MARKET SUMMARY 07-12-2021

In today’s USDA report, the spring wheat market came back into focus with the reflection of the difficult crop conditions in that area. Dealing with a historic drought, the USDA lowered the estimated spring wheat crop output to 345 mb, well below estimates of 459 mb. Pre-trade estimates suggested yield about 15% below the recent trend. This seemed unlikely with the worst crop conditions since 1988, a year where yields were down nearly 50%. Last week’s crop ratings dropped to a historic low of 16% good to excellent. This will likely be the first of additional reduction of the crop and long-range forecasts keep the conditions unchanged, and the talk of abandoned acres continues to grow. The September Minneapolis spring wheat contract rallied aggressively and established a new contract high close to the end of the trading session, opening the door for an additional push higher.

CORN HIGHLIGHTS: Corn futures finished with a firm tone gaining back some of last week’s losses. Sep gained 15-3/4 cents to close at 5.45-1/4 and Dec added 16 cents to close at 5.33. The WASDE report was released at 11:00. Estimated production was 15.165 versus the pre-report estimate of 15.115 (pre-report yield of 178.82). Yield was kept unchanged at 179.5. Carryout prior to the report was estimated at 1.088. The actual figure was 1.082 bb and considered neutral. For the 2021/2022 marketing year, carryout was estimated at 14.32 versus the pre-report estimate of 14.402, slightly negative. Overall, no major changes were noted. Sometimes it is what a report does not say that the trade takes a cue from. There was nothing negative today and with prices off over 60 cents last week, it was enough to maybe encourage buyers to either buy back short positions or enter new long positions. The northwestern regions of the Midwest received less than expected rain over the weekend and with little moisture in the outlook for the next couple of weeks as well as temperatures expected to be above normal, selling interest dried up. Strength in wheat and soybeans was supportive as well. The soybean report was mostly neutral and wheat supportive. Brazil’s corn crop was reduced to 93 mmt, viewed as supportive and 5 mmt lower than last month. Export inspections at 39.1 mb were termed neutral and bring the year-to-date figure to 2.329 mb or 81.7% of expected export sales of 2.850 bb.

SOYBEAN HIGHLIGHTS: Soybean futures closed with strong gains of 20-1/2 to 25 cents as Aug led today’s rally. Jul did gain 28-1/2 cents, yet cash prices are likely based on Sep futures with Jul having its last trading session on Wednesday. The USDA WASDE was released at 11:00 and contained little surprises with projected carryout unchanged at 135 mb and the 2021/2022 projected carryout at 155 mb. Projected yield at 50.8 bushels an acre was also left unchanged. Weather will be the dominant factor for the next 30 days as the next USDA report is not due out for release until August 12. Regions of the west and northwest remain with a forecast that indicates above-normal temperatures and below-normal precipitation. Weekend rain events were mostly a disappointment. We indicated last week we felt that Nov bean futures had little or no weather premium priced in. We cannot underscore just how tight carryout is at 135 million bushels old crop. More importantly, next year is 155 million and suggests there is no room for error. Some satellite private firms are arguing yield is under 50 bushels an acre. Most farmers will tell you it is too early to draw conclusions that this year’s crop could be reduced. Key weather is the end of July and August. The projected average farm price for the 2021-2022 season is 13.70.

WHEAT HIGHLIGHTS:  Sep Chi up 25-3/4 cents at 6.40-3/4 & Dec up 23-1/2 cents at 6.47-1/4. Sep KC wheat up 21-1/4 cents at 6.15-1/4 & Dec up 20-3/4 cents closing at 6.25-3/4.  Just when the trade thinks they might know what the USDA will say, once again the USDA throws in a bullish report for the wheat market today. The USDA lowered U.S. ending stocks from 0.77B bu to 0.665B bu. The real surprise was the USDA lowering global ending stocks, which was 296.8B bu in June and today reported at 291.68B bu. With what’s going on with spring wheat this year, it was really no shock to see U.S. wheat production drop from 1.898B bu to 1.746B bu. As expected, winter wheat production numbers increased from 1.309B bu to 1.364B bu– however, spring wheat production was even lower than expected at 345 mb. Yields are now projected for spring wheat at 30.7 bu per acre – lowest projected since 2002, pushing MNPLS wheat to a contract high today. The Plains are still too dry with the exception of parts of eastern North Dakota which did get some showers over the weekend. Winter wheat harvest now at 59% versus 45% last week. Spring wheat headed is at 83% versus 69% last week. Spring wheat conditions stay at only 16% good/excellent – Washington rated 83% poor/very poor, South Dakota rated 71% poor/very poor, and North Dakota rated 54% poor/very poor.

Author

Bryan Doherty