Today’s Prices
Grain markets finished mixed today as the trade is now starting to consolidate following yesterday’s bullish crop report.
Grain Market News
Argentina Precipitation
In Argentina over the past 7 days, late Sat-Tues Argentina saw some decent rains. This map shows Argentina precip in mm, 25 mm is about an inch and 50 mm is about two inches. The darker greens are 1-2” and the blue 2” or more. We saw a few pockets of solid precipitation over the past 3-4 days in Argentina. Not everybody got rain but the dry areas were reduced with the recent rains. Unfortunately, due to dryness prior to this week’s rain, 30-day precip compared to average shows almost all of Argentina below average for precipitation. This makes rainfall going forward very important for the corn and bean crops in Argentina. Brazil’s weather is mostly favorable at this time.
Argentina 2-Wk Precip Forecast
The first week of the forecast shows lighter rains of .25-.75” in the south and 1-2” possible in the north so additional good rains are expected in portions of northern Argentina. During the second week of the forecast, things start to dry out again and very little rain is forecasted for much of the nation of Argentina. The bulk of the rains in the nearby forecast are forecasted for late this week and then when we get into the weekend and next week things look to start to dry out and look to remain dry for the next two weeks with temperatures heating up next week. So even though Argentina got some very beneficial rains recently they could return to a dry trend if the current forecast is correct. This needs to be monitored very closely.
Grain Market News
January U.S. Corn Prod. Vs Trade Est.
We’ve mentioned there’s no room for production losses and yesterday’s USDA crop report showed corn production well below the average trade guess. In fact, a record amount of production below what the trade was expecting. In fact, yesterday’s miss of nearly 300 mb vs the average trade guess is over 100 mb larger than any previous errors based on trade expectations over the past 30 years. This is the type of production loss that the U.S. markets can’t afford and that is why corn prices are limit up yesterday and we saw some additional follow through to the upside today.
U.S. Corn Ending Stocks
This chart shows corn ending stocks and its clear to see ending stocks are the lowest in 7 years and many traders estimate that stocks could slip lower because USDA is underestimating demand.
U.S. Soybean Ending Stocks
A massive drop in soybean ending stocks from 909 mb to 140 mb projected for the end of this crop year. The 140 mb ending stocks is some of the lowest stocks recorded in recent history for U.S. soybeans and it puts soybeans in a situation where we need to ration demand or risk running out before new crop becomes available late next summer or early in the fall.
U.S. Wheat Ending Stocks
Wheat stocks dropping significantly, in fact, the 4th year in a row of lower stocks. Wheat stocks are not at risk of running but at 836 mb, that’s about 350 mb lower than just 4 years ago. And even though wheat ending stocks are not considered wildly bullish they’re still considered supportive.
Weekly Ethanol Production
Ethanol production was up just slightly from last week, up to 941K barrels/day. Unfortunately, that is 14% below the year ago level. Last year at this time we hit an annual high for production. Year to date ethanol production is down 7.9% due to restrictions to travel and stay at home orders and that will remain the case probably in the near term. But when we get into April, May, and June when the coronavirus first caused ethanol production to be reduced by nearly 50%, we estimate our production this year will be steady and then gradually rising as more and more of the population gets vaccinated and commuting gets back closer to normal. USDA lowered its estimate of corn use for ethanol by 100 mb in yesterday’s report. If the U.S. can get closer to somewhat of a more normal driving and traveling schedule there’s a possibility that USDA has lowered its estimate too much and corn use for ethanol could come in about USDA’s target.
Weekly Stocks of Fuel Ethanol
Stocks increased to 23.7 million barrels. That’s up 3% from last year when we combine ethanol production and ethanol stocks, today’s report should be considered neutral to just a little bit negative.
March Corn Chart
Corn prices gapped higher this morning after yesterday’s limit up move. We did gap higher and traded almost limit higher in the other night trade before settling back and closing at $5.24. Today’s close was $0.17 off the daily high and it does appear the market may want to back and fill that gap that was left in the charts yesterday.
March Soybean Chart
Soybean prices also made a new high today up $14.36, keeping the uptrend intact. But we did have a disappointing close with beans closing lower at $14.06, $0.30 off the daily high. It is possible the soybean market does some back and fill as well but we’re likely to find some pretty solid support in the consolidation area that we saw for a week prior to yesterday’s crop report.
March KC Wheat Chart
Wheat prices also surged to a new high, up to $6.39, turning around and closing at $6.25, $0.14 off the daily high. If the wheat market experiences some profit taking, $6.16 the previous high and breakout level would be the first area of chart support and that’s about a dime below where we closed today.
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