What? China buys 230 million bushels of U.S. corn in four days

Friday’s corn market jumps 12¢, soybeans closed 16¢ higher.

On Friday, the CME Group’s farm market traders digested the huge amounts of U.S. corn being sold to China.

At the close, the March corn futures closed 12½¢ higher at $5.47. May corn futures settled 11¼¢ higher at $5.47½. New crop December corn futures ended 6½¢ higher at $4.45½. 
 
March soybean futures closed 16¾¢ higher at $13.70. May soybean futures ended 15½¢ higher at $13.67. New crop November futures closed 11¾¢ higher at $11.43.

March wheat futures ended 16¢ higher at $6.63. 

March soymeal futures settled $3.90 short term higher at $431.00.

March soy oil futures finished 0.03 lower at 44.62¢ per pound.

In the outside markets, the NYMEX crude oil market is $0.19 per barrel higher (-0.36%) at $52.15. The U.S. dollar is lower, and the Dow Jones Industrials closed 547 points lower (-1.78%) at 30,059 points.

On Friday, private exporters reported to the USDA the following activity:

  • Export sales of 2,108,000 metric tons of corn for delivery to China during the 2020/2021 marketing year.
  • Export sales of 132,000 metric tons of soybeans for delivery to China during the 2021/2022 marketing year.

The marketing year for corn and soybeans began September 1.

Today’s purchase from China was the second largest daily purchase of U.S. corn ever.

Bob Linneman, Kluis Advisors, says that the markets are clearly trying to digest the huge Chinese purchases of U.S. corn.

“The corn bulls got another surprise Thursday morning in the daily export sales report. In total, the daily report showed a staggering 1.9 million metric tons of corn booked to ‘China’ and ‘unknown.’ This is on top of the whopping 1.46 million metric tons announced Tuesday morning. These are some serious sales! Traders are quickly updating export models and trying to determine how upcoming USDA reports could change,” Linneman stated in a daily note to customers.

Linneman added, “The weekly export sales report Thursday morning shows that prices are not high enough to ration supply. Next week’s report will be huge for corn. Any sales for soybeans will continue to make that balance sheet narrow.”

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Thursday’s Grain Market Review

On Thursday, the CME Group’s farm markets started today’s trading higher, turned lower, and closed mixed.

At the close, the March corn futures closed ½¢ higher at $5.34¼. May corn futures finished 1¢ higher at $5.36¼. New-crop December corn futures ended 3¾¢ lower at $4.38½. 
 
March soybean futures closed 21½¢ lower at $13.53¼. May soybean futures finished 21¾¢ lower at $13.51¾. New-crop November futures settled 18¢ lower at $11.31¼.

March wheat futures closed 11½¢ lower at $6.47. 

March soymeal futures finished $9.50 short term lower at $427.10.

March soy oil futures are 0.13 higher at 44.65¢ per pound.

In the outside markets, the NYMEX crude oil market is $0.57 per barrel lower (-1.08%) at $52.28. The U.S. dollar is lower, and the Dow Jones Industrials closed 499 points higher (+1.65%) at 30,803 points.

The market sell-off today was more technical than it was fundamental, according to a trader choosing anonymity. 

“Without a doubt, fundamentals are still supportive, but prices can’t just go straight up, and part of the price discovery process requires chopping around. At this point, a good amount of the fundamentals have been priced into the market, so we are trying to set a new price range while we wait for additional information,” the trader says.

On Thursday, private exporters reported to the USDA the follow activity:

  • Export sales of 1,700,000 metric tons of corn for delivery to China during the 2020/2021 marketing year.
  • Export sales of 213,600 metric tons of corn received during the reporting period for delivery to unknown destinations during the 2020/2021 marketing year.

The marketing year for corn began September 1.

Separately, the USDA’s Weekly Export Sales Report Thursday shows very strong demand figures for corn and soybeans.

  • Corn = 1.85 million metric tons (mmt.) 
  • Soybeans = 2.02 mmt.
  • Wheat = 596,600 mt.
  • Soybean meal = 142,200 mt.

Bob Linneman, Kluis Advisors, says that the charts are speaking.

“Corn prices hit new contract highs during trading on Wednesday. However, prices settled the day nearly unchanged. Normally, this is considered a doji candle on the candlestick charts. Recall that doji candles can indicate a change in momentum. I like to confirm this type of chart indicator with the bull spreads; I want to see the bull spread chart confirm a similar idea. The spread between March and December corn hit new highs and closed in the upper part of the daily range on Wednesday, which does not necessarily indicate the same as the doji candle. This spread should be watched closely for signs of weakness,” Linneman stated in a daily note to customers.

Linneman added, “It is interesting to look at other years with chart patterns similar to what has unfolded over the past six months. Those analog years were driven by a supply shock. But lately, we are seeing prices react to a demand shock. However, each year has a similar theme: rationing of supply happens at higher prices.”

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Wednesday’s Grain Markets Review

On Wednesday, the CME Group’s farm markets started sharply higher, before selling off and closing mixed.

At the close, the March corn futures finished 1¾¢ higher at $5.34. May corn futures settled 1½¢ higher at $5.35¼. New crop December corn futures settled 2¢ lower at $4.42½. 
 
March soybean futures settled 4½¢ higher at $13.74¼. May soybean futures finished 3¾¢ higher at $13.73¾. New crop November futures ended ¾¢ higher at $11.49¾.

March wheat futures closed 7¢ lower at $6.58¾. 

March soymeal futures closed $0.10 short term higher at $436.60.

March soy oil futures finished 0.61 higher at 44.52¢ per pound.

In the outside markets, the NYMEX crude oil market is $0.16 per barrel higher (+0.30%) at $52.77. The U.S. dollar is higher, and the Dow Jones Industrials closed 497 points lower (-1.61%) at 30,439 points.

On Wednesday, private exporters reported to the USDA the following activity:

  • Export sales of 680,000 metric tons (26.8 million bushels) of corn for delivery to China during the 2020/2021 marketing year.
  • Export sales of 132,000 metric tons of soybeans for delivery to China during the 2021/2022 marketing year.
  • Export sales of 126,500 metric tons of soybeans for delivery to unknown destinations during the 2020/2021 marketing year.

The total amount of soybeans purchased equals 9.5 million bushels.

The marketing year for corn and soybeans began September 1.

Britt O’Connell, ever.ag, says that volatility is the only constant in the grain markets these days and potentially for the foreseeable future.  

“This morning, grain markets continued strength on yet another round of Chinese purchases. Yesterday, they bought about 50 million bushels of corn and this morning another 26 million. Soybeans also got in on the action with 4.85 million bushels of new crop being booked. On the flip side of that, South American weather is turning more favorable, with sufficient rains in the extended forecast. Believe it or not, there are now worries about getting the soybeans out of the field in a timely fashion and in good condition. This could delay the planting of the Safrinha [second] corn crop. This constant tug-of-war between opposing storylines is what keeps volatility high. Look for the overall trend on old-crop corn and soybeans to remain strong,” O’Connell says.

Bob Linneman, Kluis Advisors, says that the bulls are emboldened by the strong export demand.

“The rebound rally was bolstered by the impressive export sales announcement for corn on the daily sales report. Will the bulls be disappointed if we don’t see more sales again today, tomorrow, or the next day? The bull spreads in corn hit new highs, while the outright futures are still under the highs posted January 13. This suggests corn bulls are in the driver’s seat,” Linneman stated in a daily note to customers.

Linneman added, “The big export sales announcement Tuesday morning proved to the corn bulls that China is hungry for U.S. corn. It also validated the bull case that U.S. exports have room to be increased in upcoming USDA reports. This would tighten the balance sheet further.”

Meanwhile, the Energy Information Agency released its weekly U.S. ethanol production report Wednesday.

For the week ending January 22, 2021, the U.S. ethanol production fell 12,000 barrels per day to 933,000. 

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Tuesday’s Grain Market Review

On Tuesday, the CME Group’s farm markets are rallying on strong demand for corn and soybeans and the end of aggressive investor selling.

At the close, the March corn futures closed 20¾¢ higher at $5.32½. May corn futures settled 19¼¢ higher at $5.33¼. New crop December corn futures finished 9¾¢ higher at $4.44¾. 
 
March soybean futures closed 26¾¢ higher at $13.70¼. May soybean futures closed 26¾¢ higher at $13.69¾. New-crop November futures finished 18¼¢ higher at $11.48½.

March wheat futures closed 16¾¢ higher at $6.65½. 

March soymeal futures settled $6.90 short term higher at $436.50.

March soy oil futures closed 0.97 higher at 43.91¢ per pound.

In the outside markets, the NYMEX crude oil market is $0.22 per barrel lower (-0.42%) at $52.55. The U.S. dollar is lower, and the Dow Jones Industrials closed 32 points lower (+0.10%) at 30,992 points.

On Tuesday, private exporters reported to the USDA the following activity:

  • Export sales of 1,360,000 metric tons of corn (53.5 million bushels) for delivery to China during the 2020/2021 marketing year.
  • Export sales of 102,800 metric tons of corn for delivery to unknown destinations during the 2020/2021 marketing year.

The marketing year for corn began September 1.

Bob Linneman, Kluis Advisors, says that the bulls were relieved that the markets made a comeback yesterday.

“After starting out lower Sunday night, grain prices managed a solid turnaround trade Monday. The corn and soybean charts posted a lower low on Monday, but were able to close near the top end of the range for the day. Many bulls were breathing a sigh of relief after the aggressive selling seen last week. Will we see buyers step back into the corn and soybean market? Or are we entering more of a sideways, range-bound pattern? The range-bound trade would be OK for both the bulls and the bears for next few weeks. It would allow the South American harvest to progress and give the export market a chance to continue working out rationing of supply,” Linneman stated in a daily note to customers.

Linneman added, “The wicked sell-off last week pushed many longs out of positions. The dive also scared many producers into selling cash grain. Although those sales didn’t hit the top, they are likely still very good sales for those operations. If you still feel there is upside for those bushels that were sold, then consider buying call options.”

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Monday’s Grain Market Review

On Monday, the CME Group’s farm markets started lower, but quickly turned higher.

At the close, the March corn futures finished 11¢ higher at $5.11½. May corn futures closed 11¼¢ higher at $5.14¼. 
 
March soybean futures ended 31½¢ higher at $13.43¼. May soybean futures finished 31¾¢ higher at $13.42¾.

March wheat futures closed 14¢ higher at $6.48¼. 

March soymeal futures settled $8.00 short term higher at $429.60.

March soy oil futures are 0.67 higher at 42.94¢ per pound.

In the outside markets, the NYMEX crude oil market is $0.48 per barrel higher (+0.92%) at $52.75. The U.S. dollar is higher, and the Dow Jones Industrials closed 100 points lower (-0.33%) at 30,898 points.

Jack Scoville, PRICE Futures Group, says that the markets are reacting to the end of the outside investors’ short-covering. 

“Up sharply. Looks like the fund long liquidation is over and wow, did we see a recovery. The export inspections were great, but we went up before that was known. It seems to be more like spec-based buying returning with a vengance. I don’t see any other news to account for the rally,” Scoville says.

Al Kluis, Kluis Advisors, says that the markets should bottom by Tuesday. 

“The grain markets closed sharply lower on fund liquidation, margin call selling, and rumors of Chinese purchase cancelations. The selling brought on more selling in a very volatile day. Corn closed down 24¢, soybeans were 58¢ lower, and wheat closed 22¢ to 26¢ lower,” Kluis stated in a daily note to customers.

Linneman added, “If the usual pattern unfolds, then grain prices will bottom by Tuesday. The normal ‘margin call massacres’ usually last five days. After an early week low, watch for a pull back and secondary low in early February. Since the first week of August 2020, the grain markets have bottomed the first week of each month.”

Dave Tolleris, WxRisk.com, says that Brazil’s crops could see some rain this week.
“Over the weekend, more rain moved across central Brazil. In Argentina, rain moved through the northern areas and into Paraguay,” Tolleris stated in a Kluis Advisor’s note to customers Monday.  

Tolleris added, “The extended weather models over the next two weeks show more rain for Brazil and most of Argentina. The longer term week three and four forecasts bring back dry conditions to southern Brazil and northern Argentina.” 

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