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Mark's Market Talk

November 16, 2020

The USDA released their November WASDE report last Tuesday. Normally this report is a non-mover as it sits between the September report heading into harvest and the postharvest report released in December.  However, this year it was a big mover. On the corn side they lowered the yield 2.6 bushels and raised the exports 325 million bushels. Along with some other minor changes this lowered the estimated ending stocks 465 million bushels down to 1.702 million bushels. This is a very bullish number especially when you consider that going into this season many projected a 2.6 or greater carryout. The board loved this report and corn ended the day 16 cents higher. Thursday, they took some of that increase back on profit taking and we ended last week with December corn 2 cents higher. Basis levels stayed strong as end users are having to work hard to get their needed supplies bought. With harvest all but over the farmers have shut the bin doors and appear to be content holding for the time being. It is hard to find a similar year where we have had such a harvest rally without having a poor crop. The USDA admitted last month that corn stocks were overstated going into this year’s harvest and that has been proven in the countryside. Add in the great export pace along with good domestic demand and suddenly corn is profitable. If COVID-19 19 had not invaded our lifestyle, the ethanol business might not be depressed and then we really would have had something to talk about. News last week concerning a promising vaccine for COVID-19 gives us great hope that help is just around the corner. The soybean market responded big time to last week’s report as ending stocks were reduced to 190 million bushels. This was due to a 1.2-bushel reduction in yield. They did not raise the export numbers and that has many people thinking the actual carryout may dip down close to 100 million bushels. If that happens the US pipeline will be sucking air next summer as we wait for new crop beans to show up. January beans ended the day Tuesday up 35 cents, and for the week they were up 46 cents. Farmers sold a large volume of beans this fall as higher prices enticed them to turn their beans into cash. In normal times once the farmer has sold most of his crop prices tend to work higher yet. With the reduced carryout numbers, we have this may well happen this marketing year. The higher board numbers last week did not seem to affect basis levels as they remained strong for the season. The exception would be the river markets that are struggling with very high freight rates and a barge shortage. However interior markets remained aggressive as farmer movement is slow and the commercials see an opportunity for even better basis levels in the future. Several customers are asking about 2021 harvest prices. Local October 21 corn bids are in the 3.60’s while beans are in the 9.70 range. On the corn side we are currently looking at normal basis levels for that time frame compared to the narrower than normal basis we have today. On the bean price there is a 1.08 inverse right now on the board from Jan to Nov. The weather in South America and how it affects their crop in the next 3 months could have a huge impact on the 21 prices. If they start getting good rains 9.70 may look good. But if they continue to struggle with hot dry weather things might get really interesting in a hurry.   
Posted: 11/16/2020 2:09:49 PM by Rob Matherly | with 0 comments

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