Market Analysis




Will corn need to rally to $8 or beans to $18 to ration the remaining supply?

By Jon Scheve, Superior Feed Ingredients, LLC

The week’s biggest story was the inverse spread between the May and July contracts.  Inverses mean that the market is short and really needs to find supply.

Corn

Corn rarely sees inverse at this point in the year, so when they show up in the spring, they are a very big deal. The spread opened in late April with May being 23 cents higher than July on Monday. By Thursday’s close it was 51 cents higher.  This kind of spread hasn’t happened since the spring of 2013 which followed the drought year of 2012.

That Thursday was the last trading day on the May futures for most market participants before the delivery process starts on the May contracts.  Therefore, it was also the last day that the May contract had a daily price limit.  From now until its final trading day in mid-May, May futures movement won’t really matter because there are few market participants trading it.  Everyone’s… Continue reading

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Prices and weather… weather and prices

By Jon Scheve, Superior Feed Ingredients, LLC

May corn prices blew past $6, and then a few days later $6.50. Additionally, May futures gained on July futures by almost 10 cents this last week, which is huge, because in a normal week in a normal year a 1-cent move on that spread in a weeks’ time would be a big deal. Basis values across the US also increased another 5 cents this week. These are clear indications that the market is begging for corn and is unable to find it.

How much corn is left to sell by farmers?

The last USDA WASDE report showed on-farm cash corn prices unchanged at $4.30 from the March report, suggesting most farmers already priced the majority of their 2020 crop at lower values compared to today’s prices. Plus, elevator mangers across the Midwest are telling me that a lot of corn was sold around $4 futures and then most farmers sold another big portion of their production again in November when prices hit $4.50.… Continue reading

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Planting progress slow around the Corn Belt

By Jon Scheve, Superior Feed Ingredients, LLC

While temperatures were nearing normal last week on our farm in southeast Nebraska, a cold front has pushed in and put a stop to any planting progress. Usually, we start planting corn by April 11 and try to finish within 7 to 10 days. However, ground temperatures in our area remain below 45 degrees and forecasts show lows near 25 degrees on Tuesday. The weather outlook later in the week looks more favorable, so hopefully everyone can start planting soon. The entire Corn Belt along I-80 and I-70 seems to be in the same situation through April 23.

South America’s second corn crop

Brazil’s weather is looking dry, so there are growing concerns for their second crop’s yield potential, with some already speculating a possible 20% yield reduction. If this dryness continues, it will likely support corn prices. However, it’s still early and many in the trade assumed Argentina would have a 20% yield reduction due to La Niña, but late season rains have improved conditions there and losses may only be around 10% below normal according to some recent estimates.… Continue reading

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Prices could go even higher without significant corn and soybean acre increases

By Jon Scheve, Superior Feed Ingredients, LLC

With the USDA increasing demand for all categories, the tightest carryout since summer 2014 is expected. This has led to plenty of uncertainty in the market. 

Export potential

Exports have the most potential for change as traders are still debating how much U.S. corn will be exported before late August. Some believe cancelations are possible and reductions are still likely, while others expect exports will increase significantly.

Brazil impact

If exports stay strong, Brazilian corn could be imported into the southeast U.S. to relieve tight carryout pressure. However, much of Brazil’s corn crop was planted late, and with recent dry weather, yields may be compromised. Still, crop development there is early and good weather conditions could help improve yield potential.

U.S. New Crop corn

With current export estimates and the USDA predicting only 91.14 million corn acres for 2021, next year’s carryout could be potentially tighter than where we are this year.… Continue reading

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Mixed numbers from WASDE

By Bennett Musselman, Leist Mercantile

The report was bullish for corn and wheat. There were neutral numbers for soybeans. 

Average trade estimates leading into the report were corn ending stocks at 1.396 billion bushels, soybeans 119 million bushels and 847 million bushels of wheat. The trade was expecting slightly higher wheat stocks and expected the USDA to lower corn stocks while leaving soybeans relatively unchanged. 

Corn ending stocks were 1.352 billion bushels, down from last month’s 1.502 billion bushels. Soybean ending stocks held steady from last month at 120 million bushels. Wheat ending stocks were 852 million bushels. Last month they were at 836 million bushels. 

The trade was estimating Brazilian soybean production at 134.03 million tons. The USDA report estimate was higher at 136 million tons.  Argentina soybean production was 47.5 million tons and that is unchanged from last month. 

Immediate reaction to the report had May corn up  6 3/4 cents at $5.86 ½  , May soybeans were down 2 cents at $14.13 ¼ and wheat was up 10 ½  cents at 6.39 1/4 .… Continue reading

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Soybean numbers show tight supplies moving forward

By Doug Tenney, Leist Mercantile

Since December, numerous rumblings have inferred U.S. corn exports were too low. At that time many had projected U.S. corn exports would be increasing 200 million to 300 million bushels with corn ending stocks shrinking a similar amount. The frustration has been high as USDA seemed stuck in a rut with the January, February, and March WASDE reports unchanged. At those times a common thread suggested USDA was merely “punting,” kicking the can down the road waiting for more information in particular to South America corn production in Brazil and Argentina. 

Last month China purchased 4 million tons, or 157 million bushels of U.S. corn. Yet, corn prices were unable to break above the highs seen in early February. In February and March, both corn and soybeans were firmly entrenched in a sideways price pattern. The March 31 USDA Perspective Planting Report was a bullish surprise, a game changer which had both corn and soybeans locked up their respective daily limits of 25 cents and 70 cents. … Continue reading

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How is the acreage battle shaping up in March 31 planting intentions?

By Doug Tenney, Leist Mercantile

Corn locked up the 25 cent limit.

The report was bullish for both corn and soybeans. 

U.S. acres numbers for today: corn 91.44 million acres, soybean 87.6 million acres, and all wheat  46.35 million acres. U.S. grain stocks are: corn 7.701 billion bushels, soybean stocks 1.564 billion bushels, and wheat stocks 1.314 billion bushels. 

Watch the acres total for corn and soybeans. Early estimates had that total at 182-183 million acres. A number above that total will be difficult to actually achieve. Last year it was 173.9 million acres.

The corn and soybean price declines of the past two weeks has the potential to see this report set the stage differently compared to past March 31 reports. Some suggest neutral reports could yield price gains today. That is not normal.   

Just after the noon report release, corn was up 25 cents, soybeans up 60 cents, and wheat up 13  cents.… Continue reading

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Which USDA reports are the most important?

By Jon Scheve, Superior Feed Ingredients, LLC

The upcoming March 31st USDA report is highly anticipated for several reasons:

  • It provides the estimated remaining stocks stored on farms and at commercial elevators.
  • It shows how tight stocks are and if price rationing is necessary.
  • It includes the first official planting intentions estimate for the upcoming year based upon surveys filled out by producers in early March.

Last month the USDA Economic Outlook Forum estimated 92 million corn acres and 90 million soybean acres would be planted in 2021. However, these are budgetary derived numbers and not based upon actual producer surveys. Therefore, the market will be comparing these estimates and other private estimates until the March 31streport. Prices will then adjust accordingly.

How important is each USDA report?

Many people say the end of March report day is important, and it is, but how does it compare with other reports throughout the year?… Continue reading

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Will price levels hold?

By Jon Scheve, Superior Feed Ingredients, LLC

China’s purchasing of corn and beans is the biggest factor impacting the market right now. Everything else seems to be noise. If buying continues to outpace any potential cancellations, stocks will decrease, and prices should trend higher. If the reverse happens then the market will have difficulty remaining at these levels.

Soybean outlook

Most U.S. beans have already been shipped, and while some of the remaining ones could still be canceled, there is less opportunity every day for that to happen. This means old crop carryout is tight and its likely next year’s will be too pending planting intentions. Beans seem to have more upside potential than downside risk at this point. 

Corn outlook

China added more purchases this week, which suggests the USDA will likely need to increase export estimates and decrease carryout in upcoming reports. Unlike beans, a lot of corn has not been shipped out of the U.S.… Continue reading

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South American corn production

By Jon Scheve, Superior Feed Ingredients, LLC

Global demand is focused on China’s upcoming needs, which are largely unknown.  The market is watching to see if they will buy more, cancel purchases, or delay shipments to next season.  

Supply is also uncertain and ever changing because it is heavily influenced by U.S. and South American weather, which is highly unpredictable. 

With so much uncertainty in so many areas of the world, the market will continue to be volatile until U.S. crop production estimates become clearer by August.  

South American corn production

There are many different corn crops grown in South America. The earliest planted is the Brazil’s first season corn crop which is planted from early September to mid-November. Argentina also grows a corn crop at nearly the same time with most of it planted in October. Brazil’s second and largest corn crop is planted in February and early March.  In the last couple of years there has even been a third Brazilian crop being planted in the north eastern portion of the country which is planted at nearly the same time as the U.S.… Continue reading

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What crops will farmers plant this spring?

By Jon Scheve, Superior Feed Ingredients, LLC

Late last week, March corn and beans futures were trading at higher values than May contracts. Since this is happening in the March contract delivery period, it means demand for the physical commodity is extremely high. Also, basis is stronger for both commodities throughout the Midwest. This suggests the market is begging for grain now and futures may have to work higher to incentivize farmers to sell. However, if futures move too high, it could lead to increased South American export demand and U.S. export cancellations.

The acreage battle is on between corn and beans, with minimal consideration for other crops this year. A couple weeks ago the USDA Economic Outlook Forum predicted 92 million corn acres and 90 million soybean acres (182 million combined) would get planted this year. That’s 2 million more total corn and bean acres than 2018, which is the highest on record.… Continue reading

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Mixed March 9 USDA WASDE numbers

By Doug Tenney, Leist Mercantile

The report was neutral for corn and negative for soybeans. Brazil soybean production was up one million tons, a small surprise.

It is most interesting to review the market expectations for USDA reports in 2021. Last month, traders were expecting lots of changes with the monthly WASDE Report. That did not happen. The word, “punt,” was used numerous times in comments which followed the February WASDE Report when referencing what USDA did last month. 

Conversely, few changes were expected today. The trader’s estimates for corn ending stocks are down 31 million bushels from last month. Trader estimates for soybean ending stocks are down just 3 million bushels compared to February.

Plenty of price volatility has taken place in the past 30 days. Both old and new crop soybeans have made new contract highs. New crop corn made the most new contract highs with the December 2021 or March 2022 CBOT contracts.… Continue reading

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Big market reports in March

By Doug Tenney, Leist Mercantile

The monthly USDA WASDE Report is on March 9. Traders and producers will be most anxious to learn if U.S. corn and soybean exports will increase compared to the February report which projected corn exports at 2.6 billion bushels, while soybean exports were pegged at 2.2 billion bushels. The trade was most disappointed with the February WASDE Report. Some analysts suggested USDA “punted until March or April,” when corn exports were not increased to the degree of expectations. It appeared USDA desired to gather more information regarding South America corn and soybean production in spite of dry weather conditions during December and the first five weeks of 2021.  

The second and third USDA reports this month will be on March 31 when the Prospective Plantings Report and Quarterly Grain Stocks Report are released. It seems a forgone conclusion U.S. corn and soybean acres will be above those planted in 2020.… Continue reading

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What happens to grain after it is delivered to elevators?

By Jon Scheve, Superior Feed Ingredients, LLC

Corn and bean prices will continue to be extremely volatile as the market determines how much grain will ultimately be exported out of the U.S. South America is beginning their harvest and currently their corn and beans are worth less than the U.S. right now. This could slow down U.S. export demand.

While a large percentage of the beans purchased for export have been shipped, a lot of corn purchased for export has not. Both crops still face the potential for cancellations, which could lead to larger carryouts and impact prices long-term.

How do cancellations work? To answer this, it helps to understand how grain trading works after farmers sell and deliver their grain.

What happens to grain after it is delivered to elevators?

Some farmers may be surprised how many times a bushel of grain changes hands before it’s consumed or processed in another country.… Continue reading

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Export demand

By Jon Scheve, Superior Feed Ingredients, LLC

Corn demand from China has increased dramatically over the last few months causing corn to rally $2 per bushel from August lows. This chart shows how unprecedented China’s recent corn import demand has been compared to the last 60 years. 

Source: Matt Campbell

Currently the USDA estimates China will import 24 MMT (Million Metric Tons) of corn from all over the world this year. Some private forecasts indicate it could even exceed 30 MMT (1 MMT = approx. 40 million bushels). To put that into perspective, China has only imported about 75 MMT of corn TOTAL over the last 60 years. 

And for the last 6 years, of the 50 MMT of corn the US exports on average each year, only 2 MMT were sent to China (4%) each year. In the last 6 years the US hasn’t provided even half of China’s yearly import needs. … Continue reading

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A look at the February USDA numbers

By Jon Scheve, Superior Feed Ingredients, LLC

The February USDA report is usually considered less important than most other monthly reports but this one offered some surprises. Here are some report observations and highlights.

Corn

The market was hoping for some big adjustments but were disappointed when the corn carryout was only decreased 50 million bushels. The average trade guess had expected a drop of nearly 150 million bushels. 

The USDA seems to be playing catch up when estimating final carryout at the end of the marketing year in August. If they lower carryout too quickly, the market could spike early and force a rapid drop in demand. That could in turn hurt overall demand and trim usage later or even worse decrease demand long-term. On the other hand, decreasing carryout too slowly may mean limited short-term demand rationing, which could cause supply issues later this year and early 2022.

February’s report showed exports increased by 50 million bushels.… Continue reading

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Bullish surprise did not happen

By Doug Tenney, Leist Mercantile

The report was negative for corn and neutral for soybeans.

Traders were expecting lots of changes with this report, which included U.S. corn and U.S. soybean ending stocks, U.S. corn and U.S. soybean exports, as well as corn and soybean production numbers in South America. World ending stocks will also be closely watched.

However, from an historical perspective, the February WASDE often yields few changes.

Corn ending stocks were 1.502 billion bushels, last month was 1.552 billion bushels. Soybean ending stocks were 120 million bushels, last month was 140 million bushels. Wheat ending stocks were 836 million bushels, last month at 836 million bushels. Soybean crush was unchanged with exports up 20 million bushels. Corn exports were up 50 million bushels and ethanol was unchanged.  

Brazil soybean production was 133 million tons, last month was 133 million tons. Argentina soybean production was 48 million tons, last month was 48 million tons. … Continue reading

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Market volatility ahead

By Jon Scheve, Superior Feed Ingredients, LLC

Market volatility is expected to continue for quite some time. Much of the 2020 U.S. corn and bean crop has been sold and China’s demand remains impressive. Even South American farmers have sold 50% more of their new crop beans than usual by this point. Therefore, many are uneasy about shorting the market as it’s unknown who is left to sell into this rally. 

Corn

China purchased a lot of corn recently, so the market now expects upcoming USDA reports to show increased export values and lowered carryout. Corn may need the price to rally to help ration what is left until harvest.

South American weather has turned from dry to wet. Parts of Brazil are experiencing bean harvest delays from the wet weather that could push back their second corn crop planting. This delay could push corn pollination on the second crop into late May when weather is drier and reduce yields.… Continue reading

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Will bullish markets continue?

By Doug Tenney, Leist Mercantile

The Argentina dock strike last month lasted far longer than had been expected as it was drawn out to almost three weeks. It has been an annual occurrence for an Argentina dock strike to last 1 to 3 days as the dock workers demand more money. It has been reported the grain companies offered an increase high enough to keep government intervention from taking place. While you may think Argentina is a small player in the grand scheme with soybean production below that of Brazil and the United States, Argentina is the world’s largest exporter of soymeal. As the strike ended, reports noted at least 170 vessels waiting to be loaded with grains.

March 2021 CBOT soybeans finally breached the $12 mark on Dec. 17 after at least five different unsuccessful assaults in a month. The next resistance level of $13 was penetrated in significantly fewer days, taking place on Dec.… Continue reading

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Bullish report for Jan. 12

By Doug Tenney, Leist Mercantile

Corn stocks were less than expected. Corn production was below trade estimates.

Plenty of changes were expected with this USDA report. The January USDA report today has been called one of the most important USDA report days for the entire year. This report details final U.S. corn and soybean for 2020. In addition, quarterly U.S. grains stocks were released. U.S. corn and soybean demand was expected to increase. South America corn and soybean production changes were expected for both Brazil and Argentina.

U.S. corn and soybean ending stocks along with South America corn and soybean production were the main features with this report. World grain ending stocks were closely watched as well.

Corn ending stocks were 1.502 billion bushels, last month was 1.702 billion bushels. Soybean ending stocks were 140 million bushels, last month was 175 million bushels. Wheat ending stocks were 836 million bushels, last month at 862 million bushels.… Continue reading

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