0.0175/bushel to $4.195 on the overarching sentiments. May futures followed $0.0175/lower to $4.225.
USDA’s Farm Service Agency (FSA) released updated Prevent Plant acres yesterday afternoon. Acreages were largely unchanged from November’s report, but some slight adjustments were added.
Corn acres prevented from being planted in 2020 grew 2,471 acres from November 2020 estimates to 6.186 million acres for the 2020 growing year. Another cool and wet spring left many acres unplanted in both North (2.024 million acres) and South (1.252 million acres).
It marked the second highest prevent plant acreage for corn in history, after 2019’s record 11.4 million acres. Prevent plant soybean acres were the fourth highest on record in 2020, due largely to planting delays in North Dakota (622,064 acres) and South Dakota (393,096 acres).
Yesterday’s WASDE report didn’t incite much price action from domestic corn reports. USDA did not make any changes to domestic corn usage rates for ethanol, despite a 13% drop in gasoline consumption since early November.
But on the global stage, stocks saw a little more action. USDA cut beginning corn stocks in China and raised corn import forecasts by 137.8 million bushels, which may help stabilize the corn futures market after last week’s selloff. And that will be critical to pricing for U.S. corn growers, since export demand from other top U.S. corn buyers is down 1.3% in the first quarter of the new marketing year.
Soybeans
Smaller than expected cuts to soy ending stocks and unchanged U.S. export figures exposed the soy complex to downside price potential after yesterday’s WASDE report. Losses were capped by increasing domestic demand. But markets bounced back overnight on strong Chinese export loading paces and ongoing concerns about the South American soybean crop provided enough incentive for a round of profit-taking this morning.
January soybeans rose $0.0175/bushel to $11.545 in overnight trading. March futures added $0.015/bushel to $11.6025. January soyoil futures traded $0.06/lb higher to $38.12. Meanwhile, January soymeal futures fell $0.4/ton to $379.00.
An Argentine grain inspectors and oilseed workers strike will continue after stalled wage negotiations failed to result in favorable progress for union workers amid high inflation rates. Workers are also protesting the lack of compensation appreciation amid pandemic conditions.
The strike’s extension from Wednesday will continue to slow global grain flows out one of the world’s top suppliers of soy products, soybeans, corn, and wheat. Wheat harvest has just begun in Argentina, while corn and soybean planting are well underway. Argentina is heavily dependent on export taxes from international grain sales to raise funds to repay previously defaulted foreign debts.
Commitment of Trader data to be released by the CFTC later today will likely show speculators easing back from record net buying positions on several ag commodities as futures prices declined during the December 2 – 8 reporting period. Expect producer funds to ease back from record sales as well in today’s report as falling prices become less lucrative for booking new sales.
USDA left Brazilian soybean estimates unchanged in this month’s WASDE report. But shrinking soy output estimates in Argentina contributed to smaller global ending stocks for corn and soybeans.
Record U.S. crush volumes for soybeans propelled domestic usage rates for soybeans to their highest levels in history, even though export volumes remained unchanged. USDA likely erred on the conservative side of export estimates, even though international soybean export commitments stood at 1.9 billion as recently as a week ago.
Wheat
|
Contract |
Price Change* |
Price* |
|
Chicago SRW – March Futures |
+$0.0825 |
$6.0475 |
|
Kansas City HRW – March Futures |
+$0.0725 |
$5.7075 |
|
Minneapolis HRS – March Futures |
+$0.015 |
$5.64 |
Wheat futures rallied this morning after a bullish WASDE report yesterday. Russian measures to reduce domestic food price instability will invariably take Russian exportable supplies off the market, offering more profit potential to U.S. wheat exporters, especially as the dollar weakens. The ICE Dollar Index rose slightly overnight, up $0.165 to $90.985.
As domestic food price instability rises, Russia may look to further limit exportable grain supplies by considering an export tax of $0.708/bushel on wheat while the February 15 – June 30 grains quota is in place. It’s an unusual move, as Russia typically favors using a formula-based tax when wheat prices are atypically high, not a single-sized tax.
While no official government policy has been released, a Reuters report suggests that Russian officials are scrambling to enact polices to stabilize domestic food prices, especially after President Vladimir Putin’s adamant displeasure with the situation was vocally expressed yesterday.
Yesterday’s WASDE report from USDA gave wheat prices a chance to shine. A 3% increase in global wheat feed demand should add another layer of price support to the wheat futures complex. High corn prices have driven a global shift to cheaper alternative feedstocks, with wheat as a prime candidate
At nearly 5.2 billion bushels of usage expected for livestock herds around the world, 2020/21 feed demand for wheat will be the fifth highest on record, shrinking global ending stocks by over 145 million bushels.
With plentiful domestic wheat stocks on hand, USDA lowered U.S. wheat imports for the 2020/21 marketing year by 5 million bushels. Unseasonably strong export demand helped increase usage rates, drawing domestic ending stocks down nearly 1% to 862 million bushels – the lowest volume since 2014.
This is great news for U.S. wheat growers. As long as the dollar remains at weak levels, current prices and strong export demand will likely support an increase in acreage for the 2021/22 growing season.
Weather
A winter storm system will move across the Central Plains today and into the Central and Southern Mississippi River Valleys by this evening, according to NOAA’s short-range forecasts. A rain-snow mix will collide over Iowa, Missouri, and Northern Illinois this evening, dropping snow to the north and rain to the south while shifting further east. Skies will begin to clear by Sunday.
Financials
Coronavirus cases in the U.S. rose by a staggering 226,244 from yesterday morning to 15,618,438 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. The death toll increased by 2,740 lives overnight to 292,190 deaths as of press time.
Former Secretary of Agriculture Tom Vilsack will retake the helm at the U.S. Department of Agriculture under the Biden Administration, as announced by the Biden-Harris Presidential Transition team yesterday. Vilsack, who served in the same office during the entirety of the Obama administration, is considered a favorable bipartisan selection for the incoming administration.
The former Iowa governor, who has been serving as head of the U.S. Dairy Export Council during the Trump Administration, is a popular figure in farm country and with good reason, Farm Futures policy editor Jacqui Fatka explains. “Vilsack is known for being an effective listener and working across traditional divides within the agricultural industry recognizing the role that small and large farmers play in American agriculture’s success.”
The dairy industry continues to struggle as the pandemic rages across the country. Restaurant closures and remote learning have taken a toll on Class III milk futures prices. Reduced buying power has also hit dairy prices as many consumers remain out of work and with dwindling financial reserves, Total Farm Marketing’s Naomi Blohm points out.
But there is a silver lining – a lower dollar helped October 2020 exports rise 13% from the previous year. “Hurry up and wait seems to continue to be a theme for Class III milk futures,” Blohm observes in the latest Ag Marketing IQ column. “The industry is aware of the large milk production values, and now all eyes continue to monitor any signs that the Farm to Family program will continue along with monitoring export demand.”
Rocky negotiations plaguing the Brexit movement rattled U.S. stock futures this morning. Media magnate Disney helped cap losses after announcing their subscriber base would triple to 260 million paying viewers by 2024. S&P 500 futures fell 0.75% overnight to $3,633.25 as the U.K. struggles to reach an exit deal with the European Union.
The Link LonkDecember 11, 2020 at 08:22PM
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Morning Market Review for Dec. 11, 2020 - Farm Progress
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Corn
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