Editor’s Note: Joe Lardy, CHS Hedging research analyst, is sitting in this week for Phyllis Nystrom, the regular “Grain Outlook” columnist.
The following marketing analysis is for the week ending Oct. 16.
CORN — After starting the week on a sour note, corn was able to rally. December futures settled the week at $4.02.5 which is up 7.5 cents for the week. There were three morning flash sale announcements for corn totaling 659,000 tons this week. Two of the sales were for Mexico and one sale of 420,000 tons to China.
Export inspections are starting out the year on a really slow pace. This week’s total of 632,000 tons was below expectations, and the lowest total of the new marketing year so far. Inspections are behind the U.S. Department of Agriculture’s export pace by 94 million bushels. Through the first six weeks of the marketing year, inspections are 177 million bushels. The bad news? Its way behind the USDA pace; but the good news is that inspections last year at this point were only 97 million bushels.
Export sales data was also disappointing. The flash sales to China will be picked up in next week’s numbers. Net sales of 655,200 metric tons for 2020-21 were down 47 percent from the previous week and 63 percent from the prior four-week average
Harvest is gaining speed. The crop is 41 percent harvested which is nicely ahead of the five-year average of 32 percent. The weather has cooperated across most of the country and harvest should keep at a brisk pace. Good yields are being reported across Minnesota. Overall test weights are looking good, but clearly lack of rain in certain areas clipped a really good looking crop back to an average one.
The dry weather seems to be causing more fires while combining than normal this year. Please be safe.
Ethanol production increased by 14,000 barrels per day this week. Production is still below any level for this week in the last five years — although production normally picks up post-harvest. It will be interesting to see if that happens during this Covid-affected year.
Outlook: Keep an eye on a couple items. The first is Chinese corn prices. The Dalian future exchange saw record prices this week as prices continued their steep rally. This is going to keep a bullish fire lit under U.S. exports. The second thing to watch is Chinese buying of U.S. distiller’s dried grains. In August they bought 51,000 tons which is the highest total since April of 2017. This could be an interesting bullish input not a lot of people are paying attention to.
SOYBEANS — The soybean market also started the week with a big setback as a big forecast change for South America really hit prices hard. Futures tried to claw a little bit back midweek, but still ended the week with a 15.5 cent loss with January futures at $10.50.25.
In sharp contrast to corn, this week’s soybean inspections were outstanding — posting the biggest total since November 2019. Of the 2.15 million tons, China took 1.6 million tons or roughly 75 percent of the total. Good flash sales on Oct. 14, 15 and 16 to both China and unknown. This week’s export sales data was truly outstanding at 2.6 million tons. China accounted for 1.6 million tons, or roughly 60 percent of the total.
Soybean harvest is really moving along at a quick pace. So far, 61 percent of the crop is harvested compare to only 23 percent last year with the five-year average at 42 percent. The good weather and inverses in the futures market have producers pushing to get the crop in. Plus, we are hearing about beans drying down rather quickly and no one wants to let mother nature steal revenue.
Outlook: Brazil is going to be a key driver of soybean prices. Despite the rains in the forecast, the temps are also well above normal in the 95-105 degree range. With all of the heat, the rains have to deliver.
There is also talk of Brazil removing tariffs on imports of corn and beans on non-Mercosur countries. This would point to Brazil importing from the United States. It probably won’t be a huge balance sheet altering quantity, but it is a big indicator that Brazil is out of beans. Their domestic price is around $13.25 a bushel right now. The domestic side will want the first beans to get harvested in January further pushing out their export start.