MARKET SUMMARY 11-30-2021
The wheat market has been hardest hit of the major grains, with the turn lower since the middle of last week. On Tuesday, November 24, the March Chicago wheat market posted a bearish reversal as prices broke to new contract highs during the session, but weak price action saw trade close lower on the day. This technical signal opened the door for some long liquidation and profit taking in an over-bought market. Global wheat prices have been on the rise, with concerns of tight available supplies for importers globally. Weather issues in many regions of the globe have added to the strength, but with the holiday trade last week, a topping signal was put into the charts. As news broke regarding the new variant of COVID, the risk off trade in the markets triggered by profit taking and wheat was extremely vulnerable. Since the November 24 high, prices have quickly lost over 90 cents, and are possibly looking to test support under the market near the 50-day moving average. This sell off has been aggressive, but in modern markets the combination of speculative trade and momentum trade can quickly drive prices in either direction.
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CORN HIGHLIGHTS: Corn futures plunged today, as did most commodities and equities on growing concern of a resurgence of Covid. A new strand that had one CEO of a vaccine manufacturer indicating he was not sure if current vaccines would be useful against this variant. Energy prices sank again today, giving up $3.00 to 4.00 at the time of this writing. December corn lost 14 cents to close the session at 5.67 yet did manage to finish 5 cents off the daily low. December 2022 closed 9-3/4 cents lower at 5.46-1/2.
The most recent Commitment of Trader’s report indicated that manage money was net long as much corn as of last Tuesday as they were back in May when their position peaked at just over 400,000 contracts. The most recent report indicated they were long over 366,000. Technical support held at the 40-day moving average. The La Nina pattern in South America continues to suggest a warmer and drier pattern in mid-late December. Today’s trade looked as though the corn market was more of a follower of weaker commodities than a leader. With that being said, although critical weather is yet to come for the southern hemisphere, there is not a viable weather threat at this time. With the export pace behind what the USDA is forecasting next week’s WASDE report
SOYBEAN HIGHLIGHTS: Soybean futures finished with losses for the second day in a row and lower in 3 of the last 4 sessions. January closed 24-1/4 weaker at 12.17-1/4 and November 2022 down 20 cents at 12.09. Weaker crude oil prices along with sharp losses of more than 300 points in soybean oil were, in part why, soybean futures dropped so hard. Weaker corn and wheat coupled with sell stops triggered once January futures dropped under the 40-day moving average at 12.41 were also reasons prices were lower today.
Today’s trade activity in many commodities was considered a risk off. Growing concern that a new COVID strain could affect world commerce is weighing on markets this week. For the most part we would term southern hemisphere weather as conducive to crop production, yet many forecasters are suggesting a drier outlook for December and January in southern Brazil and northern Argentina as a La Nina pattern keeps moisture north of these regions. With soybean oil prices leading the way lower futures were vulnerable to a break and today this was evident. We would not be surprised if January futures retested it’s recent low of 11.81-1/4.
WHEAT HIGHLIGHTS: Wheat futures took a beating today as concerns regarding the Omicron virus strain continue to increase. Dec Chi lost 33-3/4 cents, closing at 7.73-3/4 and July down 30-1/2 at 7.87. Dec KC lost 35 cents, closing at 8.19 and July down 28-1/4 at 8.09-1/4.
Wheat has lost a significant amount of momentum over the past few trading sessions. With uncertainty surrounding the new virus variant, players in the market do not seem to want to take any risks. When covid first became a global problem, it affected not only commodities, but entire economies. With the CEO of Moderna’s recent comments that the vaccine may not be as effective against this strain, the worry is that we could see another economic slump, along with decreased demand for fuel, raw materials, (and most impactful to wheat) a decrease in food demand. Akin to US futures, Paris milling wheat futures again closed sharply lower and even gapped lower in deferred contracts. Adding to the recent negative tone, it was revealed that Australia and Argentina are expecting record large wheat crops. There was positive news today – as an example, it was reported that Egypt bought 22 mb of wheat from Russia, Romania, and Ukraine. Ethiopia was also tendering for wheat today in the amount of 14.7 mb. Additionally, the USDA reported that 44% of the US winter wheat crop is rated good to excellent, which is the second lowest level since 2010. Unfortunately, any supportive news today was simply overshadowed by strong selling pressure.
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Author
Bryan Doherty