Marketing

Grain Outlook New crop corn sales largest of the year

The following marketing analysis is for States alone, they have bought 41.3 percent the week ending May 21. of their forecasted corn imports for 2021-22. CORN — Despite the spectacular sell-off last week in corn, July corn this week dropped to its lowest point since April Either China’s corn import prediction is too low, or the USDA needs to bump up the U.S. number. 28 and December since April 20 on improved For old crop, China has 397 million weather forecasts and sharp losses in the unshipped bushels remaining on the books soybean and wheat markets. However, corn as of May 18. A portion of this may still be was able to recover and close higher on the canceled or rolled forward. None of these week thanks to huge new crop export sales PHYLLIS NYSTROM numbers include any portion of sales that announcements to China totaling 222.3 CHS Hedging inC. may eventually move from unknown to million bushels, and corn planting that was St. Paul China. not as far along as expected. Corn planting as of May 16 was 80 percent complete compared to estimates for 85 percent, and the 68 percent average for this date. Corn emergence was 41 percent, slightly ahead of the 35 percent average. Weekly ethanol production was the highest since March 2020 at 1.03 million barrels per day. This was a 53,000 bpd increase week-on-week and the biggest one-week jump in 10 weeks. Ethanol stocks rose 40,000 barrels to 19.4 million barrels.

Brazil’s safrinha corn crop continued to fade with Gasoline demand increased 880,000 bpd to 9.22 milAgro Consult publishing a 91.1 million metric ton lion bpd and a 61-week high. Compared to 2019 (pretotal corn crop vs. U.S. Department of Agriculture’s Covid) gasoline demand is down just 2.2 percent. Net 102 mmt number this month. Rain was on its way for ethanol margins surged 32 cents to 57 cents per galtheir safrinha corn crop, but it may only help 40 per- lon! cent of the safrinha crop from suffering further yield loss. Argentina’s corn harvest was 27.6 percent complete as of May 20, according to the Buenos Aires Grain

Weekly export sales for the week ending May Exchange. The Ag Ministry is higher at 40 percent 13 were huge with new crop sales the largest of the complete. The BAGE is projecting its corn crop at 46 marketing year and combined sales the second-larg- mmt while the Rosario Grain Exchange is at 50 mmt, est of the year. Old crop sales were 10.9 million bush- and the USDA at 47 mmt. els to bring total commitments to 2.677 billion bushels. The USDA is estimating this year’s exports at 2.775 billion bushels, so we need just a couple of million in sales per week to ring the bell. New crop sales were a staggering 159.9 million bushels for the week that ended May 13. Total new crop commitments stand at 351.8 million bushels which is 14.4 percent of the USDA’s 2.45 billion bushel 2021-22 export forecast. Adding new crop sales announcements since May 13, total new crop commitments to all buyers of 627.6 million bushels equates to 25.6 percent of the USDA forecast. This is a very high percentage for this time of year. Outlook: Tight stocks this year, skyrocketing new crop sales, favorable weather for crop development (but we’re just getting started), and inflation fears will keep us on our toes until we begin to see more acreage estimates leading up to the June 30 report. It would be unusual for us to see December highs set in May, but this has been a strange year so I’m not sure anything would surprise me. We have a long way to go before this crop is put to bed and it may take a weather scare to give us another leg up. I would continue to manage risk using a variety of available marketing tools. Looking out to your 2022 crop may also work into your marketing plan. These

China’s new crop U.S. corn purchases since the cut- markets are not for the faint of heart, so tread careoff for the weekly export report were 275.8 million fully. bushels. It’s estimated they have bought 423 million bushels of U.S. corn for the 2021-22 crop year as of May 20. The USDA’s latest estimate for U.S. 2021-22 exports is 2.45 billion bushels. This calculates to China being responsible for a minimum of 17.2 percent of our projected exports, so far. It’s estimated For the week, July corn traded a range from $6.33 to $6.71.25, closing 15.75 cents higher at $6.59.5 per bushel. The December contract traded from $5.20.75 to $5.55.75, settling 3.75 cents higher for the week at $5.46.5 per bushel. China will import a total of 26 mmt (1.023 billion SOYBEANS — We’re spelling volatility a different bushels) of corn in 2021-22. From just the United way this week. This week it’s spelled S-O-Y-B-E-A-

Cash Grain Markets

corn/change* soybeans/change*

Stewartville $6.15 -.97 $14.77 -1.15 Edgerton $6.32 -.97 $14.81 -1.54 Jackson $6.23 -1.12 $14.73 -1.58 Janesville $6.26 -1.11 $14.74 -1.38 Cannon Falls $6.20 -1.02 $14.87 -1.18 Sleepy Eye $6.30 -1.02 $14.97 -1.28 Average: $6.24 $14.82 Year Ago Average: $2.78 $7.97

Grain prices are effective cash close on May 25. *Cash grain price change represents a two-week period.

N-S. Soybeans did not suffer the same sell-off as corn in the previous week. Remember in the week ended May 14, July soybeans were only down 3.5 cents and July corn crashed 88.5 cents lower. This week it was the soy complex which experienced extreme ranges. Soybeans fell to their lowest price since May 4. A disappointing April National Oilseed Processors Association Crush Report and improving Midwest weather were catalysts for profit taking.

World vegetable oil markets were also on the defensive. Nearby basis levels at processors jumped lower, suggesting they are covered at least into June. The April NOPA Crush was 160.3 million bushels compared to expectations for 168.7 million bushels. Increasing cases of Covid-19 in Asian countries, which are our largest customers, put a scare into the market at mid-week.

We had our first announced soybean sale this month with 5 million bushels for new crop sold to Mexico. Planting progress as of May 16 at 61 percent complete was right what the trade was anticipating and well ahead of the 37 percent average. Soybean emergence was 20 percent vs. 12 percent average. Soyoil set another new contract high this week, but then retraced gains to the 20-day moving average technical support line.

Weekly export sales were neutral this week with old sales of 3.1 million bushels and new crop sales of 3.5 million bushels. Total commitments for 2020-21 rose to 2.258 billion bushels vs. the USDA target of 2.28 billion bushels. China has 26 million bushels of unshipped old crop bushels on the books. Total U.S. 2021-22 commitments are 258 million bushels vs. just 78.2 million last year and the USDA’s 2.075 billion bushel forecast. China has purchased 113.9 million bushels of U.S. new crop soybeans or 44 percent of the total U.S. new crop sales on the books.

Argentina’s port workers staged a 72-hour strike to protest the lack of vaccine availability. There is the possibility of another strike in the coming week if they are not satisfied with the government’s prog-

See NYSTROM, pg. 17

MIELKE, from pg. 15

The 2022 herd is projected to average 9.465 million head, 5,000 less than the 2021 projection, as “Some contraction is expected due to relatively high feed prices and weaker milk prices,” explained the USDA. Milk per cow was projected to average 24,335 per head, a year-over-year increase of 1.1 percent.

The USDA’s latest Crop Progress report shows 80 percent of the U.S. corn crop is planted, as of the week ending May 16, up from 67 percent the previous week, 2 percent ahead of a year ago, and 12 percent ahead of the five-year average. Forty-one percent is emerged, 1 percent ahead of a year ago, and 6 percent ahead of the five-year average.

Soybean plantings are at 61 percent, up from 42 percent the week before, 10 percent ahead of a year ago, and 24 percent ahead of the five-year average. Twenty percent are emerged, 4 percent ahead of a year ago and 8 percent ahead of the five-year average. Thirty-eight percent of the cotton crop is planted, 4 percent behind a year ago, and 2 percent below the five-year average.

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Cheese prices are under close scrutiny. Uncle Sam’s Food Box program ends May 31 and cheese production is increasing from spring flush abundant milk supplies and increased cheese processing capacities. Food service cheese demand from restaurants is very strong, offsetting drops in retail sales.

Last year we shorted the cheese market some, according to StoneX Dairy’s Dave Kurzawski in the May 24 “Dairy Radio Now” broadcast. That was due to the wild price swings we saw and manufacturers didn’t want to produce any more than they had to at $2 per pound, he said. “We’ve had this Goldilocks cheese price for the last several months of $1.70$1.80 and now we’re in the $1.60s.” He said there’s plenty of milk now and plenty of incentive to make cheese; so there’s excess out there, but the lower prices should open more export potential.

The May 14 Dairy and Food Market Analyst warns, “It is looking increasingly likely that government will not favor cheese in its remaining interventions.

USDA released its first post-Food Box program solicitation, which totaled just 1.7 million pounds of cheese for delivery July thru September. For perspective: at its peak, the government was buying more than 30 million pounds of cheese per month thru the Food Box program. Instead, USDA is moving to favor butter and released a solicitation to buy 13 million pounds for delivery July thru September,” the Analyst stated.

Thankfully, third quarter U.S. dairy demand was solid, based on USDA’s latest data. Cheese disappearance topped that of a year ago for the third consecutive month and set a new first quarter record high, according to HighGround Dairy, “as demand remained firm to kick off the year opposite record production.” Butter disappearance bested that of a year ago for the fifth consecutive month and marked the strongest March disappearance on record, according to HighGround Dairy. Total nonfat dry milk disappearance “surged into March and marked a new record high for the month,” says HighGround Dairy, and “In a similar trend seen in other dairy products, both domestic and export disappearance were up versus prior year.”

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Down on the farm, “Dairy margins strengthened over the first half of May as there was a sharp selloff in the feed markets that more than offset slightly weaker milk prices,” according to the latest Margin Watch from Chicago-based Commodity & Ingredient Hedging LLC. The Margin Watch says, “The milk market remains supported by very strong dairy product exports that are boosting their prices.”

“Feed expenses however remain a headwind to dairy operations,” the Margin Watch warned, “particularly those who are more exposed to variable cost increases in the spot market as well as those who are more exposed to Class IV pricing and negative PPDs in their milk checks. This may begin to slow down or even reverse the ongoing growth in the dairy herd as high prices are expected to increase through the upcoming marketing year according to USDA.”

The Margin Watch reported corn prices have moderated significantly, down over $1.00 per bushel in nearby futures while soybean meal prices likewise declined about $40 per ton recently.

The June Federal order Class I base milk price was announced at $18.29 per hundredweight, up $1.19 from May, $6.87 above June 2020, and the highest Class I price since December 2020. The sixmonth average stands at $16.13, up from $15.84 at this time a year ago and $15.94 in 2019. It equates to $1.57 per gallon, up from 98 cents per gallon a year ago.

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The bearish Milk Production data and plenty of product coming to the Chicago Mercantile Exchange added pressure on prices. Block cheddar closed the third Friday of May at $1.57 per pound, down 15.5 cents on the week, third week in a row of decline, and 36.75 cents below a year ago when it jumped almost 16 cents to $1.9375.

The barrels saw their May 21 close at $1.6075, down 12.25 cents on the week and 28.25 cents below a year ago when they gained 17 cents. Thirty-three sales of block were reported on the week at the CME and 46 of barrel.

Dairy Market News says milk remains available

See MIELKE, pg. 18

Low export news drops soybean price

NYSTROM, from pg. 16

ress. The strike halted shipping as the country continues to battle low river levels. According to the BAGE, Argentina’s soybean harvest was 85.5 percent complete as of May 20. The Ag Ministry is slightly less at 81 percent complete. The BAGE is carrying Argentina’s soybean crop at 43 mmt, the Rosario Grain Exchange is at 45 mmt, and the USDA is at 47 mmt.

Argentina announced they will limit exports of beef for 30 days to try and contain inflation which is approaching 50 percent annually. Brazil’s oilseed association Abiove raised its soybean estimate to a record 137.5 mmt with record exports of 85.6 mmt. The USDA is using a crop estimate of 136 mmt with exports at 86.9 mmt.

China’s cabinet this week stated they will strengthen the management of commodity markets to stabilize “unreasonable” increases in commodity prices and prevent pass-through to consumers. How this plays out in the marketplace is uncertain. Remember in late April the government closed a private firm which provided oilseed data to foreign customers. China’s largest hog producer said meal made up only 9.8 percent of their feed mix in 2020 compared to the industry average of 18%. High prices have moved feeders to use alternative ingredients.

Outlook: Broad trading ranges will likely be with us until the June 20 Prospective Planting and Grain Stocks reports. This week it was soybeans turn to take one for the team. Improving weather and a lack of export news, in combination with a weaker global vegetable oil market, prompted fund selling which pushed July contract prices to their lowest for the month. The tight stocks issue hasn’t been settled but retreating basis levels this week suggest the nearby panic has subsided. As in corn, keep your seatbelts buckled. The ride has not come to a complete stop.

For the week, July soybeans traded a range from $15.12.25 to $16.04.75, closing 60 cents lower at $15.26.25 per bushel. The November contract traded from $13.51 to $14.13, settling 40.25 cents lower for the week at $13.60.5 per bushel.

Nystrom’s notes: Contract changes for the week as of the close on May 21 (July contracts): Chicago wheat dropped 33 cents to 46.74.25, Kansas City tumbled 33.75 cents to $6.24, and Minneapolis fell 40.25 cents to close at $7.00.5 per bushel.

The Wheat Quality Tour put Kansas hard red wheat yield at a tour-record 58.1 bushels per acre vs. the tour’s five-year average of 43.1 bu./acre. v