MARKET SUMMARY 7-28-2021

The Class III milk market has continued to struggle as prices have dropped well over $3.00 off spring highs.  The most active August contract was trading near $16.40 on Wednesday afternoon, after touching a May high of $20.14/CWT.  Ongoing large milk production and heavy supplies of milk have pressured the market overall.  This has lead to a strong push in cheese and other dairy product production, causing supplies to build.  On top of that, logistic issues with trucking and shipping due to worker shortages has only helped back up supplies.  The dairy market looked at a recovery going into July, but that has quickly fallen away as cheese prices and on-going heavy milk production has weighed on the market.  In the near-term, price looked pressured and the carry into deferred prices have the milk market set up as a seller’s market.  As the lead month comes close to or expire, the next month in line drops to take out the premium.

CORN HIGHLIGHTS: Corn futures ended the session with small gains of a 0-1/2 to 3 cents higher. September closed at 5.49-1/4, up 0-1/2 and December up 2-3/4 at 5.49. For the most part, futures continue to consolidate waiting for additional news to provide direction. This news, which of late is mostly weather over the next several weeks will set the tone for either and continuation of longer-term larger uptrend, or confirm prices have peaked and will establish lower lows (close below 5.00 December) on its way to fill a price gap at 4.50 from March 31. News today was lacking, yet prices managed to claw higher and hold positive gains. Growing concerns that extremely high temperatures in the western Corn Belt and lack of rain will limit yield potential is being weighed against outstanding yield potential in the central and eastern Midwest. Yet, as it is only the end of July, most of the entire Midwest will need additional moisture so rainfall totals and coverage will be critical this August. Producers in the western Corn Belt have already accepted that their crop will likely be something less than average and could be something closer to a failure. Some have argued demand could be lower due to wheat usage. There is some truth to this, yet probably not all that impactful. There is talk China will use less. This unlikely as their hog herd is said to be to back to the level of pre-African Swine Fever. Additionally, during AFS the poultry heard expanded utilizing more feed. Lastly China’s economy continues to hold positive suggesting more consistent demand.

SOYBEAN HIGHLIGHTS: Soybean futures traded both sides of steady throughout the morning session, eventually finishing 13-3/4 cents higher in August at 14.32 and November up 1-1/2 at 13.61. A continuation of warm and dry in the northwestern regions of the Midwest is supportive. Recent rainfall totals in all the Midwest have been variable or spotty. It will take additional rain in the weeks ahead to keep the USDA yield estimate at 51 bushels per acre intact. Soybean oil prices were higher today, but soybean meal was weaker. In the end, it looked like another day of consolidation, as the market is trying to determine which direction prices should go. We can not separate ourselves from the idea (or fact) that hot and dry conditions in July, which are now forecasted for early August, is anything less than friendly for futures. Crop ratings are a guide, but at 58% good to excellent, versus 72% a year ago, does not suggest higher yield. Either the USDA will lower yield estimates or copious amounts of rain and an improvement to crop ratings are needed to justify 51 bushels an acre. We also hear talk that US soybeans will find their way into Canada to make do for a shortfall of canola production due to dry weather.

 WHEAT HIGHLIGHTS: Sept Chi up 14 1/2 cents at 6.88 3/4 & Dec up 13 1/2 cents at 6.97 3/4.  Sept KC wheat up 18 cents at 6.59 1/4 & Dec up 18 cents, closing at 6.70 3/4. Futures were up today as the What Quality Council’s spring tour projections were not shocking, but gravely reduced from last year. After touring fields in southern and east-central North Dakota, the tour pegged average yield at 29.5 bpa versus 45.9 bpa from 2019.  Although the trade was expecting a lower number, this average was lower than even the trade and anticipated allowing MNPLS wheat to rebound pulling all fellow wheat markets alongside. Globally, there are no concerns that look to make a “short-crop” per se, but with flooding in China and Europe, and disappointing yields out of Russia, the booming anticipated crop is definitely on the path to shrink. Tomorrow’s export report it not really expected to be all that bullish, as US wheat still just isn’t competitive on a global scale as of yet, but the last couple weeks exports have been over 400,000 mt – which all things considered are decent numbers.

Author

Bryan Doherty