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Afternoon Market Recap for July 31, 2020

Soybeans rise on improving biodiesel demand.

Corn closes the week lower on favorable yield forecasts

Corn

Weekend forecasts featuring favorable weather for crop development limited positive price action for corn this afternoon. Losses were limited by a record-smashing daily export sale to China yesterday. September corn futures ended the week over $0.10/bushel lower.

Cash corn prices on the Mississippi continued to fall despite a large export sale announced to Mexico this morning. Basis narrowed $0.04/bushel to $0.06 over September futures at a Union City, Indiana ethanol plant. Country movement of corn was about as active as futures gains today – slight, if any.

Low corn prices and a cheap dollar spurred a flash sale from Mexico, USDA announced this morning. Private exporters reported 4.5 million bushels of corn had been booked to delivery to Mexico during the 2020/21 marketing year. About 222,000 tons of soybean cake and meal was also earmarked for delivery to the Philippines in the new marketing year.

Soybeans

 Increasing biodiesel demand sent soyoil futures rising in today’s trading session, underpinning strengthening soybean futures prices along the way. August futures lost $0.0725/bushel this week, slipping below the $9/bushel benchmark to $8.9675.

The U.S. Energy Information Administration released May 2020 biodiesel production statistics earlier today, which showed a 3-million-gallon increase from April 2020. About 76% of biodiesel used for blending was produced in the Midwest. Around 778 million pounds of soyoil were consumed in May, as U.S. soy farmers continued to supply the largest raw ingredient for U.S. biodiesel production.

The EIA’s monthly report indicated that soy demand for biodiesel strengthened despite reduced fuel demand in the pandemic era. This could be a telling sign that USDA will likely increase their monthly WASDE estimates for soybean crush and soyoil production in the August 12 WASDE report.

Spot basis bids for soybeans were mostly flat across the Midwest today. Basis strengthened a penny per bushel to trade even with August futures on the Mississippi River at the Savanna, Illinois terminal. As futures prices rebounded, farmers in need of cash booked new cash sales of old crop soybeans according to an Iowa merchandiser.

Cash offerings for soybean meal strengthened as export demand in the Gulf at New Orleans increased. But many large soymeal buyers have remained on the sidelines, waiting to see how rising coronavirus cases impact processing speeds at meat plants. If a resurgence of cases occurs at slaughterhouses, livestock production could be further constricted, offering potential price opportunities for soymeal buyers.

Wheat

The U.S. wheat complex firmed today on a series of end-of-month technical trades. After the European markets closed, there was little market news to spur any significant price action. The wheat market traded mostly sideways this week, with the September Kansas City contract losing $0.065/bushel on the week.

The European wheat complex will likely trade sideways for the foreseeable future on a lack of impactful market news. A rising Euro against the dollar limited gains in Paris this afternoon.  

The dollar has taken its largest fall in the last decade as global investors doubt the United States’ ability to recoup economic gains as coronavirus cases rise around the country and sow consumption fears in American households.

Cash wheat prices held steady across the Midwest and Southern Plains today. Cash sales were scarce as Chicago and Kansas City futures posted fractional gains.

Winter wheat harvest has largely finished on the soft red winter wheat crop in the Midwest, according to a weekly harvest report by U.S. Wheat Associates. Early test weights point to a strong crop with the average test weight projected at 77.8 pounds/bushel, 1.6 lb/bu higher than 2019 yields.

Hard red winter wheat harvests are wrapping up in South Dakota over the next week. Early progress in Montana, Idaho, and Washington will likely continue in rapid fashion on favorable weekend forecasts for harvest conditions.  Test weights were steady at 61.3 lb/bu while protein inched up slightly to 11.9% with the inclusion of the South Dakota crop – strong signals of a favorable-quality crop for 2020.

Soft white wheat harvest is largely underway in the Pacific Northwest with a little over 20% of the crop harvested. Hard red spring harvest opened up the past week South Dakota and southern Minnesota. 

A hot and dry forecast across the Northern U.S over the next week will not only support rapid harvest progress, but it will also raise protein levels in the wheat plants remaining in unharvested fields.

Yield forecasts for the Brazilian wheat crop could top record books this year, according to industry analysts. Brazilian agricultural consultancy Trigo & Farinhas estimates the 2020/21 wheat crop at 269.7 million bushels, up by 42.5% from 2019 when adverse weather conditions damaged yields. But with favorable weather forecasts and minimized threats of disease and pests, the 2020 crop could soar past 2016 record volumes of 246.2 million bushels.

Wheat is typically sown into Brazilian soybean fields after spring harvest season. As soybean production in Brazil increases, wheat acreage will likely follow. While Brazil is not a significant producer of wheat on the world stage, it is projected to be the world’s third-largest wheat importer in 2020/21. Rising acreage likely impacts import demand – meaning global exports to Brazil could shrink in coming years as soybean and wheat production expands.

Weather

Moderate temperatures across the Midwest will favor crops in the last stages of pollination, according to NOAA's short-range forecast. Chances for showers in the Northern Plains today will shift into the Upper Mississippi River Valley by tomorrow and through Sunday. A rain system in the Southern Plains earlier this week will settle over the Eastern Corn Belt over the weekend.

Financials

Coronavirus cases in the U.S. rose by 67,731 to 4,495,224 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. The death toll increased by 1359 lives to 152,075 deaths as of press time.

Subsoil moisture is beginning to be sucked dry in Indiana, according to farmer Kyle Stackhouse. Light rains over the past week replenished topsoil moisture levels but abnormally dry weather during the crucial reproductive stages for corn and soybeans could inflict further yield damage into August. Low corn prices have sent farmers slashing aerial pesticide applications on low-production acreage, Stackhouse reports in the latest Between the Fencerows column.

Have you used a recruiter on your operation to attract new talent? Professional recruiters can be a great asset, AgCareers.com’s marketing associate Bonnie Johnson points out, as long as they avoid a few detrimental practices that could deter potential workers away from your farm. A complicated application process, poor job description, and a distracted interviewer all decrease the chances of attracting high-quality job candidates she writes in the latest Managing Talent column.

How do your crops stack up against other farms around the country? Click here to share your crop reports with other growers around the country via a short survey. We will update the interactive Google map with results throughout the day. Check out our most recent analysis here. Thank you!

On Wall Street, strong tech company earnings released yesterday could not offset concerns over a struggling economy in the pandemic era, leaving U.S. stocks mixed in the aftermath. S&P 500 futures rose 9.88 points or 0.3% to $3,256.1 while Dow futures were on track to post a 27.94-point or 0.11% loss to $26,285.71.

Today is the last day of National Ice Cream Month! I hope you continue the celebration into August to support your local dairy farmers! Have a good weekend, JH

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