MARKET SUMMARY 9-28-2021
The U.S. Dollar Index takes uncertainty and pushes to new highs for the year. The U.S. Dollar Index (USDX) traded to its highest levels since November 2020, crossing back over the 93.00 basis point levels. The USDX was reacting to strong moves in the bond markets, as the Federal Government was working on legislation to open the debt ceiling and keep the U.S. government open. With a Friday deadline approaching, the uncertainty is adding volatility into the markets. Bond markets traded lower on the prospects of higher interest rates, and equity futures tumbled over 500 points during the trading session. The spill-over weakness made it difficult for the commodity market to trade higher unless there was a commodity-specific story, like lean hogs and follow-through buying after the most recent Quarterly Hogs and Pigs report. The market will be watching headlines going into the end of the week, and the volatility will likely remain.
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CORN HIGHLIGHTS: Corn futures, after a strong session yesterday, traded softer early in the morning session on a weaker stock market and harvest. Pressure continued throughout the session with futures ending near the low of the daily trading range. Dec lost 7 cents to close at 5.40-1/2 and Dec 2022 2-3/4 cents weaker at 5.15-1/4. There was also talk that most of yesterday’s strength was on rumors of China’s interest in U.S. corn. Without confirmation of buying, the market went to a more defensive posture as the dollar hit its highest level since last November. It is also likely there was an uptick in farmer selling after a rally of near 45 cents from recent lows. Worries about availability and price of fertilizer are providing strength for December 2022 futures reaching a high today of 5.21, its highest price since late August. The reason for us to indicate today’s high is to point out prices are rallying during the onset of heavy harvest pressure. Nonetheless, if behind on sales, with today’s negative hook reversal, get current with recommendations. Expectations for higher energy prices will likely support corn post-harvest. In the near-term, futures have bounced back to near where they have spent most of the time over the last several months, near 5.50. The Quarterly Stocks report is due out Thursday.
SOYBEAN HIGHLIGHTS: Soybean futures ended the session with a loss of 10-1/2 cents in Nov closing at 12.77 and 9-1/4 weaker in Nov 2022 to end the session at 12.51-1/4. Mostly positive harvest results have kept rally potential in check as has a generally conducive forecast for harvest moving forward. 75% of the crop has dropped leaves. This compares to a five-year average of 66%. Harvest is 16% complete versus a five-year average of 13%. Crop ratings have the good to excellent category unchanged at 58%. This compares to 64% a year ago. The poor to very poor category is 14% versus 10% last year. If the crop ratings are any indicator, it may be difficult to expect USDA yield estimates will rise in future reports. Yield is forecasted at 50.6 bushels per acre which compares to 2020’s crop at 50.2, higher yield despite poorer ratings. Therefore, attention will continue to focus on demand. After building up for two years, the Chinese hog herd is beginning to decline on poor producer margins. This might suggest that end users, in particular China, will remain mostly hand to mouth in their purchasing. Bottom line, they know there is a U.S. crop, and it is being harvested. Supporting prices are a tight carry out coming into this harvest season and expectations for higher energy prices.
WHEAT HIGHLIGHTS: Dec Chicago wheat lost 15-3/4 cents today, closing at 7.06-1/2 and Mar lost 14-3/4 cents, closing at 7.19. Dec KC wheat lost 15-3/4 cents, closing at 7.05 and Mar lost 15 cents, closing at 7.13-1/2. Wheat was not alone in the selloff today, with corn and soybeans also closing lower. This may, in part, have been due to the strength seen in the U.S. dollar, which is at its highest level since last November. Winter wheat plantings are reported to be 34% done vs 21% last week and 32% average. Winter wheat is reported to be 9% emerged vs 3% last week and 8% average. On Thursday, we will receive the USDA’s Grain Stocks report but also the Small Grains Summary, on which they are likely to lower the production estimate, with lower harvested acres and higher abandoned acres. U.S. wheat ending stocks in 2021 are at eight-year lows, in part due to the drought faced by the northern Plains. The forecast for the HRW Wheat Belt is for 1/2 to 2 inches of rain starting Wednesday. In global news, Brazil is talking about banning GMO wheat imports. This could stop annual imports of 6.7 mmt of Argentinian wheat, meaning that Argentina will need to find new homes for those exports. Consequently, Brazil will also need to find new sources – maybe from Russia and the United States.
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Author
Bryan Doherty