Closing Market Comments July 28, 2021

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Today’s Prices

We had a stronger day in the grain markets today with corn, beans, and wheat closing higher.

Grain Market News

Weekly Ethanol Production

Weekly ethanol production came in at 1.014 mil barrels/day average. That was down from the previous week but it was 5.8% versus a year ago. When we look at year to date, going back to the start of the crop year Sep 1st, we are up 3% versus a year ago. USDA, in the latest WASDE report is forecasting ethanol production to be up 4.1%. So we’ll need to see the pace pick up going forward or we’ll have to look for some adjustments in lower demand for corn use for ethanol in future WASDE reports.

Weekly Stocks of Fuel Ethanol

Weekly ethanol stocks came in at 22.733 mil barrels. That was up slightly from last week. We are up about 12.1% versus last year. So, we are having a build but it’s not uncommon to see once we get close to peak driving, then we’ll see supply build.

ND Average Temperature

What do we think the yield could end up being in ND, SD, MN, and IA? That’s a big enough area that it has a huge impact on the national yield. Today we’ll focus on ND. In ND, the average temperature for June came in at 69.1 degrees. That’s the highest average temp going all the way back to 1988 for June. What impact could that have on the corn crop and in particular the amount of rows around on the ear.

ND Precipitation

The June precipitation for ND came in at 2.1” and that’s the lowest level going back to 2006.

ND Top Soil and Sub Soil

This graph shows the ND topsoil and subsoil moisture levels as reported in the weekly crop progress report compiled by NASS. This graph shows the short to very short % for week 29 and that’s the latest data from NASS. The ND data is only available back to 1995. On the left is short to very short percentage. How are we stacking up versus other years? The topsoil is sitting at 87% short to very short and subsoil is sitting at 85% short to very short. That would be the driest subsoil going back to 1995 and the driest topsoil we’ve had going back 2006.

ND Corn Condition

We took the corn condition rating from the weekly NASS crop progress report. NASS reports excellent, good, fair, poor, and very poor. Anything that’s very poor we take times 0, poor times 1, fair times 2, good times 3, and excellent times 4 and we build an index on that data. That gives us the ability to take in account the full range of conditions present in the corn crop. Even though the data for ND only goes back to 2000 for week 29, this is the lowest rated corn crop going all the way back to 2000.

ND Crop Index

Based on temp, precipitation, sub and topsoil moisture, and condition what should we expect the crop to do? The easiest way to talk about that is to compare to trend. Crop years is along the bottom, the right side is the crop index, and on the right is the percentages. Yellow is the trend percentage and that’s telling us for each of those years, how did that year compare to trend. In 1993, that was a very wet year in ND and the final yield came in 49% below trend. In addition, we’re plotting the crop index in blue. The topsoil and subsoil short to very short numbers are also plotted. There are couple yields that stand out to us. In 2012, that yield was off 16% nationally. We have a much worse condition than we had in 2012 and we have drier topsoil and subsoil moisture than we had in 2012. Another year that stands out it 1988 when the yield was off 26%. Unfortunately, we don’t have any additional date other than temp and precip data. We are watching very closely the hard red spring wheat crop and that could give us an indication of what the corn crop might do. So right now, we’re thinking it’s possible this corn crop could be 25-30%, even 35% below trend. As we going forward we’ll continue to talk about this but we wanted to give you an idea of all the data we’re watching to get our arms around how this corn yield is going to turn out.

December Corn Chart

The corn chart is very similar to recent days but we have added an up trending channel. We do have a pennant formation developing but we have the support level in parallel to that. We have been bouncing against the resistance on the top side. Right in the area where we’re consolidating, we have our first level of resistance at the 20-day moving average in red at $5.52. The second level of resistance is the 10-day moving average in green at $5.54. And then the third level of resistance is the 40-day moving average in black at $5.60’6. We’ll continue to watch this market. We think there’s enough concern because of tight stocks and dry conditions on the weather side that we should be able bounce this market through those levels of resistance.

November Soybean Chart

The soybean chart also has a pennant formation. The lows are higher and highs are lower. Our first level of resistance as we focus on this area with consolidated trade would be the 10-day moving average in green and also in that same area we have the 20-day moving average coming in there also and that would be at the $13.72 level. If we break through those levels of resistance then we’re opening the area all the way up to the area at the down trending line and resistance in that area would be the $14 level. So we do believe that just like corn, we have more upside available to this market. It’s that the market is not to a point to buy those rallies we’ve been getting from time to time.

September KC Wheat Chart

Wheat continues to find some strength and we are probably getting some spill over from the Minneapolis wheat market. The Minneapolis side is unsure what the crop size will be. As we result, our first level of major resistance on the KC wheat would be at the $6.74 level.

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