TFM Daily Market Summary 8-30-2021


Despite heavy supplies, U.S. dairy exports are continuing at a record pace. Through the first half of the year, U.S. dairy exports are running nearly 12% above last year’s pace in both value of dairy products and volume. June data saw total export volume at 232,462 MT, up 11.5% year over year. The value of U.S. dairy export products was $664 million dollars in June, slightly less than May, but still the highest June total since 2014. The demand has been driven by the demand for dairy ingredients such as dried whey and milk powders. China has been a large player in the export market, helping drive the purchases of these products. Whey powder exports were up 16% year-over-year, and Non-Fat Dry milk/skim milk powder was following suit adding a 7% jump year-over-year. The laggard has been cheese exports, down 13% year-over-year. The weakness in the cheese exports has added to the pressure on Class III milk prices, as well as the surplus of production by U.S. dairy producers. The export market will likely stay strong into the end of the year, but for domestic prices to see strong support, the milk supply needs to tighten, or more development needs to happen in the global cheese.

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CORN HIGHLIGHTS: Corn futures ended the session with sharp losses of 17-3/4 cents in front of first notice today tomorrow for the September contract. September closed at 5.40-1/4 and December 11 cents lower at 5.42-3/4 after posting a daily high of 5.42-3/4. After gaining 3 cents on Friday and nearly 4 cents on the overnight, prices struggled to find follow-through buying and consequently came under selling pressure. It is growing likely that traders will view positive price action as an opportunity to sell in front of harvest. This may have been partly why prices lost ground after positive overnight gains. Overall support comes from smaller supplies than in recent years and firmer wheat prices. World wheat supplies have been on the decline this year, making the feed grain picture tighter and providing support. Wheat prices posted a reversal today, however, adding to corn’s weak finish. Recent trade activity suggests the market is content trading new crop December at 5.50, a level where futures prices have traded each of the last five months. To that end, bullish traders will argue the market is holding well. In a more typical year expectations for a 10 to 15% loss in value off the high would make sense. So far this year, the high for December corn is 6.38 which would imply that at 5.50 the market is already over 14% off the contract high. Because 6.38 is a rare, and high price, expectations for lower price make sense. A drop of 20% targets 5.10 December, a more likely harvest pressure type low.

SOYBEAN HIGHLIGHTS: Soybean futures finished 54 cents lower in September as traders bailed on long positions in front of first notice day tomorrow. While no one knows, the prospect of being delivered on must have scared the bulls of last week who were holding or buying September Friday. A sale to China announced this morning for 256,000 mt was viewed as supportive. The signal to the marketplace is that China is a continuous buyer. Yet weekend rains and a lack of other new supportive news suggests the market is likely factoring better yield potential. The September report will be objective, meaning actual field data. Export inspections at 13.9 mb were supportive but have little impact as the market is focusing on the beginning of harvest soon. This brings the year-to-date total to 2.178 bb or 96.4% of a forecasted total sale of 2.260 bb. Today’s softer finish may have also been over concerns that grain facilities along the Mississippi and other tributaries shutter as hurricane Ida makes its way inward. Crop losses are expected to be minimal but three is some grain terminal damage that will need assessment.

WHEAT HIGHLIGHTS: Wheat started the day with minor gains, supported by Paris Milling futures. However, the tumble in corn and soybean prices finally tugged on wheat as the trade progressed midday. Although it is not last trading date for September futures until September 14, first notice day is tomorrow. September Chicago wheat lost 9 3/4 cents closing at 7.08 3/4 and December lost 9 cents, closing at 7.23 1/2. KC September was down 8 at 7.04 and December contracts losing 11 ½ cents at 7.12 1/2. The other bearish hit to the market today, was the report out of Canada. Stats Canada estimated this year’s crop to be 22.9 mmt – and although that is a 35% decline from last year, the trade was expecting a number a little lower of 22.6 mmt. With that said, we may see today to be just a knee-jerk reaction of the report not being as bearish as the market wanted, however in the next couple of days the trade may digest that number and decide it’s still a very steep cut to production none the less. Ukraine wheat production was also dropped by their Ag Minister today as well to 32 mmt. Russia’s IKAR consultancy lowered the Russian crop to 73.75 mmt – still slightly higher than the USDA’s latest adjustment to 72.5 mmt. Overall, in the world of reports, today was a bullish day for wheat although you wouldn’t know it to look at today’s close. Grain inspections for the week were underwhelming with trade guess around 400-600,000 mt, and the reported number this morning was 316,844 mt.

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John Heinberg

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