Marketing

Grain Outlook USDA data is overshadowed by weather issues

The following marketing Exchange put Argentina’s analysis is for the week end- corn harvest at 56 percent ing July 9. complete, well behind last CORN — A large collective “Ouch!” was heard across the corn market when traders returned from the long Fourth year’s 86 percent complete pace. They kept their corn production estimate at 48 mmt. of July weekend to broad- The July World Agriculture based selling. Rain over the Supply and Demand weekend and forecasts for PHYLLIS NYSTROM Estimates report may be cooler temperatures and bet- CHS Hedging inC. behind us by the time you ter chances of rain pushed St. Paul read this, but the average corn down its 40-cent daily trade estimate for U.S. corn limit! Money guys continued yield was 178.8 bushels per their risk-off stance and exited long acre with production of 15.115 billion positions. Prices drifted lower through- bushels. The June U.S. Department of out the week, closing lower every day. Agriculture balance sheet used 179.5 Corn took out the June lows ahead of the weekend. December corn hit a high bu./acre for a crop of 14.99 billion bushels. of $6.11.25 on July 1 and traded to a The 2020-21 ending stocks were low of $5.07 on July 9 — a drop of pegged at 1.088 billion bushels vs. $1.04.25 or 17 percent from the July 1.107 billion in June. The 2021-22 endhigh! ing stocks were forecasted at 1.402 bilThe weekly drought monitor showed 45.5 percent of the Midwest was abnormally dry, down slightly from last week, but the area in severe drought rose from 7 percent to 12.1 percent. Crop conditions for the week ended July 4 were steady at 64 percent good/ lion bushels vs. 1.357 billion bushels in June. We have seen estimates for new crop ending stocks as low as 920 million bushels from a well-known private consultant. World ending stocks for 2021-22 were estimated at 288.97 mmt vs. 289.4 mmt in June. excellent compared to 71 percent last Weekly export sales were in the lower year. South Dakota had nothing in the half of expectations at 6.8 million bushexcellent category. Weather heading els for old crop and 7.8 million bushels into pollination has improved, export sales have been slow, and we’ve seen See NYSTROM, pg. 19 funds exit length — all contributed to the sell-off. Early safrinha corn Cash Grain Markets yield reports out of Brazil corn/change* soybeans/change* were “better than expect- St. Cloud $6.07 -.02 $14.05 +.85 ed,” but no numbers were Madison $6.13 -.08 $13.73 +.68 seen. Conab this week cut Redwood Falls $6.16 -.08 $14.00 +.60 their crop estimate 3 million metric tons to 93.4 mmt. This is still well above private estimates Fergus Falls Morris Tracy $6.11 $6.11 $6.22 -.08 -.07 -.15 $13.60 $13.55 $13.93 +.60 +.50 +.55 that are closer to 85 mmt. Average: $6.13 $13.83 AgRural lowered their Brazilian corn estimate to Year Ago Average: $2.78 $8.09 85.3 mmt. The USDA in Grain prices are effective cash close on July 13.June was 98.5 mmt. The Buenos Aires Grain *Cash grain price change represents a two-week period.

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NYSTROM, from pg. 18

for new crop. Old crop total commitments are 2.74 billion bushels compared to the USDA target of 2.85 billion bushels. We need to average 4.9 million bushels of sales per week to meet the forecast. China has 224 million bushels of old crop corn purchases to ship and it looks like they will fulfill their commitment. New crop commitments are 627.8 million bushels, out-shining last year’s 185.4 million bushels on the books by this date.

Weekly ethanol production fell 9,000 barrels per day to 1.07 million bpd and a seven-week high. This is also a record for this week. Ethanol stocks fell 423,000 barrels to 21.1 million barrels. Margins were steady at 3 cents per gallon. Gasoline demand soared to 10 million bpd from 9.2 million bpd in the previous week. This was the greatest weekly demand for any week in the past five years!

In other news, President Biden is expected to sign an executive order that would include promoting competition in the U.S. rail market. Reportedly, they would investigate rail routes and rates. China’s 2021-22 corn production is estimated to increase at least 6 percent to 253.9 mmt, according to the consultant JCI. The Chinese National Grains and Oils Information Center is calling for a 4.9 percent increase. The JCI is expecting 2021-22 corn imports of 27 mmt vs. USDA’s 26 mmt estimate and the U.S. ag attaché in Beijing’s 20 mmt forecast.

Outlook: We have factored in the drought conditions in the west and may need another major weather scare or support from another sector to push back into the gap lower we left on July 6. The gap in the September corn is from $5.70 to $5.88 per bushel, and from $5.52.25 to $5.73.5 in the December contract. The July WASDE report is upon us and I wouldn’t expect a lot of changes from the USDA. They don’t usually make any significant yield changes on this report, normally waiting until the August report.

Weather will continue to be a major factor for direction, but watch for any returning demand with Brazil’s safrinha corn harvest progress providing us with what their total corn crop will be. Is it closer to 90-93 mmt or 82-88 mmt? Regardless, we may see corn demand move up to the United States earlier than usual if Brazil doesn’t have the export numbers.

MARKETING

High volatility, big daily ranges, and large price swings will be the “norm” as we head into the heart of pollination over the next few weeks. Attitudes have changed from buy the dip, to sell the bump. However, that can change at the drop of a forecast. Traders are trying to balance improving conditions in the eastern belt with losses in the western belt. Buckle up.

For the week, September corn was down 62.5 cents at $5.29.5 and December corn dropped 62.75 cents to $5.17 per bushel. The next support level in December corn is $5.00 per bushel.

SOYBEANS — Soybean traders saw the same maps as corn traders and followed suit with huge declines for the week. However, soybeans have longer to determine their yield. Minimal changes are expected on the July WASDE report, but it is expected to lean friendly. In the last 15 years, USDA has cut soybean yield just three times on the July report and has never increased it. Soybean conditions as of July 4 fell 1 percent to 59 percent good/excellent — sharply lower than last year’s 71 percent rating. This year’s rating is the second lowest in the last nine years for this date. As in corn, South Dakota did not have any soybeans rated in the excellent category.

The hot, dry conditions in the Canadian prairies pushed canola to new contract highs to end the week. The support spilled over somewhat to soyoil and soybeans. This is likely more of a perimeter market input, but it could gain traction down the road if the perception is our soyoil demand will increase.

Trade estimates for the July WASDE report on July 12 were: yield of 50.67 bu./acre vs. 50.8 bu./acre last month; production of 4.94 billion bushels vs. 4.405 billion in June. Ending stocks for the 2020-21 crop year were estimated at 134 million bushels, down just 1 million from June. Ending stocks for 2021-22 were pegged at 148 million bushels compared to 155 million bushels in June. We have seen an estimate of 98 million bushels from a well-respected private consultant. World ending stocks for 2021-22 were estimated at 92.57 mmt compared to 92.55 mmt in June. Conab raised their Brazilian soybean crop marginally to 135.9 mmt from 135.86 mmt.

Weekly export sales were on the low end of estimates for old crop, but lower than the smallest new

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crop expectation. Old crop sales were 2.3 million bushels to bring total commitments to 2.274 billion bushels. The USDA export forecast is 2.28 billion bushels. We need to average 1.2 million bushels of sales per week through the end of the marketing year to meet the forecast. New crop sales were 4.4 million bushels. New crop total sales are 345.3 million bushels, well ahead of last year’s 268.9 million bushels.

China reported increasing cases of African swine fever in the Sichuan province. They are also considering insuring hog herds to encourage producers to continue to replenish herds.

Chinese soybean crush margins are slowly improving. The CNGOIC reported China’s soybean stocks are at their highest level of the year as Brazilian beans arrive. U.S. soybeans have narrowed their premium to Brazilian beans to the 10-15 cent area vs. 75 cents a month ago. Watch Brazil’s soybean planting this fall. If their government keeps the biodiesel mix at 10 percent (13 percent previously) it could discourage some soybean planting this fall.

Argentina’s government is considering changing the way they pay the dredging contractors on the Parana River. Currently, vessels pay the dredging companies directly. The government wants the vessels to pay them and they will pay dredgers. Farmers are against the idea believing it may delay payments to the dredging companies and drive up transportation costs.

Outlook: The extended forecasts show the dry areas get short-changed on rainfall, but other area outlooks are expected to be favorable for development. The key time frame for soybean yields to be determined will be August so we have a lot of time yet to hypothesize on the final soybean yield.

Weather will garner the overall attention of traders in the coming weeks. November futures have respected its 100-day moving average support near $13.09 per bushel. Will it hold? Weather will be the determining factor with the most important yield setting weather not until August.

For the week, August soybeans dropped 54 cents to $13.79.25, and the November soybeans plunged 69.75 cents to $13.29.25 per bushel. November soybeans have respected their 100-day moving average support at $13.10 per bushel.

Nystrom’s notes: Contract changes for the week as of the close on July 9, (September contracts): Chicago wheat was 37.75 cents lower at $6.15, Kansas City was 25.25 cents lower at $5.94, and Minneapolis fell 24.5 cents to $8.14.25 per bushel. The good/excellent rating for spring wheat at 16 percent as of July 4 is the second-lowest on record back to 1986. In the drought of 1988, 8 percent was rated good/excellent.v