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Markets: Exports to China remain strong through the end of September

Markets: Exports to China remain strong through the end of September

CORN------

Corn closed the week 14 ¼ cents higher. Private exporters sales of 110,800 metric tons (mts) of corn to Japan and 207,140 mts of corn to an unknown destination.

In the weekly export inspections report, U.S. corn exports last week of 807k tonnes (31.8 million bushels (mb)) were within market expectations of 650-900k tonnes (25.6-35.4 mb) and were little-changed from the previous week's 766k tonnes (30.1 mb), but well above last year's same-week exports of 422k tonnes (16.6 mb), continuing the pattern since the start of 2020/21 four weeks ago of a solid start to this year's export program versus last year's rather slow start. Cumulative exports of 110 mb are well above last year's 61 million at this time, leaving weekly shipments needing to average roughly 43 mb per week through the end of August in order to reach the USDA's 2.325 billion bushels (bb) export projection versus last year's 32.7 million per week average from this point forward. This week's activity included 274k tonnes shipped to China.

In the weekly crop progress report, U.S. corn crop conditions were unchanged at 61% good or excellent versus 61% expected, 61% last week and 57% last year. U.S. corn crop harvest is now 15% complete versus 17% expected, 8% last week, 10% last year and 16% average.

In the weekly Energy Information Administration report, ethanol production fell to 881,000 barrels per day in the week ending Sept 25 versus 906,000 the previous week and versus 958,000 the same week last year. Ethanol stocks slipped to 19.7 million barrels in the week ending Sept 25, down from 20 the previous week and down from 23.2 million the previous year. An estimated 87.9 mb of corn was used last week, with usage in the first 25 days of the marketing year at 1.074 bb, versus 1.109 billion in the first 27 days of the last marketing year.

In the quarterly stocks report, USDA reported September 1 U.S. corn stocks (2019/20 ending stocks) at 1.995 bb, a considerable 255 mb below the average trade estimate and 258 mb less than the USDA’s previous old crop ending stocks estimate of 2.253 bb. June - August feed/residual disappearance was the largest since 2005/06 at 928 mb.

Strategy and outlook: The stocks news is bullish and places increased importance on 2020 US yields and South American production. As harvest begins, the market is likely to begin to work lower under harvest pressure and the weight of the world supply begins to be felt. The COT report has turned bearish.

 

SOYBEANS------

Soybeans closed the week 17 ½ cents higher. Private exporters announced sales of 264,000 mts of soybeans to China, 100,000 mts of soybeans to Mexico, 120,000 mts of soybeans to Egypt and 685,300 mts of soybeans to an unknown destination. 

In the weekly export inspections report, U.S. soybean exports, for the week ended 9/24/20, were 44.5 mb, within market expectations of 40.4-51.4 mb, but down from the previous week's 50.7 mb and were the lowest of the first four weeks of the 2020/21 marketing year. Given the strong start, cumulative exports of 178 mb remain well above last year's 116 million at this time, but in order to reach the USDA's 2.125 bb export projection, soybean shipments are going to need to average nearly 39 mb per week, versus last year's 30.5 million, over the next 48 weeks. The vast majority of this week's exports went to China at 893k tonnes.

In the weekly crop progress and conditions report, U.S. soybean crop conditions improved to 64% good or excellent versus 63% expected, 63% last week and 55% last year. U.S. soybean crop harvest advanced to 20% complete versus 18% expected, 6% last week, 6% last year and 15% average.

In the quarterly stocks report, the USDA also shocked the trade as stocks came in 52 mb below pre report expectations. Trade had expected the USDA to increase the size of the soybean crop and instead they lowered the crop by 333,000 bushels. The smaller stocks levels indicate smaller carry in stocks and places more importance on yields to rebuild carryover stocks.

Strategy and outlook: A record export pace of new crop soybeans has rallied values to 27 month highs. Producers should continue to sell into front month contracts as there is no carry and the market is telling you not to store soybeans. Producers should look to re-own using futures and options on a large setback.

 

WHEAT-------

For the week, Chicago wheat closed 29 cents higher, Kansas City wheat closed 35 ¾ cents higher and Minneapolis wheat a half a cent higher. 

In the weekly export inspections report, U.S. wheat exports last week were 563k tonnes (20.7 mb), up modestly from the previous week's 503k tonnes (18.5 mb), as well as last year's 503k tonnes, while falling within market expectations of 400-650k tonnes (14.7-23.9 mb). Wheat exports continue to run at a consistent pace, falling within an 18-26 mb range in each of the last 12 weeks and averaging 20.2 mb per week through the first 17 weeks of 2020/21. Cumulative exports of 339 mb are up 8% from last year's 313 million versus the USDA's 975 mb export projection reflecting an expected 1% increase from last year. Wheat exports will need to average roughly 16.8 mb per week, versus last year's 17.3 million per week, from this point forward in order to reach the USDA's estimate.

In the USDA weekly crop progress and conditions report, U.S. winter wheat seedings moved to 35% complete versus 35% expected, 34% last year and 33% average. 

In the quarterly stocks and small grains summary report, September 1 stocks were 2.16 bb, down 187 mb from last year and the lowest since 2015/16. NASS estimated final 2020 wheat production at 1.826 bb, down 12 mb from prior estimates, meanwhile June-August feed/residual disappearance was a four year high at 214 mb.

Strategy and outlook: Dryness is noted in parts of the Black Sea region and producers should reward any rallies.  Supplies are increasing in Russia, Australia and Canada and they will be looking to export supplies to the world.

 

LIVE CATTLE-----

Last week, live cattle closed 17 cents lower while feeder cattle closed 37 cents lower.

Last week, fed cattle cash trade in the North was $107 live and $167 to mainly $168 dressed – $2 to $3 higher than last week. Moderate trade in the South occurred at mostly $107 – $2 firmer.

Last week, the weekly Fed Cattle Exchange online auction listed a total of 901 head. 358 head sold, including 144 head in Texas and 214 head from Nebraska, both sales were at $106. The other listings were PO'd after bids of $104. 

The latest USDA steer carcass weights were down 1 pound from the prior week at 919, making them 23 pounds above last year.

Beef packer margins are estimated at $299.20 per head. Boxed beef was higher with choice beef $.58 higher at $217.74 and select cuts $.55 higher at $207.54 on a volume of 155 loads. The feeder cattle index is $.22 higher at $142.58.

Last week's beef export sales were 24,700 MT with shipments of 1,300 mts reported.

Strategy and outlook: Seasonal trends have turned lower at a time that increased supply and limited restaurant openings will force consumers to eat large supplies of beef at home. Producers should have employed hedging strategies that utilize options and futures.

 

HOGS----

Lean hogs closed the week $1.95 lower. 

Iowa/S. Minnesota hog weights for week ending September 26 at 281.8 pounds (lbs.) versus 280.2 lbs. the previous week and 281.9 lbs. last year.

Last week's net pork sales of 39,500 mts with shipments at 32,600 mts. This included China buying 6,500 mts and taking shipments of 9,500 mts.

Strategy and outlook: Strong exports of US pork and higher product values have rallied futures off their lows. As the market rallies into resistance, producers should at a minimum, use a put/call spread to lock in profits.

 

Brian Hoops is president and senior market analyst of Midwest Market Solutions Inc. The home office is in Springfield, Mo., with branch offices in Thief River Falls, Minn.; Verona, N.D.; Yankton, S.D.; Storm Lake, Iowa; and Springfield, Neb.

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