In spite last two day’s market sessions was mainly negative, grain futures prices resiliently continued their uptrend week over week.
In fact, all wheat futures prices ended above last week’s close.
CBOT May soft red winter (SRW) futures gained 12
cents to close at $6.60/bu.
KCBT May hard red winter (HRW) futures gained 3 cents to end at $6.34/bu.
MGE May hard red spring (HRS) futures added 6 cents to close at $6.39/bu.
Matif wheat May futures added 2 €/t to close at 229,25 €/t.
Matif corn June futures up 1,75 €/t from last week to end at 220 €/t.
Also CBOT corn futures added 9 cents to close at $5.47/bu.
Matif rapeseed May futures jumped 29,25€/t from last week to close 490,75 €/t.
While CBOT soybean futures jumped 29 cents to end at $14.04/bu.
Meal was the weaker of the products, with a $1.10 drop.
Soybean oil continued to rise, up another 379 points (8% for the week).
That rally was worth 44 cents per bushel in product value at recent yields.
Canola futures posted new all time highs, and palm oil futures are within striking distance.
This is one of the longest lasting, highest volatility price increases we have ever seen.
In the past we have witnessed ag markets reach higher pricing levels than we are seeing today, but to be in an uptrend with only a few price breaks since August, is a unique situation.
Multi-year highs in old crop corn and soybean futures are part of a larger commodity boom sweeping markets from crude oil to copper.
Extreme price swings, dynamic fundamentals, and strong global demand have created an exciting bull market until now.
In this context, the February average for December corn futures (used for crop insurance purposes) was $4.58. That’s the highest insurance guarantee price since 2014 for corn.
While, the February average price for November soybean futures was $11.87, the highest insurance guarantee price since 2013.
Price volatility, however, continues to persist for all grains, as the lot of news has coming not are always simple to understending.
USDA’s latest weekly grains export inspection report, out Monday morning that covering the week through February 18, didn’t hold a lot of bullish data for traders to digest.
Corn, soybeans and wheat all trended moderately lower from a week ago, while all three crops managed to stay within the range of trade estimates.
Conversely, the latest USDA export sales report, covering the week through February 18, held a lot of “apparently” bearish data to digest.
Indeed, corn and wheat totals faded to marketing-year lows, and also soybeans took a significant week-over-week tumble.
Going inside to the data, Thursday’s Export Sales report indicated corn bookings were down from the previous week, to 453,300 MT.
New corn crop sales totaled 145,900 MT.
However, the USDA total of shipped and unshipped corn export sales (i.e. commitments) is 128% of year ago at 59.008 MMT.
Commitments are 89% of the full year WASDE forecast.
They would typically be 68% by now.
Also wheat export sales report showed total wheat sales slipping to 167,700 MT, down 58% from last week’s 399,000 MT and well below trade expectations of 250,000 MT to 700,000 MT.
However, that brought the total wheat export commitments to 23.776 MMT, this mean 4% above last year at this time.
Compared to the USDA projected 20/21 export total of 26.8 MMT, that would put shipped and unshipped sales at 89%, the 2% ahead of last year.
Also soybean export sales report showed a somewhat expected 63% week over week decline in soybean sales to 167,900 MT.
There was another 70,800 MT for new crop bookings.
However, total soybean export commitments for the MY now total 59.953 MMT, or 2.202 bbu.
That is 98% of the USDA full year forecast, compared to the 5-year average pace of 82% for this date.
Shipments are moving along, at 84% of that projection vs. the 66% average.
To note, this report was for the week ending Feb 18, so it included both President’s Day and much of Asia being on vacation for Lunar New Year holidays.
So this low sales number was not a surprise for all operators.
Certainly, expectations of a large Brazilian soy crop and concerns about African swine fever in China muted soybean demand in weekend’s trading session.
Ethanol production that was down 28% past week with just 658,000 barrels per day added more pressure on prices.
The new African swine fever outbreaks in China sent Chinese soymeal futures on the Dalian Commodity Exchange 5% lower in overnight Friday trade as concerns about demand weighed heavily on traders’ minds.
The outbreaks, which began in China’s northern and northeastern provinces, have spread farther south suggesting this latest round of outbreaks may be more problematic to China’s goal of a pre-ASF hog herd volume by June 2021.
However, losses on soybean were capped by strong U.S. usage projections.
Indeed, strong biodiesel production figures in December 2020 released yesterday by the U.S. Energy Information Administration offer some insight into record-breaking domestic usage demand for soy stocks over the past several months.
In December, U.S. biodiesel production rose 8 million gallons from the previous month to 159 million gallons.
But will January 2021 soy crush data begin to show signs of demand rationing?
Monday’s crush report from USDA is likely to show 195.6 million bushels of soybeans were crushed in January 2021.
If realized, it will be the second largest crush volume on record, following only October 2020’s crush rate of 196.5 million bushels.
The chances Monday’s crush volume will be high are pretty good.
Average analyst guesses for the January 2021 crush range between 195.0 million – 196.1 million bushels.
The January crush is expected to be even higher than December 2020 volumes, which came in at 193.7 million bushels – the second largest crush volume to date.
Soybean oil usage, which is the primary feedstock for biodiesel production, rose nearly 9% from the month prior to 744 million pounds.
The increasing numbers in this week’s report from the EIA suggest that demand rationing, rising soybean prices, and rapid export demand was not yet impacting biodiesel production as 2020 came to a close.
In add, Chicago-based AgResource released a lower production estimate for Brazil’s 2020/21 soybean crop currently being harvested, based on heavy rains slowing optimal harvest progress.
AgResource pegs the crop at 4.775 billion bushels, down from USDA’s February 2021 WASDE estimate of 4.886 billion bushels.
This is significant because Brazil’s exportable soybean supplies are already forecast 8% lower than a year ago despite an 8% annual increase in soy production.
But any further tightening of Brazil’s exportable supplies would send international soy buyers to U.S. shores.
That would be favorable to upward price movement, especially after this week’s lackluster export report for soybeans.
The International Grains Council (IGC) increased its 2020/21 global wheat production estimate by 7.0 MMT on bigger than expected crops in Australia, Russia and Kazakhstan.
IGC and USDA estimates are both 773 MMT, 1% more than last year.
The current projection for 2021 global production is 790 MMT.
Also Russia released it updated harvest data for the 2020/21 crop year yesterday, with Russia’s Federal Statistics Service (Rosstat) that estimates 2020 wheat production at 3.156 billion bushels, a 15% increase from the previous year.
The forecast remains the largest Russian wheat crop on record.
USDA’s February 2021 WASDE report had pegged the 2020 Russian wheat crop at 3.133 billion bushels.
However with the implementation of the new tax model, Russia wheat export sales are beginnig to be more limitated than expected.
Russia is the world’s largest exporter of wheat.
In add, Rosstat’s updated stats also placed 2020 Russian corn production at 547 million bushels, that down nearly 3% from the year prior.
According to Ukraine’s Ministry of Agriculture, the country has now exported 13.6 MMT of wheat, 20% behind last year’s pace on reduced production due to extremely dry conditions.
On Feb. 25, the European Commission (EC) increased its 2020/21 European Union (EU) non-durum wheat export forecast by 1.0 MMT to 27.0 MMT, in line with USDA’s estimate.
If realized, EU exports would come in 30% lower than last year on significantly reduced production during 2020.
Despite a cold snap earlier this month, France’s winter next wheat crop seems remains in good condition.
Indeed, favorable growing conditions could lead the 2021/22 French winter wheat crop to surpass last year’s yields.
However, it was rated only at 87% good to excellent as of Monday according to French farm office, down from 96% good to excellent in November 2020.
This week marked the end of historic freezing temperatures also in the Great Plains.
However, drought pressures continue, indeed, severe drought expanded in central North Dakota and western South Dakota while some beneficial precipitation eased dryness only in western Nebraska.
Looking ahead, warmer temperatures and minimal precipitation are expected across the Northern and Southern Plains.
Money managers and speculators had largely flocked back to grain commodities in recent weeks amid strong export forecasts and tight projected 2021/22 ending stocks.
In deed, the yesterday’s weekly Commitment of Trade report from the CFTC showed spec funds trimming 4,634 contracts from their net long position in corn, taking it to 361,151 contracts as of February 23.
While, they added 5,625 contracts to their net long in CBT wheat (to 26,910 as of Feb 23).
However, they pruned another 3,925 contracts from their much larger KC HRW net long, taking it back down to 53,208 contracts.
Furthermore, they added 10,954 contracts to their CFTC net long in soybeans, slightly more than the 10,360 longs they reduced the previous week.
That change put them net long 172,364 contracts (futures + options) as of February 23.
So, wheat, corn, and soybeans have seen another week of supportive speculator buying amid mixed winter wheat conditions in the U.S. and Russia, soybean harvest delays in Brazil, corn planting delays in Brazil, tight new crop ending stock projections and strong long-term export forecasts as announced by USDA in last week’s outlook.
Looking ahead, there are still some items to watch closing during the month of March which still could spur the round of price action for this bull market.
Really, the agricultural community is expecting for a super cycle.
History tells us that four to six years of cheap sideways consolidation builds demand and is usually followed by a two- to four-year rally in markets.
Technical traders often identify this four to six year consolidation as a “rounded bottom.”
These are very rare, but very powerful technical formations when they begin to break out.
There was some flight to cash late last week, so the asset allocators should have some big chunks of money to buy cheap assets this week.
We’re back to a full five day schedule as the calendar turns to March.
The US weekly Export Inspections report is expected on Monday.
As the first day of the month, we’ll also get USDA’s monthly Grain Crushings, Fats & Oils and Cotton Consumption reports.
The weekly EIA report will be out on Wednesday, and USDA’s weekly Export Sales data will be released on Thursday.
