Closing Market Comments July 13, 2021

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Today’s Prices

Grain prices finished mostly a little bit higher. Some of that follow through on yesterday’s strength but also a little bit of a question mark in the longer term forecast that are hinting at warmer, drier conditions.

Grain Market News

U.S. Corn Ending Stocks and S/U

This crop year, 2020-21, is in red. Last year in May and June USDA was expecting we’d have 3.3 bb of stocks as of yesterday’s crop report it looks like we’re going to end up with something just over 1 bb, less than a third of what we thought a year ago. It’s also important to note, next year’s stocks projected at 1.432 bb. They would still be very tight, just not as tight as this year. Keep in mind, the 1.432 bb stocks estimates demand that is likely too low and could be raised and it also includes a trendline yield which will require very good weather for the next 8 weeks or so to achieve trendline yields in the U.S. We would not be surprised to see next year’s ending stocks gradually working lower, to something similar to this year just over a billion bushels. Again, making a second consecutive year of extremely tight stocks. Similar situation with stocks to use at 7.2% this year. Next year 9.7% projected for next year. That could very easily slip closer to what we’re seeing this year for the second year in a row.

U.S. Corn Ending Stocks

From a longer-term perspective, our stocks this year at 1.082 bb, very tight and among some of the tightest levels over the last 17 years. Even though next year’s stocks are expected to be a little bit higher as of yesterday’s USDA’s numbers, they would still be considered exceptionally tight, well below anything we’ve seen over the past 6 years.

U.S. Soybean Ending Stocks and S/U

Stocks at 135 mb are boarder line running out and next year at 155 mb, extremely tight. This year’s stocks and the projected stocks for next year much tighter than anything we’ve see over the past 6 years. It’s also worth noting in beans, this is using a trendline yield. Just a 1 bu/ac decline in this year’s yield could result in stocks around 70 mb which would be too tight and below minimum pipeline value. The U.S. soybean supply and demand is teetering on being extremely tight, if not running out for the second year in a row. This can also been seen in stocks to use at 3% this year and just 3.5% next year, extremely tight for a second year.

U.S. Soybean Ending Stocks

A longer-term chart of soybean stocks shows this year at 135 mb, among some of the tightest levels we’ve seen over the last 18 years. Next year’s stocks at 155 mb, although they are slightly higher, still extremely tight and gives us no room for any increase in demand or loss of yield.

U.S. Wheat Ending Stocks and S/U

This year’s wheat stocks shown in red and have been slipping significantly. The lowest since 2014-15 but not critically short. But next year’s stocks, based on the massive losses of the spring wheat and durum wheat that were noted in yesterday’s report. Next year’s stocks are getting critically tight at 665 mb. We can also see that in our stocks to use which this year projected at 40% S/U. Next year down to 32.1% and again, getting down to be some of the lowest levels we’ve seen in recent history. Wheat is very quickly going the party with corn and beans when it comes to extremely tight stocks projected for next year.

U.S. Wheat Ending Stocks

We can see that on a longer term chart with 844 mb this year’s stocks. Certainly the lowest in the last 5-6 years. But not critically low but by next year, if USDA is correct at 665 mb, we are getting exceptionally tight. Wheat prices won’t be a drag on corn and bean prices. They could be supportive as well.

U.S. Grain Stocks

It’s not just one grain that is experiencing tight stocks and could experience even tighter stocks next year, it’s all three primary grains combined, corn, soybeans, and wheat. When we combine those stocks, this year’s stocks currently being projected at the lowest level going back to the 2012, 13 and 14 timeframe and experienced consistently high prices. Next year’s stocks are projected to be up a little, mostly due to corn stocks rising from 1.082 to 1.432 bb. Any increase in demand or slight reduction in yield could cause that to fall significantly as well. We would not be surprised to see next year’s stocks of corn, beans, and wheat coming in below this year’s total and we do expect prices will remain firm on any price breaks going forward until the marketplace is comfortable that stocks increasing significantly.

Grain Market News

High Temperatures Mon 7-12-21

The near-term weather has been mostly favorable for the last week or so. Yesterday’s temperatures primarily in the 80’s with some 70’s in the central belt. This is certainly seasonally cool and quite favorable for U.S. crops.

7-Day Observed Precipitation

In addition to the moderate temperatures, we’ve seen decent amounts of precipitation especially in some of the dry areas of the western belt. SD, MN, parts of IA, and eastern NE has all seen some pretty decent rains with 1-2”, 2-4” of rain has been in seen in many of those areas. Not everyone has gotten rain but we’ve certainly gotten some rain in the drier areas that will help us buy some time.

7-Day Precipitation Forecast

The forecast calls for some good rains in the northwestern belt and that is primarily late tonight, tomorrow, and into early Thursday. Then additional precipitation is expected in the eastern belt, OH Valley, down into the Delta with that rain coming through Thur, Fri, and Sat. If the rains fall as expected on this map, the crops would have some pretty good moisture to work with and would buy us some time.

6-10 and 8-14 Day Forecast

Unfortunately for crops and farmers in the northwestern belt it is calling for warmer conditions in the northwestern belt in the 6-10 and the 8-14 day forecast and some of those warmer temperatures look to impact IA and NE as well. Adding to the warmer temperatures profile for the northwestern belt is a drier profile in the 6-10 and 8-14 day. So we have the potential for warmer, drier conditions in the northwestern belt in the 6-10 day and 8-14 day and that is not what the crops are needing so we’re hoping this forecast doesn’t verify and that temperatures do not turn warm/hot and dry into early August.

December Corn Chart

Corn prices over the last few days have certainly turned to the upside. In fact, today we traded at $5.47, 40-cents above Friday’s low. The chart has turned upward and the technicals have also turned upward at least in the short term. The next level of overhead resistance is initially where our moving averages all come into play. We also have a gap on the chart that was left following the 4th of July weekend. That gap would be the next target, pushing prices up to the $5.75 level from a chart perspective.

November Soybean Chart

Soybean prices also trending higher in the short term. Technicals turning higher on today’s rally as well. Overhead resistance initially where our downtrend line comes into play around the $14 mark. If that would surpass the next chart point would be the $14.23 highs posted a little over a week ago.

September KC Wheat Chart

The wheat chart also turning higher in the short term. Technical indicators have turned higher. That means chart and technical indicators are indicating the potential for some additional upside. Right now the next level of overhead resistance would around the $6.40 level where our downtrend line comes into play and then the next chart area would be at $6.69, the highs posted a little over a week ago.

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