TFM Daily Market Summary 07-14-2021

MARKET SUMMARY 07-14-2021

The weather and drought issues in the northern Plains are also impacting the Canadian prairies and the crops grown in that region. Besides wheat crops, canola is a key crop, and the drought conditions have strongly impacted potential production. The difficult weather has sent canola prices to record highs, as the November contract traded at nearly $950/MT on Tuesday, nearly $293/mt off the low of 6/18. The strong canola prices have spilled over into the soybean market for U.S. producers. Canola is used as an edible oil and feed ingredient, and the surge in prices has been one of the factors pushing soybean oil prices higher to their record levels this marketing year. Private analysts are forecasting even weaker production, as weather models forecast ongoing heat and dryness through this region going forward, with 100+ degree temperature. This will likely push canola prices higher and will keep support on the soybean complex as well.

CORN HIGHLIGHTS: Corn futures traded both sides of steady on the overnight and early morning and eventually decided to rally finishing with strong gains and firmer for the third day in a row. Sep futures gained 17 cents closing at 5.68-1/4 and Dec added 18 to finish the session at 5.58-3/4. Managed money is considered long in the area of near 200,000 contracts, well below the peak of 400,000. Yet with 65% of the crop rated good to excellent, the concern is that prices are subject to more liquidation. It should not surprise anyone if funds eventually are net-short corn futures. To that end, if behind on sales, get current with recommendations. Call options have recently declined in value as well. A consideration is to sell cash and purchase calls. Yet, there is a lot of key weather ahead of the crop. Today’s strength is another sign that; despite funds reducing positions since late May, volatile price action continues. Be prepared for almost anything to occur. Firmer wheat and bean prices this week are helping to keep corn supported yet, that is likely to only last so long. We are not downplaying the need for copious moisture, especially in the northwestern regions of the Midwest, yet we also want to be prepared for heavy liquidation of long fund positions if there are improvements to crop conditions. The technical picture has Dec gaining over 50 cents from the most recent low and hovering at a 50% retracement of the high from two weeks ago and low last week. This we will call a pivot point. Stay balanced, new life in the market this week has bulls arguing tight carryout leaves no room for error. A private firm that uses satellite is suggesting yield is 172 versus the USDA 179.5.

SOYBEAN HIGHLIGHTS: Soybean futures firmed again today with futures closing higher for the fourth consecutive session gaining 38-1/4 cents in Aug and 31-1/4 in Nov. Aug closed at 14.53 and will be the lead month as today was the last trading day for Jul. Nov ended the session at 13.83-1/4. Recent strength in canola futures, as well as tight supplies of soybean oil, is providing underlying support as are expectations for crop ratings to stay near 60% good to excellent and 11% poor to very poor. The poor to very poor category is more than double for this same time a year ago. While the mindset amongst buyers is to remain hand to mouth, a more aggressive ownership position could occur if the market senses less than ideal weather. As mentioned yesterday, it is difficult today to expect 51 bushels an acre yield when 10% or more of the crop is in difficult shape. Today we do not have confidence the rest of the crop can make up the difference. Yet, we exercise caution as critical weather is from this point forward. If conditions improve, end users will back away, and speculative interest could quickly turn bearish. Soybean meal had an impressive showing with gains of well over 10.00 on futures, perhaps signaling that it has reached a low enough level for end users to be more aggressive. A buy signal in stochastics was noted for meal today.

WHEAT HIGHLIGHTS:  Sep Chi 20-1/2 cents at 6.54-1/4 & Dec up 19-1/2 cents at 6.62-1/4. Set KC wheat up 16 cents at 6.27-3/4 & Dec up 16-1/4 cents closing at 6.38-3/4. Another strong day in the wheat market, led again by MNPLS wheat futures but easily pulling KC and Chi along for the ride. Most of this week’s rally is attributed to the USDA lower production for spring wheat and of course the dismal weather conditions in the northern Plains. Rain did land in South Dakota today but whatever they got today will be it for the next 10-14 days. Hot temps are expected to return to spring wheat areas starting tomorrow, more damage to crops is expected, although one might wonder what’s left at this point? SRW wheat harvest still had to continue to contend with the rains that are falling there. Globally, record wheat is still being projected at 792.40 mmt. However, that number may see some adjustments in the August report, as early reports of yields not being what is expected in Russia are starting to come in. However, Australia is thinking they may have a record crop this year. So, too early to tell just yet what one might lose in yield could the other make up for it? Exports will be out tomorrow, the market is only looking for 200-300K in exports as Romania & Russia continue to be global favorites for tender.

Author

Bryan Doherty

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