Corn was pretty flat on the week, but it did not lack volatility. The war in Ukraine and the constant news make for wild swings on unconfirmed reports such as peace talks and Russian demands. The volatility has caused many headaches, but the volume has decreased, showing that many traders are watching from the sideline and not trading volatile rumors that may or may not be true. The next month of weather will be important as some areas of the US are very dry and will need moisture heading into the spring. Corn export sales were above expectations this week, helping the bounce back Thursday.
Soybeans fell on the week as the news affecting beans is not solely out of Ukraine. South America has had better weather conditions the last couple weeks and forecasted ahead. While the drought conditions did plenty of damage to the crop early on, the improved conditions are good but not great to help out. Bean exports were within expectations this week as beans have traded relatively flat the last couple of weeks.
Wheat’s volatility continued this week as the war in Ukraine continued. Reports of peace/ceasefire talks have been in the news that seems to move markets whenever a new one is reported, but the volatility will continue until there is a resolution. There will still be massive fallout from this war as Ukraine’s infrastructure will be devastated, and sanctions on Russia will be large. Ukraine’s crop year drastically change, and it will be hard to get a full read on the damage until much later. Rain fell on some of the drier areas in the US that grow wheat, but the market did not seem to care. For now, the news will continue to be Ukraine and Russia.
The equity markets rallied this week as investors aren’t sure if we bottomed but felt the market had fallen enough to be an excellent area to get back in. The fed decided to raise rates for the first time since 2018 raising it a quarter of a point. They also announced to expect six more raises as the year goes on to fight inflation. The market had already priced this news in, and after a short dip down, markets finished the day after the news higher. China has had a new round of Covid lockdowns, which is something to watch.
Tune in as biotech guru Dr. Channa S. Prakash discusses everything from Alabama football, genetics as one of the most extensive agricultural advancements, the most significant risk factors to feeding the world over the next 30-50 years, plus everything in between.
Why producing crop plants with a much gentler footprint on the natural resources will help feed the growing population. How 75% of the world’s patents in agriculture gene editing are coming from China. Understanding that trying to impose restrictions on our ability to grow food can be a considerable risk to agriculture. Listen to hear about these topics and more!
Whether you’re a producer, end-user, commercial operator, RCM AG Services helps protect revenues and control costs through its suite of hedging tools and network of buyers/sellers — Contact Ag Specialist Brady Lawrence today at 312-858-4049 or [email protected].
Corn made slight gains on the week with very volatile intraday markets. The Ukraine and Russian news continue to stay in the market and will likely dominate headlines until it ends. Other news worldwide is that South America got rains in southern Brazil and Argentina, with dry central and northern Brazil. Russian officials announced that they would suspend fertilizer exports through the end of the year, presenting a supply crunch across the world. This week’s USDA report was nonexistent in the markets as there were no surprises. As mentioned last week, Ukraine’s corn crop may not get in the ground as only 60% of seed is on farm; this will be important moving forward as world balance sheets get tighter.
Soybeans made small gains this week despite the wild intraday volatility. The USDA trimmed South American production again in this week’s report as they continue to baby step lower to what will be a smaller crop. World edible oil prices were up on the week pulling bean oil and soybeans higher. The Black Sea area’s worry and trade have affected the oils market, not just wheat.
Wheat fell hard this week with an expanded limit down the day with a small bounce on Friday heading into the weekend. All the short wheat positions that were getting run over had the opportunity to get out this week with the move down. However, the unknown in eastern Europe and China having its worst winter wheat crop on record means there is still upside with volatility. Friday’s gains were welcome to see after three days of large losses. The cash market will be essential to follow as it will help determine the fair market value.
The equity market fell again this week as continuing war, and another record inflation number was challenging for the market to figure out. While the market seems like it is struggling to make up its mind, there are pockets that are performing alright. The world economic outlook appears to be teetering, and trying to digest what to do with Russia will be a major decider.
Tune in as biotech guru Dr. Channa S. Prakash discusses everything from Alabama football, genetics as one of the most extensive agricultural advancements, the most significant risk factors to feeding the world over the next 30-50 years, plus everything in between.
Why producing crop plants with a much gentler footprint on the natural resources will help feed the growing population. How 75% of the world’s patents in agriculture gene editing are coming from China. Understanding that trying to impose restrictions on our ability to grow food can be a considerable risk to agriculture. Listen to hear about these topics and more!
Whether you’re a producer, end-user, commercial operator, RCM AG Services helps protect revenues and control costs through its suite of hedging tools and network of buyers/sellers — Contact Ag Specialist Brady Lawrence today at 312-858-4049 or [email protected].
Corn made large gains this week following wheat, but not with the same panic. While Ukraine is a major corn exporter, it is not on the same level of wheat. Corn’s moves will be similar to wheat as the news from eastern Europe, and war will be problematic for the world balance sheets. While it has not moved with the same vigor as wheat, the $1 gain in the last eight trading days shows the potential fallout from this spooks the market. It is hard to tell how many acres will be lost this spring, but it is estimated that only 60% of corn seed is on farms. How likely is it the rest will make it to the farms? We cannot be sure, but it certainly won’t be much more if the conflict drags out. We are still in an inflationary environment, and fund money is very much in these markets, so when they decide to take profits, we will see the same volatility we have of late.
Soybeans gained on the week but barely when compared to corn and wheat’s gains. Corn and wheat are major exports for Ukraine and Russia out of the black sea area where beans are not, so they are not immediately affected. South America’s weather outlook has improved but will not turn around the crop too much after its rough start. Soybeans will benefit from the corn and wheat stories, but they also have their own story to follow in South America.
The soft red winter “Chicago” wheat is in full-on panic mode, as you can see from the limit move days in the chart below. The war in Ukraine does not seem to be ending soon, and the sanctions on Russia will last and hurt their economy. Eventually, the market will figure out what fair value wheat is, but for now, with the potential for Ukraine to not do their regular care of the crop, it is on a ride. If Ukrainian farmers cannot apply the fertilizer they usually do, the crop will shrink by several metric tons and could be double digits. Ukraine is the 5th largest exporter of wheat globally; Russia is number 1; this conflict will have major ramifications in the wheat market for the foreseeable future.
This week, the equity market made decent gains as they have had a mixed trade the last few days. Jerome Powell said this week that it is all but a certainty that rates will be raised 25 basis points in the March meeting, lower than the 50 thought a few weeks ago before the war with Russia and Ukraine. Inflation has been bad the last year and will not improve soon with higher commodity prices across the board and Russian sanctions presenting a problem for some trade. Look for investors to focus on U.S. equities for the time being, as Europe and emerging market countries use Russia for a lot of their energy and could see issues with production and energy crunches.
Crude moved higher this week as sanctions against Russia have made the future of Russian oil exports cloudy. The U.S. purchases roughly 600,000 barrels of crude from Russia a day, which does not help our already high gas prices. Crude still has room to go higher as ramping up production to make up for any lost oil takes months to do. If this conflict drags out, we will see elevated fuel prices through the summer and be a larger expense on the farm than the last few years going back to 2014. The 10-year chart below shows the current levels to 2014 to help you budget if you did not hedge your fuel prices.
Tune in as biotech guru Dr. Channa S. Prakash discusses everything from Alabama football, genetics as one of the most extensive agricultural advancements, the most significant risk factors to feeding the world over the next 30-50 years, plus everything in between.
Why producing crop plants with a much gentler footprint on the natural resources will help feed the growing population. How 75% of the world’s patents in agriculture gene editing are coming from China. Understanding that trying to impose restrictions on our ability to grow food can be a considerable risk to agriculture. Listen to hear about these topics and more!
Whether you’re a producer, end-user, commercial operator, RCM AG Services helps protect revenues and control costs through its suite of hedging tools and network of buyers/sellers — Contact Ag Specialist Brady Lawrence today at 312-858-4049 or [email protected].
Corn was up a lot this week for similar reasons as wheat, with the Russian invasion of Ukraine pushing commodities higher. The conditions have improved in South America, but the length of trouble still caused large amounts of damage to the crop that we still do not know the depth of. The USDA Ag Outlook Forum came out with 92 million acres for corn, with some acres going to soybeans along with a 181 yield. A 181 yield would be a record crop, but with the supply chain issues, fertilizer prices, and availability of chemicals, many factors could affect yield if farmers can’t get all the inputs. Ukraine and Russia will be the market-moving news for now until we get a better idea of the long-term consequences. The February insurance price for corn is $5.89 ½. Friday’s early selloff will test the bulls for all markets.
Soybeans gained on the week as the Russia and Ukraine news dominated headlines. Outside of this news, the weather outlook improved for South America that would have been bearish for bean prices if the eastern European turmoil was not going on. The USDA Ag Forum came out with an estimated 88 million acres with a 51.5 bu/acre yield for beans this year in the U.S., which is a bearish number but not surprising at these current price ranges. The November bean price had a more visceral reaction as it fell quickly Thursday off the highs having over a $1 trading range for the day, ultimately falling 36 cents to $14.51 ½. The February insurance price for beans is $14.33 ½.
After days of large gains earlier in the week, wheat was limit up on Thursday after Russia invaded Ukraine. Ukraine is a major exporter of wheat and other agricultural goods as it is the 5th largest wheat exporter in the world, with Russia being #1. Not only is the world wheat supply threatened, but all trade in the Black Sea area will be affected, potentially only for a short period but disrupted, nonetheless. Russia accounts for more than 18% of the world’s wheat export and is a large oil and natural gas exporter, so any sanctions that hit their export economy could see ripple effects. This is only the beginning of this conflict, and wheat will be along for the whole ride, so you should expect volatility.
The equity markets continue to get crushed as, along with the struggles since November, we now have a war between Russia and Ukraine. This will make the Fed hesitant to raise interest rates, but as the bond rates have already risen, we are heading that way, whether it is a 25-point or 50-point bump. Tech stocks (NASDAQ) hit a 20% decline since November highs on Thursday before bouncing off the lows. Volatility will remain in the market as Russia remains a threat and China is a large unknown moving forward. Commodity prices have risen even more with oil nearing $100, so the inflationary pressure on the markets will not disappear any time soon.
Tune in as biotech guru Dr. Channa S. Prakash discusses everything from Alabama football, genetics as one of the most extensive agricultural advancements, the most significant risk factors to feeding the world over the next 30-50 years, plus everything in between.
Why producing crop plants with a much gentler footprint on the natural resources will help feed the growing population. How 75% of the world’s patents in agriculture gene editing are coming from China. Understanding that trying to impose restrictions on our ability to grow food can be a considerable risk to agriculture. Listen to hear about these topics and more!
Whether you’re a producer, end-user, commercial operator, RCM AG Services helps protect revenues and control costs through its suite of hedging tools and network of buyers/sellers — Contact Ag Specialist Brady Lawrence today at 312-858-4049 or [email protected].
How Financial Institutions and Insurance Companies Play an Essential Role in Feeding the World
The cost of farming has grown over the years, which means financial institutions are amping up their reviewal process for loans and increasing insurance deductibles for protection to reduce their loss risk. What does this mean to supporting food production for the world? Well, as part of our “What It Takes To Feed The World” series, we are diving into critical agriculture sectors and bringing awareness to their roles in the food production cycle.
Financial institutions and insurance companies are the starting point in the process and are essential in providing the necessary funds to farmers on through to commercial entities. For farmers, they help finance EVERYTHING from the seed and chemical to hedge lines for farmers to help manage their price risk and everything in between. For commercial and end user entities, financing includes loans to build and maintain infrastructure and logistics to short term bridge loans to buy directly from farmers on to their own hedge lines of credit to support carrying of positions both pre and post harvest.
What financial and insurance options are available to the agriculture industry, and how are they beneficial to farmers, commercials, and end users? We’ll discuss the answers to these questions and more below.
Farmer Direct Loans
Farm direct loans are loans that the government makes available via the Farm Service Agency, while banks provide similar farmer direct loans. In 2021 the FSA reported loan obligations of $6.67 billion. Meanwhile, in 2020, U.S. farm banks loaned $98.6 billion. The American Bankers Association defines farm banks as banks whose ratio of domestic farm loans to total domestic loans is greater than or equal to the industry average. These amounts show just how much money is needed to produce the U.S. crop each year before farmers even harvest and sell the crop. These loans range from rent payments to fertilizer costs to machinery. But farm banks aren’t just offering loans to the agriculture sector. In 2020 total bank lending reached $174 billion in farm and ranch loans (including the $98.6 billion). These banks play a significant role with billions in small farm loans and even microloans. Small farm loans are less than $500,000, and microloans are less than $100,000. These two categories alone totaled over $55 billion in 2020.
Hedge Margin Lines
Banks also help finance hedge margin lines to help farmers manage their price risk. By financing the hedge lines, banks allow farmers to place hedge positions in a brokerage account, protecting against adverse price movements that could lessen the value of their crop. When banks loan out money, they expect to be paid back; hedge credit lines are a tool banks use to help support the farmer being able to do so. If your bank is NOT willing to extend a hedge line – please give us call!
By financing hedge margin lines, banks support the farmer and themselves. With loans comes default risk and hedging is one tool to help mitigate the price risk that ultimately will be how the farmer pays back the loan.
Banks and the Rest of the Sector
There’s no question that banks are involved in the food production supply chain. When you think about it, commercials, end-users, and other units that touch grain utilize bank loans to enhance their businesses. Like feed yards and elevators, end-users use banks to improve their infrastructure by adding more storage or drying systems, using short-term loans to purchase grain and make other improvements to their business. These improvements ultimately improve the efficiency of the entire system and potentially lead to reduced costs of the final product, which helps the end consumer, people. Just like improvements to city and towns infrastructure are necessary, through the support of bank financing, these improvements are necessary to the health of the agriculture industry’s infrastructure.
Farming is not getting any cheaper, and more capital is required to produce excellent crops year after year. Banks’ loaning capacities play a major role already, but if we are going to keep up with growing demand in a growing world, their role will be even more critical going forward.
Crop Insurance
Crop insurance brings continuity to the industry year-over-year as the ups and downs of weather and prices can cost farmers millions of dollars if unprotected. There are two types of insurance for major field crops: yield-based, which pays an indemnity (covers losses) for low yields, and revenue that ensures a level of crop income based on yields and prices.
Insurance offerings and prices vary on where you are located and your land, but like other forms of insurance in your life, it is better to have it and not need it than need it and not have it. While the listed above are the main types of insurance, others can be purchased, like drought insurance for pastureland and hail insurance if your crop gets damaged by an ice storm. These are more specific to your geographic location but play an essential role.
Like banks, insurance companies help with the continuity of the agriculture sector. These companies along with government subsidy programs, provide the opportunity to continue farming when disaster strikes and threatens the financial stability of a farm.
How RCM Ag Services Partners Financial Institutions & Insurance Companies
For our Farmer Direct customers, RCM Ag Services partners with banks and insurance companies to provide our mutual customers daily expert market knowledge and advice. We are firm believers that the long term health and growth of our local farming communities requires a team approach that starts with the farmers and their banking and insurance teams.
For our commercial and end user customers, we are focused on evaluating profit margins and the cost of capital for managing the current and futures market risks. Our Ag Services team is working directly with lenders, 3rd party credit suppliers, as well as USDA government programs to support the long-term financial health of the commercial business sector.
Along with market knowledge, our brokerage services allow us to establish hedge accounts that banks can fund with a credit line, as discussed above. Our brokers have over 150 years of combined experience in the market that helps them provide hedge advice that is customized to each operation, not cookie-cutter advice. Take advantage of these benefits and call one of our knowledgeable ag specialists today at 888-875-2110 or email [email protected]
Corn made small gains on the week as grains did well across the board. The forecast for South America can’t seem to make up its mind switching back and forth on rain amounts. Argentina has consistently had rain in the forecasts, but what parts of the country and the amount has been inconsistent. Exports were better this week than last, but nothing crazy; potential conflict in Ukraine and further issues with the South American crop could see those numbers pick up soon. The markets are not open for President Day on Monday the 21st, so there is more time to develop around the world. Based on the Dec ’22 futures for corn after today, the February insurance price is $5.84 ¾.
Soybeans were up slightly on the week but have been relatively flat (relative to other weeks) the last two weeks, as you can see in the chart below. The continued weather issues in South America and the Russia v Ukraine possible invasion have been the movers for beans just like corn and wheat. Bean exports this week were the best of the group, with a flash old crop sale being announced on Thursday. We have seen private estimates continue to roll in for production in South America and what to expect this year in the US. The USDA Ag Outlook Forum will start next Wednesday, and we should find out what they are expecting for the year ahead and how the US will affect balance sheets. The insurance price for beans is $14.22 ½.
Wheat has been on a roller coaster the last two months with the ups and downs and uncertainties around Russia and Ukraine. A Russia invasion would be bullish for wheat as countries would shy away from trade with Russia, and Ukraine would stop exports as they try to keep Russia at bay. The Black Sea is a major world trade region. This conflict could lead to potential stoppages, shortages, or even a possible blockade in the region that would cripple a major trade corridor. Keep an eye on this developing story as it could have potential long-term consequences as the US has also threatened Russia with sanctions (they don’t seem to be fazed at all by Washington’s threats).
This week, the equity markets fell as confusion and concerns of post-Olympic wars between a few countries inch closer. Russia was reported to have changed their mind on invading Ukraine, only for that news to switch to them adding troops at the border. China invading Taiwan post-Olympics is also a possibility as that has seemed to be forgotten as the Russia news took over the market. Earnings season has been mixed with losers and winners in all sectors as inflation has begun to show up more in guidance for the year ahead.
Tune in as biotech guru Dr. Channa S. Prakash discusses everything from Alabama football, genetics as one of the most extensive agricultural advancements, the most significant risk factors to feeding the world over the next 30-50 years, plus everything in between.
Why producing crop plants with a much gentler footprint on the natural resources will help feed the growing population. How 75% of the world’s patents in agriculture gene editing are coming from China. Understanding that trying to impose restrictions on our ability to grow food can be a considerable risk to agriculture. Listen to hear about these topics and more!
Whether you’re a producer, end-user, commercial operator, RCM AG Services helps protect revenues and control costs through its suite of hedging tools and network of buyers/sellers — Contact Ag Specialist Brady Lawrence today at 312-858-4049 or [email protected].
The USDA report was met with a mixed reaction on Wednesday as markets traded both higher and lower immediately following the report. Thursday brought on large selling though, as rain in the dryer parts of South America took the headlines after the USDA Report ultimately did not provide any major changes. The USDA did not change the U.S. yield for corn as it stayed at 177 BPA while raising total crop size to 15.115 billion bushels and 1.540 billion bushels for ending stocks. World stocks were lowered along with smaller yield numbers expected in South America. The rain will do little to alleviate the stress on the crop as more will be needed before we feel better about less yield loss. Several private estimates believe the Brazil and Argentinian losses are larger than the USDA updated. However, there is still plenty of time before the crop comes out of the ground to rebound.
Soybeans fell on the week for the same reasons as corn. The USDA Report was slightly more bearish for beans as they raised the U.S. yield 0.2 BPA to 51.4. They slightly increased total production and raised U.S. ending stocks by 10 million bushels to 350 million. A good amount was cut from World-ending stocks due to the issues in South America, but the market had already priced that in, if not more so than was reported. Exports were within expectations, so no surprises there. One wild card still out there is that China is $16 billion behind their Phase 1 trade agreement commitments. Obviously, not all of this is soybeans, but they are far off their soybean numbers. It is unlikely the Biden administration will press them to get to their commitments, but if South America’s troubles are worse than expected, they have to go buy them from somewhere.
The Dow fell slightly on the week but bounced back off its lows from Monday. The markets are looking for direction following 4 days of loses straight. With repositioning for the year ahead and profit taking after a historic year the volatility could be around for a while.
Wheat
Wheat has taken it on the chin the last couple of weeks as you can see in the chart below. Wheat sold off following the other markets after the report. The drought in the winter wheat belt is concerning and if it does not improve, we should see prices move higher in the next month or two. The drought is not a big problem right now, but if it continues into February, it would be concerning. This week saw the lowest close in KC Wheat since October.
The 2021 U.S. grain crop has the potential to be one of the largest on record. Where did all the yield come from, what areas were the hardest hit, and why on God’s green earth are grain prices still so high?
Today, we are joined by several RCM Ag Services grain markets experts from around the country to catch up on a post-harvest update and share an outlook for production and marketing in each of their respective regions for the remainder of the 2021 marketing season and the upcoming 22 crops.
It’s been a slow week for Corn gains as China is celebrating the lunar new year. With the lack of Chinese buying the markets turned elsewhere for news. South America’s weather is still pretty consistent with wet conditions in northern Brazil and southern Brazil and Argentina remaining pretty dry. The next few weeks will be very important for Brazil/Argentina as soybean harvest is already behind pace. The Ag Forum has released the USDA expected planted acreage; Corn was pegged at 92 million acres, which was around most estimates, and not much of a surprise to the markets.
Friday’s supply and demand report is going to be the most important piece of news this week as it will be a reminder how tight the world and US supply are. The report, South American weather, and China being back from holiday will be where the focus shifts.
Like corn, Soybeans gained this week, despite a slow news cycle. Harvest delays continue in South America, to put it in perspective, the harvest is just reaching the halfway point of where they typically are at this point. The January crush report had another record month with bean crush coming in at 184.6 million bushels. The US will runout of beans this summer if this crush rate continues, and after 5 record weeks in a row it does not seem to be slowing down. The Ag Forum came out with an estimated 90 million acres of soybeans for this year which was right around estimates as well.
Chief Economist Seth Meyer: if one assumes we have normal planting weather, we would have an increase in total planted acres. But that’s entirely dependent on the weather #OATT#AgOutlookpic.twitter.com/NUIZjm5FtY
It will be important to keep watching exports as China comes back from their holiday and will begin normal activity again. The news to end the week will be the supply and demand report so how China responds next week will give us an idea how accurate we think the report is.
It’s been a strong week for Wheat as it bounced up from the lower end of the range it has been trading in. The cold weather throughout much of the country may have sparked the move this week as the possibility of damage to the crop comes in to play. It will be challenging to get a read on the extent of the damage until the spring making it more of a waiting game instead of a knee jerk reaction. Winterkill rallies are usually short-lived so we will see with this one. The USDA is estimating 45 million acres of wheat this year which is up by less than 1 million from last year. Even though we had a rally this week wheat appears to still be range bound as it has been.
Dow Jones The Dow has had an up and down week as market news has been quiet but the focus of the historic cold in parts of the country has caused energies to surge. The winter storm that ripped through the country has caused issues travelling in many areas slowing down the Covid-19 vaccine distribution and slowing down getting shots in arms as well. Cases have been on the decline the last few weeks and it will be important for this trend to continue.
Insurance This month is important for revenue-based insurance averages so it will be important to keep an eye on the markets even if you do not plan on making any sales. As of the close on 2/18 the price for corn is $4.5304 and soybeans are $11.711.
Corn lost on the week following dissapointing numbers in the February USDA WASDE Report. Despite the big losses on Tuesday and Wednesday following the report a modest bounce was seen Thursday to give the bulls a little sigh of relief. As we have seen with previous dips there has been buying after the dips that help support the market. The big surprise in the report was US corn ending stocks number being over 100 million bushels higher than trade expectations at 1.502 billion bushels. They did lower them from the January report of 1.552 BBU but not near as much as expected. The world carryout was was also bearish with the USDA raising world carryout to 286.53 million metric tonnes, a raise of 2.7 mmt, and well above trade estimates. The bullish news was that Chinese imoprt expectations increased by 256 million bushels but the US export total was only increased 50 million bushels. With this bearish news funds also began to offload some of their long positions adding fuel to the fire. You should also not expect any news to come out of China as they head into their Lunar New Year so buying from China will be slow. Parts of Argentina that have gotten needed rain may have received more help than expected on their crops as some predict it helped more than anticipated. The positive day on Thursday to stop the bleeding was important for the bulls but how the week ends will be important.
Soybeans were lower this week as the bearish news in the report for corn moved triggered a broad based sell off at the Board of Trade. Beans took it on the chin Wednesday as fund selling led the way. Despite a neutral report on the beans side, when funds decide to take profit they are the market mover. New export offers from Brazil were part of drawback as they were 40 cents below the US market and that collapse brought the US to about even. The USDA report showed that the US cannot export any more than about 250 million bushels the rest of the marketing year before bins are empty. CONAB released supportive bean crop estimates on Thursday coming in just above 133 million metric tonnes. The tightness of world stocks is on every traders mind and likely what has caused the markets to jump around – While 100 million additional bushels is only 1% of the 10 billion bushels produced any and all changes to production are being watched. The volatility of the past few weeks is best displayed on the visual daily ranges in the chart below.
Cotton once again saw a big week of gains as demand around the world continues. Exports were strong this week with Vietnam, Turkey and China being the biggest buyers. The National Cotton Council’s planted acreage estimates came out this week with the following:
The NCC sees Upland acreage down 4.9% Y-O-Y, at 11.3mm acres. Pima acreage is seen down 20.7%, to 161,000. Overall, this imputes a 5.2% decline to 11.5mm acres. (CottonGrower.com)
With only 4 trading days next week, On-Call sales basis the March contract, will have to be fixed (bought) by the Mills before Friday, ahead of First Notice Day on Monday, Feb 22. The loss of acres was expected with soybeans and corn being very attractive in price vs cotton currently. If cotton can continue its run up it may be able to gain some acres back but this recent run will need to continue. West Texas continues to be extremely dry and will need some moisture heading into the spring.
Dow Jones The Dow gained this week as supportive news from vaccines and the continued drop in Covid cases around the US. As many investors remain bullish looking at 2021 it is important to note that we still have a long way to get out of the storm that has been the last year.
Wheat Wheat has been in a sideways trade the last few weeks and looks to continue. There was no big news in the report that caused any knee jerk reaction in the market as it followed beans and corn lower on the week.
Insurance Remember that this month is important for revenue-based insurance averages so it will be important to keep an eye on the markets even if you do not plan on making any sales. As of the close on 2/11 the price for corn is $4.5141 and soybeans are $11.645.
Corn had a huge boost this week as the USDA reported the US yield to be 172 bu/acre. This was a 3.8 bu/acre decrease from the Nov report that nobody was expecting. The average trade estimate heading into the report was 175.3 bu/acre, so this surprise played a large role in why corn was limit up following the report. This number is low when you think about the past several years of yields and the fact the USDA had estimated the crop to be 181.8 bu/acre in the August report. Now we had some weather events that caused damage to large areas of crops and a drier August, but not to the point that would cause a 9.8 bushel decrease. So, the drastic change over the last few months is a head scratcher, but the USDA does usually leave us with more questions than answers. The USDA also lowered both US and World ending stocks showing why corn has been going up over the past few months, less corn in the world than expected. US ending stocks were lowered from 1.702 billion bushels to 1.552 billion and world ending stocks were lowered from 288.96 billion bushels to 283.83 billion. Tightening ending stocks played a major role in the harvest to now rally in corn and will continue to play a role as all eyes will turn to South America and their corn crop. If their crop begins to struggle or comes out smaller than anticipated this will begin to push new crop ’21 prices up as farmers make their decisions on what to grow in 2021.
Soybeans continue to go higher as March beans topped $14 this week. Like corn, the report was bullish for soybeans. The USDA pegged yield at 50.2 bu/acre after dropping them ½ bu/acre from the December report. They also raised exports and use while cutting ending stocks adding to the bullish news. Soybean’s news the last few months has been bullish as South America oversold their last crop and are now importing US beans on top of the picked-up demand from China. The USDA also lowered the production for South America from 183 million metric tons to 180.6 MMT. With the current South America weather problems (dryness) this number could continue to go down which would keep the weather as one of the bullish factors pushing the market higher. With Chinese demand continuing along with the imports into South America until their harvest, we will continue to see demand support the market. As always with this time of year pay attention to South American production numbers/weather as changes in those will also have major impacts on our markets.
Wheat followed corn up after the report this week as there were no major changes to wheat. The news from the report was that the winter wheat seedings report increased for the first time in 8 years. All wheat acres were 31.991 million acres, up 1.576 million from last year. This was also slightly higher than the trade estimate. The Dec stocks number was not much of a surprise as it came in at 1.674 billion bushels. On the supply and demand side, supply was left unchanged while seed usage was raised slightly by 1 million bushels and feed usage raised by 25 million. This lead to a 26 million bushel reduction in the ending stocks , overall friendly for the market. As you can see in the chart below, despite the Nov dip the March chart is still bullish looking back to the contract lows in June.
Dow Jones The Dow has remained pretty flat over the last week as impeachment of President Trump hasn’t been a market mover with president elect Biden set to take office in one week. As vaccine rollouts continue to be slower than hoped for, states begin to ramp up their next phase to non-healthcare workers. Governor Cuomo has now come out against another round of lockdowns but we will see what the Biden administration has in store in the next two weeks.
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