Corn: Up 2 to 4 cents
Soybeans: Up 1 to 5 cents
Wheat: Up 2 to 5 cents
GENERAL COMMENTS: Even though corn and soybeans traded higher on the week, bear spreading was a feature. taking place in futures. This is more related to speculators focusing on buying the discounted new-crop futures after USDA issued new supply and demand forecasts on Friday that showed supplies will remain tight into the 2021-22 season. The acres, yield and production didn’t come as a surprise, but what was a bit odd were the demand projections. For soybeans, total usage is forecasted to drop about 40 million bu. from this year with exports reduced by 50 million. On the other hand, corn demand is forecasted to increase by 500 million bu. in 2021-22. This is the final week for setting the 2021-crop insurance prices.
The other development last week was both Brazil cash beans and Argentina cash corn were trading at larger a discount to U.S. export values. This means exports can slow dramatically depending on the finishing weather fore crops in South America. China is also expected to return as a buyer following the end of the Lunar New Year holiday season. But China is likely to focus its next purchases on new crop supplies of soybeans and corn from South America.
This morning’s focus is on drying trend in Argentina and continued wet weather in northern Brazil. After some early-week thunderstorms, net drying is likely in Argentina over the next 10 days, with temperatures likely to be quite warm to hot, reports World Weather Inc. “Totally dry weather is not expected, but the few showers that occur will offer only temporary relief to the drying trend,” the weather watcher said. In Brazil, conditions are “mostly good” for southern areas of the country, with infrequent rains likely over the next 10 days, helping soybean harvest and safrinha corn planting to advance. But northern Brazil continues to battle wet weather, with excessive rain expected from central Minas Gerais to Tocantins. The impact of Brazil’s late soybean harvest has now shifted to the nation’s northern export route, ensnaring truckers in long lines and threatening further delays of shipments to China. Trucks trying to unload the oilseed at the Miritituba river terminal in the northern state of Para formed a line as long as 18.6 miles in recent days, according to Bloomberg, citing Edeon Vaz Ferreira, head of the logistics branch at farmer group Aprosoja. Traffic has been halted for at least a week on an unpaved stretch that provides access to the terminal, extending the stoppage to a federal highway.
Before the reopening, USDA did not announce any large grain or soybean sales this morning. That will add to the bulls’ caution this morning.
China’s annual rural policy blueprint has placed greater emphasis on food security than in prior years, calling all provinces to improve grain yields in the 2021-2025 period. China will push forward rural land reforms in a cautious manner as it tries to balance bolstering food security, particularly during the coronavirus pandemic, with economic growth. The remarks were made by agriculture minister Tang Renjian after China issued a plan over the weekend pledging to boost “rural revitalization.” The policy document addresses a raft of measures, including the transfer and leasing of rural land, which is a core issue in helping rural residents. China’s plan to rejuvenate its backward countryside is part of broader efforts to spur growth. It aims to reduce the urban-rural divide and propel the economy toward greater self-reliance, said Bloomberg Economics, adding that policies to modernize agricultural production and boost rural infrastructure may be an important new driver of the economy in coming years. Tang emphasized the need for China to maintain a “red line” that guarantees total arable land of no less than 1.8 billion mu (120 million hectares) and ensure that permanent farmland is mainly planted with grains, fruits and vegetables so that the country can be self-reliant. China will use technology, including genetically modified organisms, to improve crop yields given its limited farmland and water resources, he said.
As of Feb. 16, money managers’ net long position in corn stood at 365,785 futures and options contracts, up nearly 7,000 contracts from the week before, CFTC data on Friday showed. Money managers cut their net long position in soybean futures and options in the week to 161,410 contracts from 171,770 a week earlier, and that was due to the reduction of outright longs. Fund long positions were larger than expected but showed a larger cut in soybean longs. Money managers increased their net long in SRW wheat futures and options to 21,285 contracts, up nearly 2,000 on the week. They also reduced bullish bets in Kansas City wheat by about 3,000 contracts, resulting in a net long of 57,133 futures and options.
A wave of reflation bets sweeping across global markets is prompting traders to brace for an end to the low interest-rate regime earlier than expected. The rate on 10-year U.S. Treasury note rose 1.394% overnight, the highest in almost a year. The ramp-up in inflation expectations intensified a selloff in Treasuries sending the gap between the 5- and 30-year yields to the widest since October 2014 and bringing forward expectations for U.S. rate hikes to as early as mid-2023. That’s reverberating across assets with stocks trading lower and driving commodity prices higher. Former U.S. Treasury Secretary Lawrence Summers warned that the Federal Reserve will likely be pressured into raising interest rates sooner than markets expect, and perhaps as early as next year. An overheating economy and rising prices could force the Fed’s hand, Summers said in an interview with David Westin for Bloomberg Television’s Wall Street Week. Summers, a top official in the past two Democratic administrations, has emerged as one of the leading critics among Democratic-leaning economists of Biden’s $1.9 trillion pandemic plan.
U.S. virus herd immunity is being predicted by April, according to Dr. Marty Makary, a professor at the Johns Hopkins School of Medicine and Bloomberg School of Public Health, chief medical adviser to Sesame Care. In an opinion item in the Wall Street Journal, he notes that Covid cases have dropped 77% in six weeks and that experts should level with the public about the good news.
CORN: May corn futures were well contained inside the prior week’s range last week and a move outside of the $5.72 to $5.23 1/4 will likely set near-term direction after closing at $5.41 3/4 on Friday. Old-crop/new-crop spread activity last week also warns of declining upside momentum.
SOYBEANS: Last week’s close in soybeans was not definitive, but meal is in position to head south and may pull soybeans lower. Nevertheless, each market must close below current 2021 lows to commit to a price direction. Failure is still possible in soybean oil, but the current mode is bullish and seems well-entrenched. Malaysian palm oil futures firmed for a second consecutive day on Monday, tracking higher rival oils after U.S. soybean supplies were projected to remain tight into 2022, but expectations of rising palm oil output limited gains. Global edible oil supplies are expected to recover in the second half of the year, though a labor crunch in Malaysia, volatile weather and slow re-planting could keep crude palm oil prices above their historical 10-year. In China, Dalian's most-active soyoil contract gained 2% while its palm oil contract rose 2.3%. Dalian soybean closed higher.
WHEAT: Wheat futures closed higher last week, but below weekly highs, leaving the markets in a position to continue higher this week or risk losing upside momentum. Russian wheat export prices rose this week after declining for the past month, following a rise in U.S. wheat prices. Russian wheat with 12.5% protein loading from Black Sea ports for supply in March was at $283 MT (FOB) at the end of last week, up $5.5 from the previous week, agriculture consultancy IKAR said. Saudi Arabia purchased 355,000 MT of wheat of Australian, Canadian and Ukrainian supplies. Jordan is seeking 120,000 MT of wheat.
Russia reported the first case of H5N8 bird flu being passed to human from birds, notifying the World Health Organization (WHO) of the development, according to Anna Popova, head of Rospotrebnadzor, the consumer health agency. The WHO said in an email to Reuters that it had been notified of the situation and said if confirmed, it would mark the first transmission of the strain from animals to humans. Seven workers at a poultry plant in southern Russia were infected with the strain, Russia said.
Cattle: Without followthrough, low-range weekly closed last week look like a pause. If follow-through weakness it may put bigger recoveries on hold for two to three months. The number of cattle on feed, marketings and placements came in on the negative side of expectations Friday after markets closed. That paired with futures’ wide premium to the cash market may weigh on the market to start the week, but impact should be short-lived. Boxed beef values climbed over the past week as cold weather disrupted operations on farms, slaughterhouses and in between. Beef production dropped 10.0% from year-ago, with slaughter diving 11.8%. While operations should be returning to normal at southern packing plants this week, the stressful weather curb cattle market weights and resulted in calf losses.
Hogs: Hogs may be forming minor bull pauses, but key contracts are at levels that also put weekly pauses on the table into late March. Last week’s arctic blast also disrupted pork production, with slaughter dropping 6.6% and pork production sliding 8.4%. The pullback helped keep pork prices elevated with movement notably light. Pork prices have climbed more than $20 since the start of the year. Cash hog bids slid 36 cents on Friday. Working through processing backlogs could take several weeks. Weekly export data on Friday were good at 33,300 MT with Japan and Mexico the largest buyers, but China only showed up for 2,500 MT. This market needs strong exports to sustain current values and China is important to that mix. USDA will provide an update on the amount of frozen meat in cold storage tomorrow.