This Week in Commodities 10-9-20

Corn market rally continues

December corn futures rose 15-1/4 cents this week to close at 395. July of 2021 corn added 11 cents this week to close at 409-1/2. Going into today’s report the corn market had rallied nearly 24% in just 41 trading sessions. Buying interest following Friday’s report pushed the corn market to its highest level since October of last year. Slow soybean planting pace in South America has fund traders worried about delayed corn planting following soybean harvest in early 2021. Weekly export sales for the week ending October 1st showed net corn sales at 1.225 million tons which was near the top end of expectations. Cumulative sales have reached 43.7% of the USDA forecast for the 2020/21 marketing year as compared to the five-year average of 28.4%.

Corn yield came in a tenth of a bushel lower than the USDA’s September estimate. Minnesota is projected to have the highest corn yield of any state this year with an October estimate of averaging 202 bushels per acre. Iowa corn yield dropped for a second month in a row and is now forecasted at 186 bushels per acre. If realized this would be Iowa’s lowest corn production total since 2014. Corn planted acreage came in nearly 1 million acres lower than what was estimated last month as certified FSA was collected. North Dakota saw the biggest reduction in planted acreage from their June estimate down 450,000 acres. With all the incorporated changes US corn carryout for 2020/21 is now projected at 2.17 billion bushels, a 35% decline from the June estimate of 3.3 billion.


Soybeans continue to push higher

November soybean futures added 44-3/4 cents this week to close at 1065-1/2. July soybeans added 24-1/2 cents this week to close at 1045-1/4. The most notable changes were made to the soybean balance sheet and the market reacted accordingly. Soybean yield on the October WASDE report was left unchanged but a 700,000-acre reduction to harvested acres reduced total production by 45 million bushels from last months estimate. An expected increase to soybean exports also helped make a 74 million bushel increase to demand from last month. Soybean ending stocks are now projected at 290 million bushels for 2020/21. This is a stark reduction from last year’s 585-million-bushel carryout and the lowest ending stocks number since 2016/17.

In the last 10 years soybean export sales have averaged 50% of the USDA’s target in the first 30 days of the marketing year. This year soybean export sales have meet 70% of the USDA’s target already. This front loading of soybean exports has been reflected by the soybean market with nearby November soybeans trading at an over 36 cent premium to the July of 2021 contract this week. Planting delays in Brazil may expand the export window for US soybeans well into 2021. Brazilian farmers are still waiting for rain to start planting their soybeans. Current prices for soybeans in Brazil are record high, up to approximately $12.75 per bushel, so farmers are very anxious to plant their soybeans. The forecast is calling for improved rain chances in the coming days.


Wheat continues higher but closes well off its highs

December Chicago wheat rallied 20-1/2 cents this week to close at 593-3/4. December KC wheat added 26 cents this week to close at 535-1/2. December MPLS spring wheat joined the party adding 12 cents this week to close at 543-3/4. Only minimal changes were made to the wheat balance sheets today. Total wheat production is projected at 1.826 billion bushels, down 12 million from September. Wheat demand was increased slightly, this was enough to lower ending stocks to 883 million bushels from last month’s estimate of 925 million. The US dollar closed below trendline and below the 50-day moving average this week opening it up to further downside. Dry conditions continue to persist in the US plains. Over the past 30 days the region has seen a 70% deficiency on moisture. A drier than normal La Nina winter could compound and already dry start to the winter wheat growing season. With harvest not until next summer traders are hesitant to add additional risk premium to an already inflated wheat market.


Barrel Prices Continue to Close the Spread

The spot markets continue their trend higher as barrels continue to close the spread between blocks and barrels, butter prices struggle to keep any upside momentum, and powder prices slowly edge higher. The block/barrel average gained another 6.875 cents this week with barrels trading back above $2.00/lb. Butter prices lost 9.75 cents this week to trade to the lowest prices we have seen this year. Throughout the majority of the year butter supplies in cold storage have come in well above last year’s levels and the extra product is pressuring the market. Powder prices have finished the week at $1.125/lb but have run into resistance at $1.145/lb and buyers are struggling to justify pushing prices above current levels.

Futures prices are finally starting to see more momentum this week as October closes less than 10 cents away from $21.00 at $20.91. Spot value of milk is closer to $22.00 given current spot cheese prices. If cheese prices can hold steady or trade higher the November contract may move higher in a quick manner as it is pricing in a steep discount vs. spot at $19.73. The 2021 Calender year average is slowly trending higher as it competes with the highest prices of the year. A break out above current levels could indicate price improvement through November for the 2021 calender year average.


Kelly Rubisch

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