Strong exports, dry South American weather bring 2020 to a close on a high note for grain producers
Happy New Year’s Eve! Markets will be closed tomorrow for the New Year’s holiday. Have a safe and happy holiday weekend!
Also – happy birthday to the best dairywoman in the business! And a happy early birthday tomorrow to my favorite dairy farmer! Mom and Dad – I hope your birthdays are as wonderful as you! - JKH
Corn prices built on yesterday’s highs in today’s trading session, rising to their highest level in six-and-a-half years. Dry weather forecasts in South America, a two-month corn export ban in Argentina, and a bullish weekly export report sent Chicago futures prices soaring $0.08-$0.10/bushel higher.
The most actively traded corn futures contract, March 2021 futures, will add a 23% gain in value on the year – its largest annual price gain in 10 years.
Weekly export sales for 2020/21 corn exceeded market expectations in this morning’s Weekly Export Sales report from USDA. Forecasters anticipated today’s total to range between 19.7 million – 39.4 million bushels. But USDA reported a 55% week-over-week increase in new 2020/21 corn export sales, bringing the weekly tally to 43.1 million bushels.
Export cancellations on 2020/21 corn shipments increased by nearly 3.0 million bushels to 5.1 million bushels during the December 18 – 24 reporting week, largely due to rallying corn futures prices.
But higher prices had little impact on loading paces, as weekly corn shipments soared over 60% higher than last week’s volume to 52.7 million bushels. A weakening dollar paired with increased shipments to smaller countries contributed to stronger corn exports for the reporting week, as corn export volumes to all destinations besides China rose by over 50%, or 11.2 million bushels, to 33.4 million bushels on the week.
The weekly volume was unseasonably high as weekly corn shipments typically dip in mid-December due in large part to an uptick in U.S. corn shipments to China. The world’s second largest economy increased weekly corn export volumes by nearly 8.7 million bushels to 19.4 million bushels for the week ending December 24.
Strong export sales, shrinking supply concerns, and a dry weather forecast in South America sent Chicago soybean futures prices up $0.06-$0.12/bushel in today’s abbreviated trading session. Soymeal posted more tepid gains as Argentine oilseed workers returned back to normal production schedules following a 20-day strike over wages.
January 2021 soybean futures closed out 2020 by rising 37% since January 1 – the largest annual gain for a soybean contract since 2007.
Chinese soymeal futures peaked at record levels in overnight trading as feed demand forecasts in January for the nation’s poultry flock intensified. Rising feed demand from the country’s recovering hog herd also contributed to strong soymeal prices. Residual strength was also added from the recent Argentine oilseed workers and grains inspectors strikes, which ended earlier this week.
Soymeal futures on the Dalian exchange soared to $523.96 a tonne last night. "Soymeal prices might be even higher in the new year," a manager at a crusher in northern China told Reuters.
Soybean export sales for the 2020/21 crop surpassed analyst expectations for the week ending December 24. The trade anticipated new weekly sales ranging between 7.3 million – 25.7 million bushels. But today’s figures exceeded that estimate as sales increased by 74% from the previous week to 33.7 million bushels.
New crop soybean export sales also saw bullish prospects. For the week ending December 24, 2021/22 soybean export sales nearly doubled to 11.6 million bushels. The weekly haul brought outstanding new crop soybean export sales volumes to 29.8 million bushels, four and half times the volume of outstanding new crop soybean sales for the same reporting period a year ago.
Monday’s export inspections report from USDA suggested export loading paces for soybeans would take a beating in today’s report. However, finalized data indicated this would not be the case. While Monday’s report showed weekly soybean loadings cut in half, revised figures out this morning from USDA show that weekly soybean export loading paces only fell slightly – by 3% - to 89.6 million bushels.
Shipments to China topped the list of international soybean buyers for the week. Over 53.8 million bushels of soybeans were shipped to the world’s second-largest economy, with another 4.3 million bushels destined for Egypt.
U.S. soybean export paces typically slow in mid-December. And while some price resistance was visible in weekly shipping paces, the uptick in both old and new crop sales indicate that the U.S. is the world’s top supplier of soybeans until the South American crops are harvested. Today’s report signaled that international demand for U.S. soybeans remains alive and well for now.
Strong export numbers released by USDA today helped reverse the morning’s losses in the wheat market. Strong rallies in the corn and soybean complexes also helped fuel minor gains for wheat in the last trading session of 2020.
Chicago wheat futures for the March 2021 contract recorded a 14% gain in value from the beginning of the year. It was the fourth consecutive year that Chicago wheat futures prices ended the year higher than they started.
China auctioned off 21.4 million bushels of wheat in a weekly state auction early this morning. Only 14.41% of the state offerings were purchased. Weekly state wheat purchases have largely declined since October as rising grain imports have helped offset tightening domestic supplies. State auction sales averaged about $9.75/bushel in the overnight auction.
Wheat export sales for the 2020/21 crop were not as exceptional as those of corn and soybeans this week, but they were nonetheless strong in the wake of a weakened dollar and limited exportable wheat supplies in the Black Sea region. At 19.2 million bushels, weekly 2020/21 wheat export sales ticked up by nearly a third from the previous week and landed on the higher end of analyst estimates (7.3 – 22.0 million bushels).
The trend of unseasonably high wheat export loading paces continued during the week ending December 24. Wheat export volumes ticked up 19% to nearly 16.0 million bushels on the week. Marketing year to date loading paces remain over 8% higher than the five-year average.
The top destination for U.S. wheat last week was the Philippines (3.9 million bushels), followed by South Korea (3.0 million bushels) and Mexico (2.8 million bushels). Loading paces to China increased slightly, by a mere 8% to 2.5 million bushels.
Five buyers accounted for 88% of last week’s wheat shipments from U.S. export terminals. Six other countries tallied smaller purchases to make up the remaining volumes. By comparison, in the previous reporting week, 14 countries purchased wheat volumes totaling less than a million bushels from the U.S.
The reporting week’s futures price rally likely left smaller buyers more hesitant to book expensive U.S. wheat. But as global food hoarding continues and the dollar continues to fall, it is possible that the buyers will return with more enthusiasm in the weeks to come.
The cross-country winter storm system that hit the Plains and Upper Midwest earlier this week will shift to a heavy rainstorm stretching from the Southern Plains through the Southeast today, according to NOAA’s short-range forecasts. Two to three inches of precipitation is expected in the Southern Plains and Southern Mississippi River Valley over the next 24 hours.
The showers will shift north over the holiday weekend, sending a rain-snow mix into the Central Plains and Central Mississippi River Valley by early tomorrow morning. The system will continue to move into the Great Lakes States by Saturday.
The updated U.S. Drought Monitor found 66.41% of the U.S. to be in some form of dry or drought condition as of Tuesday. Severe drought conditions continue to plague Western U.S. states, where 88.43% of land is in some form of dry classification and 46.49% of land is rated as in extreme to exceptional drought.
Coronavirus cases in the U.S. rose to by 229,608 from yesterday morning to 19,745,888 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. The death toll increased by a staggering 3,758 lives to 342,414 deaths as of this morning.
A USDA-ERS study on the impacts of the COVID-19 pandemic on rural America provided some grim results for farm country. “Rural rates of COVID-19 mortality were never previously higher than they were in late October, and the rise in cases during this period suggests that rural mortality is likely to continue increasing," the report said. "In contrast, rates in large metro areas were the lowest since the beginning of the pandemic, although their recent rise in case rates suggests that this situation may change."
Meatpacking communities also have suffered significantly worse health fallouts during the pandemic, according to the report. But despite the dismal health outcomes in rural America, unemployment in farm country remains low, offering optimism for potential growth after rural communities can get healthy again.
2020 was a tumultuous year for ag policy, Farm Futures policy editor Jacqui Fatka reflects in the latest DC Dialogue column. Trade negotiations, Market Facility Program uncertainty, Coronavirus Food Assistance Program’s two rounds of payments, turbulent biofuels policy shifts, and finally – a new administration with some familiar faces. It was a crazy year, but optimism for ag policy in 2021 remains strong.
Great Britain will formally exit the European Union tonight after years of negotiations. Uncertainty continues to linger surrounding the logistics of the formal break – as well as logistics for goods traded between the U.K. and its largest trading partner, the European Union. Over $1.6 billion worth of products are exchanged over the U.K. border every day, so the real test of trade values being sustained amid Brexit will begin tonight at 11pm local time.
“New year, new you!” – a phrase that everyone on my social media seems to be buying into this year. Total Farm Marketing’s Naomi Blohm points out that this concept is high on many farmers’ minds as they reflect on their marketing plans for the new year. To improve market discipline, Blohm suggests doing a lot of prior planning and following through on marketing decisions in the latest Ag Marketing IQ column.
The NASDAQ is on track for a record close today, but other U.S. equity indices wobbled in the last trading session of 2020. It was a quiet day on the markets with many market participants off for the holiday. The S&P 500 index traded 0.22% higher to $3,740.20 at last glance.
|Closing Prices for Key Commodities|
|Live Cattle cents/lb|
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|Lean Hogs cents/lb|
|Crude Oil $/barrel||*Energy prices may not represent final settlements|
|Unleaded Gasoline $/gallon|
|U.S. Dollar Index|
|Fertilizer Swaps||(as of 12/28)|
|UAN (32%) New Orleans||140.55||2.76|
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