Update for November 18th, 2020
Corn prices continue to inch higher following last week’s USDA reports. The larger than expected reduction in the U.S. corn balance sheet fueled the market and prices rallied. During the rally JUL21 almost hit $4.40 per bushel, a price not seen since the spring of 2014. The hefty 2.6 bushel reduction in corn yields was the largest during a November report in 25 years. Stone X researched price movement trends in years when the USDA lowered the corn yield by 1.5 bushels per acre or more in the November report and found that since 1993 there has been 7 years when yields were reduced by 1.5 bushels per acre or more. Each of those 7 times the USDA further reduced corn yields ahead of the final report by an average of 1.7 bushels per acre.
Some several key facts to keep in mind:
* Corn demand overall has been strong, even though corn sales this past week were down more than 60% from the previous week, total corn commitments for the 2020/21 marketing year have already reached a record setting 34.2 MMT.
* Corn exports are running 3% behind the USDA’s projections.
* Increasing rates of the coronavirus are raising concerns of further lockdowns which would result in reductions of gasoline and ethanol usage.
* There is talk that China may soon be purchasing more U.S. corn for spring delivery as the Chinese domestic corn auction prices are nearing $10 per bushel.
* Weather issues in South America continue to be a key factor to watch particularly as La Niña is building strength during the heart of their growing season.
Many traders expect prices to face considerable resistance from $4.40 to $4.65 per bushel area. The last time prices broke through $4.65 (2014) the eventual high reached $5.19 per bushel. During that same time the USDA had estimated ending stocks around 1.72 billion and an average farm price of $3.85 to $4.55 per bushel. When prices are trending higher the skies the limit and when prices trend lower… There will always be that “what if” question so it’s important to know where your numbers are and have some price targets in place. I found this to be a wise quote, “trees don’t grow to the clouds and eventually higher prices cure higher prices”.
Last week the USDA made no changes to the soybean export demand. This has left traders to wonder why this number was unchanged when soybean sales continue to move along at record pace. The U.S. has total actual sales of 641.6 million bushels which is ahead of the rate needed to reach the USDA’s sales target. In fact we are only 9 weeks into the marketing year and sales to date have already reached 81% of the entire year’s sales total projected by the USDA.
Soybean prices have rallied an incredible $3.00+ per bushel since the low last spring. Global demand remains strong, U.S. supplies are tight and South America’s soybean crop has a long way to go. Over the past few weeks our attention has turned to weather concerns that have developed over key growing regions in both Brazil and Argentina. Sources with direct connections in these regions are now making some significant reductions to their yield expectations noting the odds for a large crop come harvest just aren’t as good as they were a short time ago. Dr. Cordonnier also views current conditions as unfavorable for the newly planted crop. In his weekly report Cordonnier lowered his Argentine soybean projection estimate by 1 MMT for the second consecutive week but left his corn production estimate for the country unchanged. His outlook for Brazil shows no change to the soybean production but corn production was lowered by 2 MMT following a reduction of 2 MMT a week ago.
Recent rainfall across Brazil was light and scattered. Looking ahead most of the key soybean growing regions are expecting rainfall during the next few days and the 6 to 10 day forecast also calls for precipitation.
The map below shows the expected precipitation relative to normal through the end of November for Argentina. Some rainfall is expected over the next few days followed by a dry weather pattern.
WeatherTrends 360 now says that the La Niña weather pattern is now approaching “very strong status”…” rapidly cooling equatorial Pacific Ocean temperatures. Combined with other long-term cycles like the -PDO, +AMO and weakest sun in nearly 100 years, the cycles scream mild Winter ahead, maybe a tad cooler than last year with snowfall up a bit nationally but still well below average. The one wintry spot likely to be the Northwest quarter of the country."
Expected precipitation through next Tuesday is shown in the first map below. The following two maps indicate the projected precipitation and temperature through November 26th---Thanksgiving Day!