Marketing

Grain Outlook Little support causes corn market slide

The following marketing analysis is for the week ending Nov. 5.

CORN — We had a couple of more days where you had to look for a fundamental reason corn was higher, but corn closed lower for four straight sessions into the weekend and ahead of the November World Agriculture Supply and Demand Estimates report. Money seemed to be looking for a place to land as we began a new trading month. Strong ethanol margins and spillover strength from wheat and energies were contributors to early week gains.

Corn jumped to its highest price at $5.86 per bushel since Aug. 12 before correcting lower at mid-week and into the week- PHYLLIS NYSTROM end. From the high this week to CHS Hedging inC. the close, December corn dropped St. Paul 33 cents. For the week, December corn closed 15.25 cents lower at $5.53, March lost 14 cents to $5.62.25, and December 2022 fell 9.5 cents to $5.40.5 per bushel.

Weekly ethanol production was the second-highest ever at 1.107 million barrels per day with margins at an astounding $1.07 per gallon! The record for weekly production is 1.108 million bushels. Many traders will be expecting the ethanol usage line to be raised on the WASDE report and the export line to decrease. The September National Agricultural Statistics Service Crush report indicated 407.5 million bushels of corn were used in producing ethanol, down 1.6 percent from August and up 1.3 percent from last year.

Weekly export sales were at the high end of expectations at 48.2 million bushels. Current export sales total of 1.22 billion bushels are down 7% from last year. We need to average 28.6 million bushels of sales per week to hit the USDA’s 2.5 billion bushel export forecast. Cumulative weekly inspections (what is actually shipped) are down 21.5 percent vs. last year when the USDA is forecasting year on year exports to decline 9.2 percent. China’s corn on the Dalian Exchange closed at its highest level in four months. This may prompt ideas that China may still have an appetite for U.S. corn, although we haven’t really seen any interest since May.

There is plenty of talk in the market of the rise in fertilizer prices and possible shortages this year and its impact on corn acres next spring. How big of a switch will we see out of corn and into something

Cash Grain Markets

corn/change* soybeans/change*

Stewartville $5.18 +.13 $11.56 -.07 Edgerton $5.50 +.19 $11.97 -.15 Jackson $5.43 +.20 $12.06 -.08 Hope $5.30 +.09 $11.93 -.20 Cannon Falls $5.18 +.13 $11.56 -.07 Sleepy Eye $5.40 +.12 $11.97 -.08 Average: $5.33 $11.84 Year Ago Average: $3.80 $10.71

Grain prices are effective cash close on Nov. 9. *Cash grain price change represents a two-week period.

else? Will application rates be cut and yields suffer? There is ample time before final decisions will be made and growers will be looking for expenses to prepay instead of writing a check to Uncle Sam. Russia is implementing an export quota for the next six months on nitrogen fertilizers at 5.9 million metric tons and complex fertilizers at 5.35 mmt. Brazil is in the same boat as the United States, but they need the fertilizers a lot sooner than we do for their safrinha crop.

The average trade estimates for the November WASDE report on Nove. 9 are: U.S. yield at 176.9 bushels per acre, up .4 bu./acre from October (the record was 176.6 bu./acre in 2017); production 15.05 billion bushels, up 31 million bushels from last month; ending stocks down 20 million bushels from last month at 1.48 billion bushels. World corn ending stocks are estimated at 300.82 mmt, down slightly from last month’s 301.74 mmt. The small .4 bu./acre yield increase expected by traders could set up the trade for a surprise. History suggests the corn yield on the November report can vary 2-4 bu./acre.

After the close on Nov. 5, the USDA released the 10-year baseline projections through 2031. While these are only estimates and may be ignored by many, for 2022-23 they forecast corn acres at 92 million, down 1.3 million from this year. Ending stocks for 2022-23 are pegged at 1.935 billion bushels vs. 1.5 billion this year.

The Federal Reserve announced this week that they will start tapering their monthly bond purchases. They continue to label inflation as “transitory” and did not announce any interest rate increases.

Outlook: The USDA has been known to throw surprises at us in the past year and we’ll see if this month’s WASDE report does the same thing. Seasonally, March corn trends lower through November and into early December. Weakness in wheat and oats also contributed to a pullback in corn. Energies were also on the defensive and the U.S. dollar was firmer this week. However, Argentina’s rain pattern longer-term still is on the dry side even after recent rain events have provided favorable planting conditions. Argentina’s corn planting was 28.4 percent as of Nov. 5 vs. 37 percent on average, according to the Buenos Aires Grain Exchange. Their La Niña pattern will bear watching over the next few months.

December 2021 corn’s next area of support is $5.35 with resistance at this week’s $5.86 high. December 2022 corn set a new contract high at $5.58 per bushel early in the week and faded from there. The new crop contract is gaining attention earlier than usual due to the fertilizer issue.

New daily trading limits went into effect on Nov. 1 and will continue for the next six months. The daily trading limit for corn fell from 40 cents to 35 cents per bushel, soybeans dropped from $1.00 to 90 cents, soyoil rose from 3.5 cents to 4 cents, meal dropped from $30 to $25, and winter wheat increased from 45 cents to 50 cents per bushel. Minneapolis wheat’s daily trading limits stayed at 60 cents per bushel.

SOYBEANS — January soybeans closed the week out at their lowest settlement since March 20 with disappointing export demand, decent South American planting weather, and a strong U.S. dollar. It had traded $12.50 per bushel for seven straight sessions until the mid-week sell-off. Soyoil saw a small lift early in the week before a plunging crude oil market and weaker world vegetable oil markets pressured soyoil to a weekly loss.

Brazil’s soybean basis was softer this week as its currency also weakened against the U.S. dollar. With ocean freight rates also falling, Brazilian soybeans fell below U.S. values into China for December delivery. This is about a month earlier than usual. Brazil’s soybean planting is ahead of average and many expect their exports to start a month ahead of last year. Their weather has been favorable for soybean planting which should result in their safrinha corn planting going in on time. AgRural as of Oct. 31 put Brazil’s soybean planting at 52 percent complete, the second fastest rate ever and compared to 40 percent on average. Their first corn crop was 63 percent planted. Safras & Mercado increased their Brazilian soybean estimate to 144.7 mm from 142.2 mmt previously. The USDA is at 144 mmt.

Argentina has only planted 7.1 percent of its soybeans vs. 9.4 percent on average. They have received rainfall that should allow their soybeans to get planted and up, but they will need timely rain over the next few months as classic La Niña conditions are expected to limit rainfall in the next few months.

Weekly export sales were very good at 68.5 million bushels and the second highest of this marketing year. China has purchased 17.3 mmt of U.S. soybean this year, well below last year’s 26.8 mmt bought by this time. Soybeans on China’s Dalian Exchange fell to their lowest in four months. Total sales commitments are running 33 percent behind last year. We need to average 20.8 million bushels of sales per

See NYSTROM, pg. 19