January 4, 2021

 

 

Good Morning,

 

Happy New Year! That’s definitely the way things are starting out this year with markets continuing their rally from late 2020. Overnight corn was up 6 while soybeans were up 28.

The Chinese currency in relationship to the US Dollar is the news this morning as these currencies are headed in the opposite direction. The weaker US Dollar and much stronger Chinese Yuan are making the Chinese buying power much stronger. The Yuan is managed by the communist party and they appear to be making a statement here as they are looking to import grains and meats from the world suppliers.

I do not see this recent rally as a positive for US producers long term because it is not sustainable. Higher prices result in rationed demand and this has already begun. Last weeks ethanol production and stocks report showed production down 42,000 bpd from the previous week and 132,000 bpd from 2019. We also saw stocks increase 14 million gallons from the previous week and 104 million gallons from the same time last year.

Producers should be actively making sales of old and new crop corn in the coming week before we get to the USDA report next week. This recent rally in the CBOT has and will continue to deteriorate basis levels across the country. No one knows where the end is, but my opinion is that we are very close to the top and could see a major setback in the markets. “High prices cure high prices”!

 

Have a Safe Day!

 

Garry Gard

920-348-6844

ggard@didionmilling.com

December 24, 2020

Good Morning,

 

Markets are calm this morning with the markets closing at 12 and most traders off for the holidays. Corn is up 1 and soybeans are up 3 at the time of this writing.

 

Chinese bean demand has been the catalyst for markets this week. China is expected to import more than 100 million tonnes of soybeans in 2020, a record high, said an executive with leading state-owned grains trader COFCO on Tuesday, as rebuilding of the country’s huge hog herd boosts demand for the protein. This has moved the needle on the bean market and thus pulled other commodities along as traders expect stocks to get even tighter in US soybeans.

 

The forecast for Argentina is wetter over the next 10 days, and the Southern Brazil forecast is much drier.  Rain totals in Argentina range from .5 inches to 2.0 on the model run.  If this hold true, it would be the best chance of rain in a month for Argentina.  The last forecast change failed to hold up, with only trace amounts falling.  The rain period is for Dec 26th-30th.  Northern Brazil with see normal rain into the end of December.  Temps are in the 100’s for Northern Brazil, and Argentina will be 80’s-90’s.

 

Funds are long 310,000 corn and 240,000 soybean contracts after yesterdays close. This is a signal that we could see some profit taking in the next week with month and year end profit taking.

 

Have a Merry Christmas!

 

Garry Gard

920-348-6844

ggard@didionmilling.com

 

December 18, 2020

Good Morning,

Overnight markets had corn unchanged and soybeans up 10.

Weekly corn export sales totaled 75.6 mb, the second largest week of sales for that date on record and sharply higher than the level needed weekly to hit the USDA forecast. Total commitments of 1.634 bb now account for 61.6% of the USDA’s estimate, the second highest ratio on record going back to 1990. The only area of the export sales report to raise an eyebrow at is the weekly shipments needed to hit the USDA mark which now stands at 60.4 mb. This would be a new record shipment pace from now through August with the second largest average program being 57.3 mb shipped per week in 2017/18. While Mexico was the largest buyer at 28.2 mb, China did show for 6.3 mb.

The well-followed firm Informa released their estimates for the January report and expect the USDA to cut their national average corn yield to 174.1 bushels per acre (bpa) vs. the USDA at 175.8 bpa in December. If demand estimates were left unchanged from the December WASDE, carryout would drop to 1.558 bb and a stocks/use ratio of 10.5%. This would be the tightest stocks/use ratio since 2013/14’s 9.2% but would still not support prices above $4.50 on the CBOT based on historical stocks/use ratios. The January USDA reports could prove to be some of the more important in recent history, especially depending on how South American weather fares the next 30-days.

With shortened trading hours and days in the coming weeks and traders on holiday and year end vacations, I would expect markets to trade sideways in the coming weeks. The interest and market movers continue to be South American weather and the January crop report.

Have a Safe Day!

Garry Gard

920-348-6844

ggard@didionmilling.com

 

 

December 14, 2020

Good Morning,

 

Markets are quiet this morning with corn unchanged, soybeans up 5 and wheat down 10. Coming into this morning the thought was that markets would trade higher with the US administering Covid-19 vaccines starting this week.

The U.S. Food and Drug Administration gave emergency approval to Pfizer’s Covid-19 vaccine late last week, with CDC giving its rubber stamp on Sunday. The first of the supplies have already been shipped around the country, with medical teams expected to start administering doses of it today. Covid-19 will likely continue to make headlines until our society reaches herd immunity. That means that enough people have antibodies from having contracted the illness, combined with those who have antibodies from the vaccine, to slow the spread of the virus and it starts to disappear. Health authorities believe that could happen by June. The vaccine will first be given to healthcare workers and to high risk individuals – such as the elderly. This should further reduce the death rate from the virus as one of the first indications of progress, along with reducing pressure on hospital ICU bed utilization.

China is fixated on a zero-tolerance policy for Covid-19. It locks down large population centers if it finds a few cases of the virus. Most concerning to U.S. producers are the steps it is taking against imported meat. The central government gave responsibility for managing the risk of Covid on imported meat to local provinces and cities. Nobody wants to be held responsible for an outbreak, so they’re going overboard with restrictions. Today’s China Direct newsletter from our Shanghai office describes a story that went viral in China about how consumers in Hubei were being fined for buying imported pork from a common online delivery platform. The city had previously banned the sale, purchase or storage of imported frozen products. Furthermore, a sample from that batch of Brazilian pork had tested positive for the coronavirus, leading authorities to require citizens of that city to pay to be tested, in addition to the fine for possessing the imported meat, while being confined to home isolation for the quarantine period. These obstacles are creating fear among consumers, making them wary of buying imported pork.

 

Have a Safe Day!

 

Garry Gard

920-348-6844

ggard@didionmilling.com

 

December 11, 2020

Good Morning,

 

Markets are quiet this morning with corn and soybeans trading 1 lower and 1 higher respectively. This will probably be the case moving forward until we get updated supply estimates for the United States in January. In yesterday’s report the USDA left the U.S. corn balance sheet completely unchanged this month as was expected. Weekly ethanol production and exports have been good enough to justify current estimates and feed/residual won’t be updated until December 1 stocks data can be incorporated. On the global front, the USDA cut the Argentine corn crop to 49.0 million metric tons (mmt) vs. 50.0 mmt last month and 51.0 mmt last year. The USDA left their estimate of the Brazilian corn crop unchanged at 110.0 mmt even though Brazil’s state forecaster CONAB is at 102.6 mmt. It was encouraging to see the USDA raise their estimate of Chinese corn imports to 16.5 mmt from 13.0 mmt last month. Considering China already has 11.3 mmt worth of corn imports on the books, the USDA’s estimate of 16.5 mmt could still prove too small.

The December WASDE wasn’t much of a feature for soybeans either, although carryout and the stocks/use ratio tightened further. In general, soybeans remain in a consolidative mode much like corn, making day-to-day price action difficult to manage. South American weather remains the largest factor, at least until the focus can be brought back to the United States in January.

As I have been saying for the last few weeks, South American weather and Chinese sales/cancellations are going to be the market movers for the foreseeable future. While I believe China will continue to buy US soybeans with the later supply from South America expected, I have heard from some very reliable sources that they expect China will cancel some of the purchases currently on the books.

With corn and soybean cash prices at profitable levels for both old and new crop corn, producers should be making sales. We may see a late winter/early spring acreage push, but nothing is guaranteed. As the saying goes “A bird in the hand is worth 2 in the bush”! Let’s take the bird and make sure we can farm another year.

 

Have a Safe Day!

 

Garry Gard

920-348-6844

ggard@didionmilling.com

 

December 10, 2020

December 10, 2020

 

Good Morning,

 

Markets are quiet after the release of todays USDA report. Corn is currently unchanged and soybeans are up 8. Here are todays numbers.

 

USDA 2020/21 US grain ending stocks (Billion bu.)

  December Est. November Est.
Wheat .862 .877
Corn 1.702 1.702
Soybeans .175 .190

 

 

USDA 2020/21 World ending stocks (Billion bu.)

  December Est. November Est.
Wheat 316.50 320.45
Corn 288.96 291.43
Soybeans 85.64 86.52

 

 

As expected no real surprises. South American weather and Chinese purchases or cancelations will move the market either direction until the January report.

 

Have a Safe Day!

 

Garry Gard

920-348-6844

ggard@didionmilling.com

 

 

December 9, 2020

 

Good Morning,

 

Stronger markets this morning with corn up 3 and soybeans up 10.

 

The Trump Administration offered a $916 billion dollar stimulus pact to potentially be settled by year end.  Pelosi and Schumer said in a joint statement that it marked progress because it brought McConnell closer to the $908 billion framework unveiled last week by the group of Democrats and Republican lawmakers.  But they said its omission of supplementary jobless benefits was unacceptable and backed the continuing bipartisan effort at crafting a compromise.  The plan differs from the alternative that Pelosi and Schumer endorsed as a basis for fresh talks.  It includes $600 stimulus payments to individuals, which could win support from both Democrats and Republicans, but it pays for that part by cutting the bipartisan proposal for $300 a week in supplemental unemployment aid.

No different than any other time there continue to be rumors of Chinese cancelations and rumors that China is looking for a whole host of ag and energy to purchase into year end.  Ethanol and US meats look to be big potential purchases.  Until the sales are made and the ships unloaded on their docs its all up in the air.

 

Tomorrow the USDA will release its December S&D report at 11am. Ending stocks for corn and soybeans are expected to drop slightly.

 

Have a Safe Day!

 

Garry Gard

920-348-6844

ggard@didionmilling.com

 

December 8, 2020

Good Morning,

Markets opened lower again this morning with corn down 3 and soybeans down 14. Yesterday the markets recovered from the early selloff with corn posting a 4 cent gain while soybeans closed 5 lower.

USDA report Thursday. Traders do not look for any big changes to US corn, soybean or wheat 2020 balance sheets. Conab SA crop estimate is also out Thursday. Trade estimates have Brazil corn at 109 mmt vs USDA 110. Soy 132 vs 133.

Scattered showers are falling across the Northern 2/3rds of Mato Grosso.  Rainfall totals are from .5-1.5 inches.  These rains are much less than normal, this is a time when Mato Grosso sees triple that amount of rain.  The coverage of this rain event is disappointing.  There will be another chance in a couple days for another .5-2.5 inches.  Southern Brazil and Argentina will remain in a dry trend all the way out till Christmas.
Look for more days of trading like yesterday leading up to Thursdays report. The market should be supported ahead of the crop report, and the continued dryness in Southern Brazil and Argentina.

Have a Safe Day!

Garry Gard

920-348-6844

ggard@didionmilling.com

December 7, 2020

Good Morning,

 

Markets are lower to start the week with corn down 4 and soybeans down 12. Soybeans are leading the markets as of late with South American weather and projected production being the catalyst.

 

AgRural, a Brazilian agribusiness consultancy, on Friday cut for the third consecutive time its estimate for Brazilian production of corn in the summer, citing dry weather in the nation’s southernmost state of Rio Grande do Sul. AgRural now projects summer corn production in center-south fields to be an estimated 19.4 million tonnes for the 2020/2021 cycle, down from 20.7 million tonnes forecast last month and roughly in line with last season’s 19.7 million tonnes, when dry conditions in Rio Grande do Sul farms also slashed yields and output.

Brazil’s soybean production in the 2020/2021 cycle is expected to jump to a record of 131.79 million tonnes as high prices drove farmers to increase plantings, according to the average of 13 analysts’ estimates polled by Reuters on Friday. This represents a 5.6% rise from what the government says farmers collected last season, which was an estimated 124.8 million tonnes. The poll also shows that a drought reduced expectations for an even bigger crop, as in October the average of analysts’ forecasts showed estimated output this season at 132.25 million tonnes.

Reminder that we do have a USDA report out on Thursday. Very seldom does the USDA alter this report, but corn and soybean stocks are going to be watched closely. They will not adjust yield or production, but will look at use and forward demand.

 

Have a Safe Day!

 

Garry Gard

920-348-6844

ggard@didionmilling.com

December 3, 2020

 

Good Morning,

 

Markets are unchanged in corn and up 8 in soybeans to start the day.

Rumors abound for Chinese demand for corn, beans and HRW or white wheat.  China is also looking to buy new crop soybeans with the dollar discount to current prices. Unfortunately there has been a lot of rumors of cancelations of late that have the markets hesitant to add premium.

On Wednesday, funds were net buyers of 10,000 contracts of SRW Wheat; 12,000 Corn; and sellers of 8,000 Soybeans.  Funds are net long 1,000 contracts of SRW Wheat; long 258,000 Corn; net long 172,000 Soybeans.

USDA export sales were 446,400 mt of wheat, 1,371,400 mt of corn, with China taking 154,000 mt, and 406,900 mt of beans.  Exports were on the low end for beans and on the high end for corn.  The corn sales continue to surprise, especially when you consider this was during Thanksgiving week.

Showers will fall across most of Brazil over the next ten days.  It starts in the south and works its way north over the weekend.  There will be chances of rain in North and Central Brazil every few days.  Argentina is going to dry out over the next 10 days.  La Nina looks to be a continuing trend for both Southern Brazil and Argentina.

 

Have a Safe Day!

 

Garry Gard

920-348-6844

ggard@didionmilling.com