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Afternoon Market Recap for Aug. 4, 2020

Bullish yield expectations trigger bearish prices.

Corn, soybeans and wheat all take a spill in Tuesday’s session

There’s no other way to describe it – Tuesday was a rough session for grain prices. Corn closed down more than 2.5%, with soybeans and some wheat contracts dropping double digits today. Several factors were at play that triggered a wave of technical selling, including favorable weather forecasts, strong crop quality ratings in the U.S. and expectations for bumper crops in Brazil this coming season.

A large portion of the Corn Belt may not see any measurable rainfall between Wednesday and Saturday, including most of Wisconsin, Illinois and Indiana, per the latest 72-hour cumulative precipitation map from NOAA. The agency’s latest 8-to-14-day outlook, meantime, predicts a return of seasonally wet weather for the eastern Corn Belt from August 11 to August 17. Warmer-than-normal conditions are likely for the eastern two-thirds of the country during this time.

Coronavirus relief talks in Congress sparked a modest rally on Wall St. Tuesday, with the Dow up 98 points in afternoon trading to 26,762. Energy futures continued their upward trajectory today, with crude oil rising more than 2% to hover just below $42 per barrel. Diesel was also up more than 2%, with gasoline up around 0.5%. The U.S. Dollar softened slightly.

On Monday, commodity funds were net buyers of some grain contracts, including corn (+5,000), soybeans (+3,500) and soyoil (+5,500) but were net sellers of soymeal (-2,000) and CBOT wheat (-9,500).

Corn prices tumbled more than 2.5% lower Tuesday on worries that the table is set for besting trend line yields this season. Predictions of a record-breaking crop in Brazil created additional headwinds today. September futures dropped 9 cents to $3.0850, while December futures lost 8 cents to $3.2050.

Corn basis bids were mostly steady to firm Tuesday, ticking 1 to 4 cents higher at two Midwestern locations today. Low commodity sales have suppressed farmer sales throughout the summer.

In yesterday afternoon’s crop progress report from USDA, corn quality ratings remained stable from a week ago, with 72% of the crop rated in good-to-excellent condition. Another 21% of the crop is rated fair, with the remaining 7% rated poor or very poor – all unchanged from last week. State-by-state ratings continue to vary widely, ranging from Ohio (43%) on the low end all the way up to South Dakota (86%).

Physiologically, nearly all of this year’s crop (92%) has made it to the silking stage, up from 82% a week ago. Nearly 4 of every 10 acres is now at dough stage (39%), up from 22% last week and moderately ahead of the prior five-year average of 33%.

Crop ratings nationwide are still solid, although farmers reporting to Feedback From The Field say there are some localized problems with everything from overly dry weather to nutrient deficiencies. Click here to catch up on the latest round of farmer anecdotes and view our interactive map.

Do you have a fall marketing game plan? Toni Dunker, ag risk management adviser with Advance Trading, Inc., shared some ideas that will help decision-making less burdensome when harvest really gets going in the latest Ag Marketing IQ blog. Click here to learn more.

Brazil’s Agroconsult predicts the country’s 2020/21 corn production could reach a new record of 4.342 billion bushels, which would come in 9% higher year-over-year, if realized.

In Ukraine, a grain traders union anticipates improved prospects for this year’s corn harvest, which could top 1.531 billion bushels. Corn exports are also expected to move higher for the 2020/21 marketing year, reaching 1.299 billion bushels.

Preliminary volume estimates were for 467,472 contracts, more than doubling Monday’s final count of 205,096.

Soybean prices tumbled Tuesday, closing the session with double-digit losses amid a round of technical selling fueled by better-than-expected crop quality in the U.S. and expectations for a record-breaking crop in Brazil. August futures fell 13.75 cents to $8.8375, while September futures dropped 13.25 cents to $8.7975.

Soybean basis bids were mostly steady across the central U.S. Tuesday but did drop 3 cents lower at an Indiana processor today.

Analysts thought USDA would hold soybean quality ratings steady this week, with 72% of the crop rated in good-to-excellent condition, but the agency bumped ratings up another point to 73%. Another 21% of the crop is rated fair (down a point from last week), with the remaining 6% rated poor or very poor (unchanged from last week).

Most of the crop is now blooming, with 85% now at that production stage compared to 76% last week. The crop is maturing much faster than 2019’s pace of 68% and is also ahead of the prior five-year average of 82%. More than half of the crop (59%) is now setting pods, versus 43% a week ago.

Brazil’s soybean footprint is expected to increase again for the coming crop season, reaching an estimated 93.653 million acres, per the country’s Agroconsult consultancy. That could help fuel a moderate increase in total production in 2020/21, now at an estimated 4.872 billion bushels. Exports could top 2.939 billion bushels, thanks to robust demand from China.

Preliminary volume estimates were for 223,438 contracts, trending moderately above Monday’s final count of 142,366.

Wheat prices spilled significantly lower Tuesday on a round of technical selling triggered by the usual specter of large domestic and global stockpiles, with spillover weakness from corn and soybeans applying additional downward pressure. September Chicago SRW futures fell 12.5 cents to $5.0850, September Kansas City HRW futures dropped 8.5 cents to $4.2225, and September MGEX spring wheat futures lost 4 cents to $5.0250.

Spring wheat quality ratings moved three points higher, with 83% of the crop now rated in good-to-excellent condition. Another 22% is rated fair (down two points from last week), with the remaining 5% rated poor or very poor (down one point from last week). Spring wheat harvest is moving sluggishly so far, moving from 1% complete last week up to 5% through August 2.

Winter wheat harvest also made little headway this past week, moving from 81% complete the prior week up to 85%. While that’s faster than 2019’s pace of 80%, it’s a bit behind the prior five-year average of 88%. USDA marked 8 of the top 18 production states as having concluded their harvest.

Ukrainian traders union UGA left its estimates unchanged for the country’s 2020 wheat harvest, with 984.7 million bushels. UGA’s estimates for wheat exports also held steady, at 661.4 million bushels.

Japan issued a regular tender to purchase 4.8 million bushels of food-quality wheat from the United States, Canada and Australia. Just over half of the total is expected to be sourced from the U.S.

Ethiopia received multiple offers in its tender to buy 14.7 million bushels of milling wheat that closed July 24. No purchase has been made yet, according to traders.

Thailand importers issued a tender to purchase 7.1 million bushels of feed wheat from optional origins that closes Wednesday. The grain is for shipment between October and December.

Jordan issued a new tender to buy 4.4 million bushels of milling wheat from optional origins, which closes August 12. The grain is for shipment in November and December.

Preliminary volume estimates were for 190,731 CBOT contracts, jumping moderately ahead of Monday’s final count of 128,647.

Closing Prices for Key Commodities 
  High Low Last Change
Corn                     $/bushel  cents/bu    
20-Sep 316.75 308.25 308.25 -9
20-Dec 327.75 320 320.25 -8
Soybeans        
20-Aug 893.5 881 883.75 -13.75
20-Sep 892 877.25 879.75 -13.25
Soymeal                $/ton        
20-Sep 288.6 284.6 285.8 -3.8
Soyoil                    cents/lb        
20-Sep 31.67 30.99 31.05 -0.17
Wheat                    $/bushel        
20-Sep 521.25 507.75 508.25 -12.5
20-Dec 530 516 516.5 -13.25
KC Wheat        
20-Sep 431.5 421.75 422.25 -8.5
20-Dec 442.5 432.5 433 -8.5
MPLS Wheat        
20-Sep 506.25 501.5 501.75 -4
20-Dec 520 515.75 516 -4.25
Live Cattle             cents/lb        
20-Aug 103 101.95 102.425 -0.6
Feeder Cattle         cents/lb        
20-Sep 147.4 146.05 146.55 -0.525
Lean Hogs             cents/lb        
20-Oct 49.575 48.175 49.125 0.725
Crude Oil  $/barrel *Energy prices may not represent final settlements      
20-Sep 42.08 40.14 41.67 0.66
Diesel        
20-Sep 1.2713 1.2223 1.2578 0.0169
Unleaded Gasoline   $/gallon        
20-Sep 1.2311 1.1887 1.21 -0.0031
Natural Gas        
20-Oct 2.338 2.197 2.331 0.092
Ethanol Futures        
20-Sep     1.09  
U.S. Dollar Index        
  93.815 93.24 93.355 -0.152
Gold                      $/ounce        
20-Sep 2010.1 1968.1 1998 32
Copper        
20-Aug 2.9095 2.8795 2.882 -0.026
Fertilizer Swaps     (as of 7/24)  
DAP Tampa-index      316.5 0
DAP-New Orleans      357.2 6
Urea-New Orleans      229.3 2
Urea-Middle East      245.0 9
Urea-Black Sea      222.0 7
UAN (32%) New Orleans      129.0 0

 

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