MARKET SUMMARY 12-28-2021
Stock market to new highs. Pent up consumer demand for return on investment has the trade continuing to buy dips in the equity markets. While stocks may be overbought from a long-term perspective, investment dollars have few places to go that can offer returns. Savings is losing money in an inflationary environment. Debt instruments such as bonds and savings offer so little that many are willing to take the risk of the equity market despite likely being overvalued. Consumers who saved dollars over the last 18 months on travel or other goods are investing savings into equity instruments which have helped propel prices higher. On the one hand, so far so good. Yet, on the other at some point, the last to be a buyer will suffer greater losses. In the world of investing that is often the smaller speculator.
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CORN HIGHLIGHTS: Corn futures traded both sides of steady throughout the session, but weakened into the close finishing with losses that negated yesterday’s gains. Mar corn lost 10 cents closing at 6.04-3/4 and Dec down 8-1/4 to end the session at 5.48-3/4. A bearish key reversal and stochastics sell signal may have contributed to losses as did the idea of traders taking gains before the end of the year.
Attention will continue to focus on South America as there are suggestions there will be at least some crop loss due to dry conditions. Yet, the market has been moving upward on momentum in commodity prices which we believe is due more to cash flow than necessarily the need to ration inventory through higher prices. Farmers can read and see that ethanol margins are positive, so being reluctant sellers has paid dividends so far this fall/early winter. Weather models are split for South America with some only indicating scattered rain in the forecast, while others lean toward mostly dry.
SOYBEAN HIGHLIGHTS: Soybean futures finished the session with small losses of 2-1/4 to 5 cents. Jan soybeans lost 3-1/4 cents to end the session at 13.59-1/2, 16-1/4 cents of the daily high. New crop Nov lost 5 cents closing at 12.72-1/4. Weaker corn and wheat prices were enough to pull soybean from positive to negative late in the session. Weather premium continues to suggest concern over crop conditions in Brazil and Argentina, yet forecasters were split on the short-term outlook which kept rally potential in check today. An increase in farmer selling may have kept a limited upside for prices today.
Soybean meal managed to finish with small gains closing higher for the seventh session in a row. However, strong gains from earlier in the session were erased once prices climbed into new contract highs. Strengthening energy prices have provided recent support for soybean oil, as did firmer palm oil today yet, by day’s end positive gains were erased. One scenario might suggest that managed money has been buying soybeans anticipating some potential weather developments in South America that would be less than ideal. If that is the case, the bet has been correct so far. Yet, we want to be very cautious to argue that much of any significant crop damage or loss has technically occurred. Photos on the internet may show isolated areas that should be cautiously reviewed so the conclusion of widespread crop damage or loss is not overstated.
WHEAT HIGHLIGHTS: Wheat futures had a poor day; yesterday’s technical correction saw follow-through selling today. Mar Chi lost 20-1/2 cents, closing at 7.83-1/2 and Jul down 17 at 7.83-3/4. Mar KC lost 25-1/4 cents, closing at 8.21-3/4 and Jul down 18-1/4 at 8.20-1/2.
Yesterday’s bearish key reversal on the wheat charts appears to have been a solid sell signal for traders today. But it was not just the U.S. markets that suffered. Paris milling wheat futures gapped lower on the charts today and closed significantly lower. In terms of news that is driving the wheat market, there are a few items that could be pointed to as culprits. First and foremost, the poor inspections number (10 mb) yesterday was disappointing. Additionally, the Iraqi tender of 500,000 mt to be sourced from the U.S. and Canada was reportedly pushed back. Looking over to Russia, they may be withdrawing troops from the Ukrainian border (and the market perceives this as bearish). Russia, like parts of the United States, is also receiving snow which may help insulate the crop and provide moisture in the spring. There are still reasons to be bullish wheat. As an example, Russia’s export tax is just under $95 per metric ton which should help U.S. exports. Today though, it seems like any bullish factors have been overshadowed.
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Author
Bryan Doherty