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Afternoon Market Recap for Feb. 21, 2020

Grains test gains, then stumble.

Corn, soybeans and wheat all spill into the red Friday

Grain markets came into Friday’s session hanging on to modest overnight gains, but prices eroded throughout the session as supply and demand concerns entered the fray, even amid a mostly positive round of export sales data from USDA this morning. Corn faced news of higher-than-expected production estimates for 2020, with a big uptick in ending stocks predicted for 2020/21. Soybeans eroded nearly 0.5% as fears of a coronavirus-induced economic slowdown crept back into focus. And wheat lost another 1% today in day three of a technical regression following a price surge or more than 4% Tuesday.

The latest 72-hour cumulative precipitation map from NOAA shows another round of rain and snow entering parts of the Corn Belt Sunday into Monday, with totals exceeding 1” in some areas during that time. The agency’s 8-to-14-day outlook shows a mixed bag of weather possible between February 28 and March 5, with some wetter conditions possible in the central Plains, while the Upper Midwest and eastern Corn Belt should remain relatively dry during this time. Slightly cooler-than-normal temperatures are probable across most of the central U.S. next week.

Coronavirus anxiety again gripped financial markets Friday, with the Dow tumbling 280 points lower in afternoon trading to 28,940 on concerns it could cause a global economic slowdown. Energy futures also dipped into the red today, with crude oil dropping 1% to stay below $54 per barrel. Gasoline and diesel saw similar cuts this afternoon. The U.S. Dollar softened moderately.

Corn prices sagged Friday on USDA’s forecasts for sharply higher ending stocks for 2020/21, which the agency released at this morning’s Ag Outlook Forum in Washington, D.C. A healthy round of export data kept losses minimized, however. March futures slipped 1.5 cents to $3.77, with May futures down 2 cents to $3.8075.

Corn basis bids were largely steady Friday amid a backdrop of mostly sluggish farmer sales this past week. Bids rose a penny at an Illinois river terminal and gained 4 cents at a Nebraska processor today.

Corn export sales climbed from 38.1 million bushels the prior week up to 49.2 million bushels for the week ending February 13, with more than 99% of the total represented by old crop sales. That tally is also a 12% improvement above the prior four-week average and topped all trade estimates, which ranged between 27.6 million and 47.2 million bushels. Cumulative totals for the 2019/20 marketing year remain severely behind last year’s pace, meantime, at 498.1 million bushels.

Corn export shipments eased from the prior week’s week’s marketing-year high of 30.8 million bushels to just under 30.0 million bushels. Last week’s tally still remains 24% above the prior four-week average, however. Mexico (9.7 million) and Japan (9.4 million) were the top two destinations.

USDA also said Friday it expects corn production this coming marketing year to reach 15.460 billion bushels on average yields of 178.5 bushels per acre this year, which is nearly 13% above last year’s embattled crop. That could leave ending stocks for 2020/21 at 2.637 billion bushels, booming 39% higher year-over-year, even amid rising domestic use and an uptick in exports. If realized, ending stocks could reach the highest levels since 1988.

China issued a statement today that an armyworm infestation could affect an increasing number of its corn and wheat acres this year, which could disrupt its supply and demand needs, depending on the intensity of the infestation. The country has allocated up to $200 million to prevent and control the pests.

South Korea continues to be an active buyer of corn in recent weeks, purchasing another 5.3 million bushels from optional origins in an international tender that closed earlier today. The grain is for arrival in June.

Preliminary volume estimates were for 393,602 contracts, up slightly from Thursday’s final count of 365,576.

Soybean prices spilled about 0.5% lower Friday, as traders shrugged off mostly supporting 2020/21 production and ending stocks news from USDA, instead focusing on the agency’s weekly export report, which showed another round of sales data that didn’t reveal any major Chinese purchases. March futures slid 2.25 cents lower to $8.9050, with May futures down 2 cents to $8.99 and closing below $9 for the first time in more than a week.

Soybean basis bids were largely steady across the central U.S. but did move 3 cents higher at an Illinois processor and 4 cents higher at an Illinois river terminal today.

Soybean exports fell to 18.3 million bushels in old and new crop sales last week, spilling 23% below the prior week’s tally of 23.7 million bushels and landing 22% below the prior four-week average. Total volume also fell below all trade guesses, which ranged between 22.0 million and 44.1 million bushels. China was conspicuously absent among the primary buyers, with the top five destinations represented by Indonesia, Japan, the Netherlands, Mexico and Israel.

Soybean export shipments fared much better, at 35.2 million bushels – a 57% improvement over the prior week’s tally but still 10% down from the prior four-week average. China was the No. 1 destination here, with 9.9 million bushels.

For the 2020/21 marketing year, USDA expects the U.S. soybean crop to reach 4.195 billion bushels, moving 18% higher year-over-year. With increasing global demand, particularly from China, the agency is still forecasting 2020/21 ending soybean stocks dropping from 425 million bushels this marketing year down to 320 million bushels.

President Donald Trump wrote in an all-caps tweet Friday morning that “formally targeted farmers” will receive additional aid from the U.S. federal government, if needed, until trade deals with China, Mexico, Canada and others “fully kick in.” Trump did not offer additional details about potential timing, amount or probability of such aid. Farmer reactions were mixed.

In Brazil, rains are delaying the harvest pace in some region, according to consultancy Arc Mercosul. The country’s harvest is 34% complete through today, which is in line with the historical average but moderately behind last year’s pace of 46%.

Preliminary volume estimates were for 309,773 contracts, gaining momentum from Thursday’s final count of 217,336.

Wheat prices experienced a technical regression for a third-consecutive session after rising more than 4% Tuesday. A tepid round of export sales data from USDA this morning created additional headwinds, with some contracts closing as much as 1.4% lower today. March Chicago SRW futures dropped 9 cents to $5.51, March Kansas City HRW futures fell 5.5 cents to $4.6825, and March MGEX spring wheat futures lost 3.5 cents to $5.25.

Wheat export sales took a big step back last week, falling 40% below the prior four-week average and landing at 12.7 million bushels in old crop sales plus another 2.2 million bushels in new crop sales for a total of 14.9 million bushels. Analysts were mostly expecting a bigger haul, with trade guesses that ranged between 14.7 million and 25.7 million bushels. Colombia (2.9 million), Indonesia (2.7 million) and Mexico (2.7 million) were the top three buyers last week.

Wheat export shipments improved 44% from the prior four-week average after reaching 21.9 million bushels. Mexico was the No. 1 destination, with 3.5 million bushels.

USDA is predicting lower wheat production and ending stocks next marketing year, falling to 1.836 billion bushels and 777 million bushels, respectively.

India’s farm ministry is still expecting a record-breaking wheat crop this year, which could top 3.902 billion bushels. India is the world’s No. 2 wheat producer.

Taiwan purchased 3.8 million bushels of milling wheat from the U.S. in an international tender that closed earlier today. The grain is for shipment in April and May.

In France, consultancy FranceAgriMer estimates that 65% of the country’s soft wheat crop is in good-to-excellent condition as of February 17, unchanged from a week ago

Preliminary volume estimates were for 206,939 CBOT contracts, moving moderately above Thursday’s final count of 143,117.


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