MARKET SUMMARY 08-06-2021
Gold futures on Friday ended a difficult week with the sharpest daily price drop since mid-June, losing over 2%. This move also marked the sharpest weekly drop in two months, losing over $50/ounce in this week’s trade. Gold prices have been in a consolidation pattern, hanging on to the $1800/ounce are, but after the U.S. Monthly Jobs report for July came in better than expected, and delivering a further jolt to the U.S. dollar and bond yields, gold futures were open for a tumble. The technical breakdown in gold sent prices to the lowest point since the end of June, erasing any gains from that time period into the summer months. The June low at $1750 an ounce, and additional follow-through selling next week will likely bring a test of that floor. A break there leaves a lot of room under the market for prices to retreat.
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CORN HIGHLIGHTS: Corn futures traded firmer throughout the session, finishing mixed with nearby Sep losing 0-3/4 closing at 5.50 and Dece adding 3-1/2 to finish the session at 5.56-1/2. For the week, Dec added 11-1/2 cents. While trading in a tight range the last 3 weeks, it is unlikely that Dec will stay near 5.50. Aug will be critical from a weather perspective. The most recent 6-10 day forecast indicates the western Corn Belt to be below normal in precipitation and above normal in temperature. For those who were not fortunate enough to receive moisture over this past week, the likelihood that yield will be declining is growing by a daily measure. Most of the Midwest could use rain during August and the central and eastern parts have good chances of additional moisture in the days ahead. Big picture perspective suggests that the Northwest could see a reduction in the cattle herd and with dry weather in Canada the same. This could reduce overall demand, yet at the same time, these regions will still likely have to be importers of corn. Next week on Thursday the USDA will release its monthly Supply and Demand report. The average pre-report estimate for yield is 177.6 bushels and the average projected carry out at 1.096 bb. July yield was 179.5. Total production is forecasted at 15.004 bb. Tight basis provides underlying support.
SOYBEAN HIGHLIGHTS: Soybean futures finished higher gaining 19-1/2 in Aug closing at 14.22-1/4 and 8-1/2 firmer in Sep to end the session at 13.44-1/4. Nov ended 8-1/4 higher today to close at 13.36-3/4, losing 12-1/2 cents for the week. An improvement in crop ratings and weaker soybean oil plagued prices early in the week. The need for rain along with calls on the 10–14 day outlook for warmer and drier provided support late in the week. Reuters published average estimates for next week’s USDA Supply and Demand report. Yield is forecasted at 50.4 bushels an acre, slightly less than the 50.8 on last month’s report. Projected carryout for this marketing year is 135 mb and for the 2021/2022 season 155 mb. Total production is forecasted at 4.375 bb. The longer-range forecasts through today are not offering much for the regions that need copious moisture. While prices were down this week, we expect next week’s supply and demand figures, as well as weather, to provide underlying support. Export sales to China were supportive today, yet the market is still not seeing enough sales to suggest importers are anything more than hand-to-mouth. Soybean oil, while choppy in price, will remain supported due to tight world inventory. Canada will experience a shortfall of canola due to dry conditions.
WHEAT HIGHLIGHTS: Sep Chi up 6-1/4 cents at 7.19 & Dec up 8 cents at 7.33-1/4. Sep KC wheat up 14-1/4 cents at 7.05-3/4 & Dec up 14-1/2 cents closing at 7.17-1/2. Wheat climbs today as the world crop outlook shrinks, with crops in the U.S., Canada, Russia, and the EU all dwindling in size due to adverse weather conditions. The supply of wheat is becoming tighter and tighter, harvesting is making only sluggish progress in many places. Southwestern Russia continues to contend with high temperatures. Western Europe is dealing with rain at harvest time and Argentina has experienced low temperatures, unfavorable for wheat. These recent adverse weather conditions will bring a lot of attention to USDA’s August 12th report, but world wheat production will probably still be at a record high level. Although U.S. wheat exports are off to a slow start, 30% down from this time last year, global demand is very strong. U.S. spring wheat supplies will continue to be extremely tight and that should keep the legs under the wheat market in the near term.
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Author
Bryan Doherty