Corn Rallies on Lower Yield Estimate
December corn futures were 10-1/2 cents higher this week to close at 368-1/2. July corn futures also joined the party rallying 8-3/4 cents this week to close at 388. The September WASDE report estimated 2020/21 corn production at 14.9 billion bushels down from 15.3 billion in August. Corn yield came in at 178.5 bushels per acre down 3.4 bushels from the August estimate and right in line with trade estimates going into the report. 2020/21 corn carry out is now estimated at 2.5 billion bushels, and while down from August, it is still a 250 million bushel increase from old crop. As to the damage from the derecho on August 10th, the USDA lowered corn harvested acres by 550,000 and left soybean acres unchanged. Even with the yield estimate reductions from last month in Iowa (11 bpa) and Illinois (4 bpa) US corn at 178.5 bushels per acre would be an all-time record. Record yields were revised even higher in Minnesota, South Dakota and Wisconsin. World corn stocks (minus China) are estimated to be 9% higher year over year, this is lower than what was estimated last month. The trade will spend the weekend digesting these numbers as attention begins to turn to yield reports out of the Southern corn belt.
Managed money fund traders held a small net long position in the last Commitment of Traders update and the increasing open interest this week would suggest funds were active buyers into and after the report. In Brazil, they are considering lifting their import tariffs for corn due to tightening supply. Strong local livestock-feed demand is restricting corn available for shipment in Brazil. Ethanol production for the week ending September 4th averaged 941,000 barrels per day. This is up 2.06% vs last week but down 8.02% vs last year.
Soybeans Move Higher Again This Week
November soybean futures rose 28 cents this week to close at 996. March futures added 23 cents to close at 996-3/4. November soybean futures traded as much as 21 cents higher following the USDA’s September WASDE report before backing off just slightly and settling 20 cents higher on Friday. The USDA dropped soybean yield potential 1.4 bushels per acre from last month, dropping to 51.9 bushels per acre. At 51.9 bushels per acre US soybean yield would tie the 2016 record yield. Of the top producers, Minnesota was the only state to have soybean yield come in above the August estimate. Illinois was down 2 bpa and Iowa was down 4 bpa.
Last week’s export sales of US soybeans topped 3 million tons. This appears to be a weekly record for a single marketing year and a great start to the first week of the 2020/21 marketing year. Since mid-July soybean export sales have been rather strong as China has continued to belly up for US soybeans. US soybeans will be about the only soybeans in the world available for export until South American soybeans are ready in early 2021. Brazilian soybean planting is expected to start relatively soon, but inadequate soil moisture may delay the start of planting in many regions.
Wheat Turns Lower
December Chicago wheat was 8-1/4 cents lower this week to close at 542. December KC wheat was 1-1/4 cents lower this week to close at 471-1/4. December Spring wheat was 10-1/4 cents lower this week to close at 532-1/4. There was next to nothing in the way of supply or demand changes for wheat on Friday’s WASDE report. US wheat ending stocks came in equal to last month at 925 million bushels. World ending stocks came in slightly above the August estimate totaling 319.37 million metric tons. Overall world wheat supplies remain adequate and the market responded accordingly trading as much as 6 cents lower on the day. December wheat closed below the 200-day moving average with today’s price action. A close below this pivotal support level is an indicator that market direction has changed from higher to lower.
Milk Futures Defy Spot Trade
This week’s spot trade was mixed as the fat complex of butter and cheese finished slightly lower, while the powder products of whey and NDM finished slightly higher. The cheese market is moving into an extreme on the block/barrel spread of over 50 cents as blocks finished at $2.16/lb, while barrels finished at $1.60/lb. This does potentially set up the cheese market for a pull back if blocks come down to barrels. Non-fat looks to be on the slow, but a steady climb higher ever since it broke above the psychological level of $1.00/lb a few weeks ago. Whey prices are challenging recent highs this week and could be on the verge of a break out if the market can hold onto this weeks gains.
The July to December average finished the week virtually unchanged at $19.07 this week vs. $19.06 last week. The market has been pricing in more negativity than the spot trade had this week and has been able to hold onto decent price levels in the fourth quarter of this year. Futures will be cautious of a block/barrel correction and may decline rapidly if they sense weakness in the block market.
Author
Kelly Rubisch