MARKET SUMMARY 7-22-2021

One of the bright spots for the beef sector is the anticipation that beef exports will possibly hit record levels in 2021. Recently the USDA’s Foreign Ag Service (FAS) projected that the foreign market for US beef could reach 1.5 MMT, which is up 16% compared to last year and 8% over the 2018 record year high. While it is projected that purchases from our more traditional buyers, South Korea, Japan, and Mexico could lead this surge, adding China into the beef export picture will pay big dividends. Projections are showing that Chinese beef demand for U.S. exports could grow more than 30% over the next decade. In a year over year comparison, Chinese involvement in the US beef export market has exploded from minimal amounts to become one of our best customers. May export data showed an 895% increase compared to May 2020. In May 2020, China took in 4.7 million pounds of beef compared to 46.3 million pounds this year. As China continues to branch out with different protein sources, the percentage of beef provided by the U.S. will continue to grow. This will likely have a longer-term impact in the cattle market and be supportive of longer-term US cattle prices.

CORN HIGHLIGHTS: Corn futures tumbled on the overnight, trading 15 cents or more weaker on revisions to some weather models. It is also likely that, given the relatively tight range prices have been in recent sessions, stops were pulled tight under the market and triggered once prices began to slip. It is likely that algorithmic trading was selling on a longer-range weather forecast, indicating increased chances for rain. September corn futures closed 7-1/4 cents lower at 564-1/2, and December also 78-1/4 softer at 5.61-1/4. The European model indicated improved rain chances in the 11-to-15-day forecast. Export sales were a disappointment at 3.5 million bushels negative. This is not unusual at this time of year when previous sales can be cancelled or moved into the near year. Nonetheless, this is not a positive event for price. Year-to-date sales are now 96.4% of the forecasted total of 2.850 bb. A small slowdown to ethanol production and increase in stocks were also not favorable this week. Still, the bigger picture perspective remains in limbo due to uncertain weather. The question this market is trying to answer is whether the central and eastern Midwest can make up for potential shortfalls elsewhere. A bill introduced by oil states to eliminate ethanol requirements in the blend will not likely go far. Yet, it is another less-than-positive event the market must deal with. Included in this less-than-ideal outside news atmosphere is continued strain over China relations and increasing cases of Covid-19.

SOYBEAN HIGHLIGHTS: Soybean futures closed with losses of 23 to 28-3.4 cents. Nearby August lost 23 to close at 14.16-1/4, while new crop November lost 27-1/2 to end the session at 13.62-1/4. Weaker palm oil prices overnight and a longer-range forecast suggesting rain in the northern Plains and Minnesota had prices on the defensive. It is likely stop orders and algorithmic trading kicked in, further exasperating losses. Export sales at 2.3 million, while not large were at least positive, bringing the total sales to date to 2.278 bb, or 100.4% of expected sales of 2.27 bb. Selling may have occurred using algorithmic trading once the longer-range outlook indicated more rain potential. While the weather is the most dominant factor currently affecting price, and from our view is supportive, outside markets have been mixed at best. Exports continue to limp along, and the crush pace has slowed. Technical support on the November chart is near the 100-day moving average at 13.25. Prices found support today near the upward channel line today. Limited supply leaves little room for production error in 2021.

WHEAT HIGHLIGHTS: Sept Chi down 18 ½ cents at 6.92 1/4 & Dec down 18 1/4 cents at 7.01 1/2. Sept KC wheat down 15 cents at 6.53 3/4 & Dec down 15 cents, closing at 6.64 3/4. It started in the overnight trade and then bled into the morning and throughout the day. Chicago wheat was down almost 30 cents at one point today, as the volatile trade overreacted on the extended forecast models now building in some rains. It wasn’t a surprise to watch the market buy the dip, as confidence in this rain is low, and it’s not expected to show up for another two weeks. Although pressured from the overnight trade, MNPLS wheat would not be bullied on rains that aren’t coming for spring wheat crops and closed positive for the day. USDA reported export sales for 2021-22 at 473,200 up 11% from last week, which makes two weeks in a row of decent export business for wheat when compared to the 100-300,000 mt export sales we had grown accustomed to seeing. Still not a “robust” export number by any means, and honestly, we are still overpriced from a global standpoint. No one looks for that to change until we become more competitive pricewise. Shipment totals were more than last week, coming in at 471,000 mt versus 365,900 last week. Conditions remain favorable for the remaining wheat harvest with warm temps and minimal to no rain expected. Near triple-digit heat continues in the northern Plains for the next several days. Stress continues to take a massive toll on spring wheat. Isolated shower may continue into next week, but the heat will continue through the end of July and the showers are unlikely to have more than a local benefit, if even that.

Author

Bryan Doherty