This Week In Commodities 8-21-2020

Corn pushes higher this week

September corn futures gained 2-1/2 cents this week to close at 327. December futures rallied 2-1/2 cents as well to close at 340-1/2. The Pro Farmer crop tour conducted across the Corn Belt this week raised some eyebrows of traders and farmers alike. Corn yields just slightly below 2018’s record yields were found in Nebraska, Minnesota, Indiana, and Illinois. Big corn yields were not the case however in the U.S. top corn-producing state, Iowa. Pro Farmer estimated Iowa corn yields at 180 bushels per acre, the lowest tour finding since 2013, down 3% from 2019, and the three-year average. Just last week the USDA pegged Iowa’s corn yield at 202 bushels per acre, this estimate, however, was taken prior to any wind damage occurring or the last three weeks of widespread dryness that has plagued the Hawkeye state. The question remains whether near-record crops in surrounding states will be enough to offset what looks like much lower yields in Iowa. As a whole, Pro Farmer estimates the U.S. corn yield at 177.5 bushels per acre, this compares with the USDA’s nation yield estimate of 181.8 bushels per acre in August.

China, again this week, put up corn from its state reserves for auction. All of the 4 million tons offered (consisting of 2014 and 2015 corn) were sold. China has now sold 52 million tons of corn from its reserves in the last 3 months. Corn exports from Ukraine and the U.S. to China are climbing year over year and are projected to continue climbing in the coming months. Exports will need to be record-strong to both meet the USDA’s projections and make up for continued lost demand in the ethanol sector of the market.


Soybeans close above $9.00

September soybean futures gained 3-3/4 cents this week to close at 900-3/4. November futures added 6 cents to close at 904-3/4. Thursday broke the 11-day streak of daily soybean sale announcements, the market reacted accordingly backing off 9 cents. On Friday, China came back to the table picking up 28.2 million bushels of new crop soybeans. Continued Chinese buying and a lack of significant rainfall across much of Iowa and surrounding areas have been contributing factors to a 40-cent bean rally in the last two weeks. Nearly all of Iowa has experienced 50% or less of normal precipitation in the last 30 days. Two-week forecasts show confidence that precipitation is on the way, but top-end yield has already been lost according to some. This week’s close above $9 is the highest weekly close for front-month soybeans since February.

The Pro Farmer crop tour counts soybean pods in a 3 x 3-foot square as an attempt to estimate the potential of the soybean crop. Much like corn yields, scouts found better crops than last year in nearly every state along the tour. Most impressive were pod counts in Indiana which were a whopping 39% higher than last year’s state average. Illinois scouts found much of the same with pod counts 25% higher than last year. The potential for a large bean crop was evident around the Midwest but lack of August precipitation could have a detrimental effect on what the USDA is projecting as a record crop. Pro farmer estimates U.S. bean yield at 52.5 bushels per acre compared to the USDA’s 53.3 August yield estimate.


Wheat moves higher this week

September Chicago wheat rallied 27-1/4 cents this week to close at 527-1/4. September KC wheat gained 20-1/2 cents to close at 445-3/4. Minneapolis Spring Wheat futures gained 17-1/2 cents this week closing at 515. Wheat markets rallied hard this week off of last week’s weekly reversal. The markets have bounced on indications of strong export demand, and new reports of heavy frosts on top of severe drought in Argentina. Planted acres in northern Argentina could see a 50% yield reduction as frost has hit during the developmental stage. The dollar fell to a two-year low to start the week but bounced back late in the week finishing higher on the week overall. Export sales were near the upper end of the expectations coming in at 523,000 tons up from 368,000 the week before. With this week’s moves, all three wheats are nearing some strong upside resistance levels. Continued strong demand and/or a weaker U.S. dollar will be needed to push prices higher.


Spot Market Trades Mixed This Week

During this week’s trade, spot dairy saw three out of the four product prices move higher. Whey added a penny, butter added 3c, and powder picked up 3.25c. It was a good week for those products overall, especially as they try to work their way out of downtrends. The worst performer on the week was spot cheese, which put together a 17c down week. Sellers hammered into the market in both the block and barrel prices, taking cheese down to $1.49/lb. The strong drop in cheese took down the component levels available for upcoming D-RP purchases.

The Class III milk futures market took a hit following the rough week for cheese. Second month September Class III was down $1.75 per hundredweight. The Q4 2020 Class III milk average gave back 67c and posted a close of $16.453. Most Class IV futures posted a red close for the week as well. Market fundamental updates from this week included a Global Dairy Trade auction on Tuesday and a Milk Production report on Wednesday. The GDT auction was mostly red across the board, with the GDT index falling 1.70%. GDT cheese led the way lower, falling 3.60%. July milk production across the U.S. increased 1.50% which was a bit of a bearish figure.


Carol Tillmann

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