TFM Daily Market Summary 07-13-2021

MARKET SUMMARY 07-13-2021

A grains futures market that is lightly traded, but could come more into focus this year, are the oats futures market. The oat market has broken through the top of the charts and is poised for a strong move higher after yesterday’s USDA Supply/Demand report. Oat prices are being heavily influenced by a quickly shrinking supply picture due to the drought conditions affecting the northern Plains and into Canada. The USDA puts this year’s oat crop at 41.3 mb on the Supply/Demand report on Monday. This is the lowest U.S. oat crop dating back to the beginning of data starting in 1866, or in other words, the smallest oat crop ever recorded. Oat futures broke through the $4.00 barrier yesterday and may be targeting the 2013 highs of $5.00 a bushel. The long-range forecast shows little overall relief in this region, and the prospects of the crops, whether it is oats, wheat, or other crops will continue to be stressed.

CORN HIGHLIGHTS: Corn futures started the overnight trade softer but managed to rally back by the pause session. Sep closed 6 higher at 5.51-1/4 and Dec added 7-3/4 cents to end the session at 5.40-3/4, well off the low of 5.27-1/2 and from the high of 5.47. After solid gains on Monday and a 6 to 10-day forecast indicating warmer and drier for the northern and northwest regions of the Midwest, traders were exiting shorts, going long, or both. Crop ratings, as expected, did show a small improvement to the crop at 65% good to excellent versus 64% last week. The crop, by some accounts, is all over the map. Some are potentially experiencing their best crop ever while others are not sure they will even have a crop. With two-thirds of the crop in good shape, the swing vote is the other third. Weather for the next two months is critical. Timely rains will be paramount to promote a large crop. With projected carryout confirmed snug at near 1.1bb, there is not much room to error with the 2021 crop. Strong gains in the dollar late in session may have limited gains.

SOYBEAN HIGHLIGHTS: Soybean futures found support from firmer soybean oil as continued tight supplies of world vegetable oils are keeping prices supported. Most oil contracts gained near 150 points. Like the corn market today, soybean futures lost upward momentum late in the session finishing in positive territory but well off the daily high. Aug soybeans gained 10-1/2 cents closing at 14.14-3/4 with a low of 14.00-1/4 and a high of 14.25. Nov gained 1-1/2 cents closing at 13.51-3/4 down 13-3/4 cents off the daily high. We were encouraged with today’s rally and probably just as discouraged with the way prices closed. Tight inventories, record demand in 2021, and some uncertainty to the crop would suggest prices should be well supported. Screaming higher canola prices as dry weather affects the Canadian crop is also supportive. Yet, from a historical perspective, we understand prices are above average and, assuming normal production, dollars per acre are encouraging producers to be forward selling. Yet with projected carryout near 135 million bushels and a warm and dry forecast for the Northwest where continuous rain will be needed to produce crops, the odds are not favorable that trendline yield of 50.8 bushels/acre will be reached. Unless there are demand changes elsewhere one must expect that prices may have to move higher to ration inventory. At 155 million bushels projected for next year’s carryout, it does not look like there is weather premium factored into the Nov contract near 13.50.

WHEAT HIGHLIGHTS:  Sep Chi down 7 cents at 6.33-3/4 & Dec down 4-1/2 cents at 6.42-3/4. Sep KC wheat down 3-1/2 cents at 6.11-3/4 & Dec down 3-1/4 cents closing at 6.22-1/2. Although a downward close in prices, wheat held most of its 20+ cent gains from yesterday. Yesterday’s USDA report gave further support to spring wheat prices and although no real bearish news was in the report for KC & Chi wheat markets, MNPLS wheat appears to be giving those markets legs to stand on regardless. USDA’s ending stocks estimate of 369 mb for HRW wheat was lowest since 2014-2015. The ending stock number of 119 mb for HRS was the lowest since 2007-2008. To recap from yesterday’s crop progress report, 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. Except for parts of South Dakota, there is little to no rain expected for the northwestern Plains for the next 2 weeks with hot temps expected to stay in full force. Globally, Russia’s crop seems to be shrinking more than expected – yesterday USDA lowered crop production from 86 mmt to 85 mmt.

Author

Bryan Doherty

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