Morning Market Review for July 9, 2021 – Farm Progress

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Traders continue to eye weather and prep for WASDE

  • Corn: Mixed
  • Soybeans: Steady to up 5 cents
  • Wheat: Up 1 to 7 cents

*Prices as of 6:50 a.m. CST

Grain prices have seen ample downward pressure overall in recent sessions, and traders will likely spend Friday and Monday morning monitoring weather forecasts (which have been generally favorable for keeping production potential in the ballpark of achieving trendline yields) and squaring positions ahead of the July 12 World Agricultural Supply and Demand Estimates (WASDE) report from USDA. This week was cut short a day by the observance of Independence Day on Monday but still managed to feature plenty of volatility, which is likely to continue until a new dominant story develops.

Overseas stock markets were mixed but mostly higher. Asian markets saw Japan’s Nikkei index slide 0.5% lower while Hong Kong markets firmed by nearly 0.75%. European markets trended 0.75% to 1.75% higher in midday trading. Dow futures were up 201 points to 34,495 ahead of Friday’s session as markets look to recover from yesterday’s selloff. Improvements to the 10-year Treasury yields will likely aid in that effort today, although investors are still wary about the current pace of global economic recovery.

Energy prices also moved higher overnight. Crude oil prices lifted more than 1% to move back above $73 per barrel. Diesel added 0.5%, and gasoline rose nearly 0.75%. The U.S. Dollar softened slightly.

The latest 72-hour precipitation map from NOAA shows at least 1.5” of additional moisture is in store for much of the eastern Corn Belt between today and Monday. Most of the Central and Northern Plains will see at least some measurable rainfall this weekend, too. Official 6-to-10-day forecasts still predict seasonally warm, wet weather for most of the Corn Belt between July 14 and July 18, with drier-than-normal conditions still latching onto the Central and Northern Plains.

On Thursday, commodity funds were net sellers of all major grain contracts, including corn (-7,500), soybeans (-4,000), soymeal (-2,000), soyoil (-1,500) and CBOT wheat (-1,500).

Corn

Corn prices were mixed ahead of Friday’s session, with July futures up around 0.75% while September futures faded more than 0.5% lower. Generally favorable forecasts have been hard on prices earlier this week, but traders are also hopeful that USDA will trim another 19 million bushels from corn stocks on Monday, sliding that number to 1.088 billion bushels. Volatility will remain the name of the game today and early next week, depending on what that WASDE data reveals.

On Thursday, corn basis bids were mixed at two Midwestern processors (shifting 5 cents in one location and 5 cents lower in another) while holding steady elsewhere across the central U.S.

Ahead of the next weekly export recap from USDA, out later this morning, analysts expect the agency to report corn sales ranging from zero to 37.4 million bushels for the week ending July 1. The low end of that range assumes there were some cancelled sales this past week.

U.S. Energy Information Administration data released on Thursday confirmed that domestic ethanol production rose for the third consecutive week to reach a daily aver-age of 1.067 million barrels through July 2. Production is now very close to pre-pandemic levels after clearing 1 million daily barrels for the past eight consecutive weeks.

Argentina’s 2021 corn harvest is now 56% complete, per the latest report from the Buenos Aires Grains Exchange, which still estimates total production at 1.890 billion bushels this season. “High levels of moistness have interrupted the flow of harvesting in some areas, but as harvesters advance in later-planted areas, yields remain higher than initial expectations,” according to the report. Argentina is the world’s No. 3 corn exporter.

In France, Europe’s top corn producer, 89% of the country’s corn crop is rated in good-to-excellent condition through July 5. Those ratings held steady from a week ago, according to farm office FranceAgriMer.

The preliminary report from the CBOT showed daily futures volume falling to 264,873, with open interest also down 10,888. Options volume tumbled to 67,939 but still favors calls (44,165) over puts (23,774). Implied volatility for near-the-money September contracts fell to 41.4% and expire in 48 days.

A quick look at some prices overseas shows that July Chinese are still mostly holding steady at $10.91, after adjustments for volumes and currencies. November futures in Europe dropped 4.5 in midday trading to $5.86.

Soybeans

Soybean prices rose sharply in April and May but have spent the past month and a half fighting to stay in the channel it was in between January and March ($13 to $14 per bushel). It may take a demand or weather shock to push prices significantly higher later this summer, while historically tight supplies will hopefully keep them from sliding too much lower in the short term.

Yesterday, soybean basis bids jumped 10 cents higher at a Nebraska processor while holding steady elsewhere across the central U.S.

Ahead of the next export recap from USDA, out later this morning, analysts expect the agency to show soybean sales ranging between 3.7 million and 28.5 million bushels for the week ending July 1. Analyst also think USDA will show soymeal sales ranging between 150,000 and 600,000 metric tons last week, plus up to 15,000 MT in soyoil sales.

Soybeans and other key commodities are largely dependent on exports, meaning trade policies are a critical component in keeping a consistent churn of overseas sales. There are some lingering questions about where the Biden administration will focus its attention in the years ahead, notes Farm Futures policy editor Jacqui Fatka. Click here to catch up on Fatka’s latest reporting and analysis.

The preliminary report from CBOT showed daily futures volume dropping to 141,920, with open interest also moving 1,662 lower. Options volume slid to 54,390 and still narrowly favors calls (27,521) over puts (26,869). Implied volatility in near-the-money September contracts fell to 30.5% with another 48 days until expiration.

Vegetable oil markets in Asia saw July soybean oil futures in China improve to 62.54 cents. Oilseed markets internationally were steady to firm today, with July soybean futures in China tracking 3 cents higher to $24.76. July Winnipeg canola contracts were near-even, at $15.83, and November rapeseed futures in Paris picked up 1.5 cents to $13.96 after adjustments for volumes and currencies.

Wheat

Wheat prices were mostly higher in overnight trading as markets may be looking at some modest bargain-buying opportunities today. With a few exceptions, winter wheat prices have been on a fairly consistent downward trajectory since early to mid-June. Spring wheat prices have seen relatively better upside price potential as crop quality has continued to erode this summer.

Ahead of this morning’s weekly export recap from USDA, analysts think the agency will show wheat sales ranging between 7.3 million and 16.5 million bushels for the week ending July 1.

Russian wheat exports between January and May have fallen 19.5% year-over-year to 367.1 million bushels, according to customs data. But thanks to improved prices from a year ago, the monetary value of those sales was only 4.5% lower. Russia is the world’s No. 1 wheat exporter.

French farm office FranceAgriMer estimates that 79% of the country’s soft wheat crop is in good-to-excellent condition through July 5, holding steady from a week ago. Harvest is off to a relatively slow start, with just 1% complete versus 2020’s pace of 10%.

Pakistan issued an international tender to purchase 18.4 million bushels of wheat from optional origins that closes on July 27. Forty percent of the grain is for shipment in August, with the remaining 60% to be shipped in September.

Iran purchased 4.8 million bushels of milling wheat earlier this week, thought to have been sourced from Germany, the Baltic Sea or Black Sea regions. The grain is for shipment in August and September.

The preliminary report from CBOT showed daily SRW sliding slightly lower, to 85,425, with open interest also down 1,248. Options volume tumbled to 10,588 and more heavily favors calls (8,084) versus puts (2,504). Implied volatility for September near-the-money options was stable at 32.1% and has another 48 days until expiration.

Volume in HRW slid to 37,780, with open interest also down 624. Options volume improved to 3,676 and is more heavily favoring calls (2,392) over puts (1,284).

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