MARKET SUMMARY 09-01-2021
Despite the recent concerns for the strength in the U.S. Dollar Index, a recent dovish tone by the Fed has put the Dollar Index to one-month lows. Just a couple of weeks ago, the U.S. Dollar Index was trading at its highest level for 2021, and commodity markets were concerned regarding that strength and possible effects on demand. Lately, the dollar has been under intense selling pressure, and that selling pressure accelerated with Fed Chairman Powell’s statements and dovish tone after the meeting in Jackson Hole, Wyoming. Chairman Powell signaled that the Fed would slow down its $120 billion/month asset purchase program. Recent strength in the U.S. economy has helped develop this view, and the tapering of the buying program will end later this year as long as the American economy is doing well. The technical picture for the dollar has weakened in recent sessions and is poised to challenge support at the 92.00 level. This could be a key crossroads for ongoing weakness and a market that would be more potentially friendly for commodity prices in a softening dollar atmosphere.
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CORN HIGHLIGHTS: Corn futures continued where they left off yesterday, with weaker price action. Additional confidence that harvest will fill the pipeline has created a more defensive tone for prices, not only in corn but soybeans and wheat as well. Since peaking early in the week at 5.58, Dec futures have lost 39-3/4 cents with today’s low posted at 5.18-1/4. Today’s lower low, as compared to yesterday, is technically a less than favorable signal. It is difficult to suggest where futures may trade to. If using history as a guide, with Dec futures peaking at 6.38 and losing 20% in value (common in most years), this would suggest the 5.10 area. Hurricane Ida may have been the catalyst for this week’s price drop. Yet, with a broad-based sell off in many commodities, it may be more reflective of managed money reducing long positions. This is not necessarily a surprise in front of harvest. The weekly ethanol report indicated total production was 6.335 million barrels, down from 6.531 last week with stocks at 21.11mb, down from last week’s 21.223. Corn used was 91.43 bn, down from the previous week’s 94.62 mb. Total for the year is 5.000 billion bu.
SOYBEAN HIGHLIGHTS: Soybean futures lost 11 to 21 cents as front-month Sep led today’s losses closing at 12.77-3/4. Nov lost 14-3/4 cents to end the session at 12.77-3/4, well below its high from Monday at 13.36-3/4. Recent rainfall is expected to have benefited much of the crop, potentially adding to yield potential. We have argued that it is difficult to expect more than 50 bushels an acre given that 15% of soybeans are rated as poor or very poor, yet where the crop is very good, yield potential is strong. The market may believe, that in the end there are more good acres of soybeans to help the total yield estimate as compared to acres which will be disappointing. Weaker palm oil and soymeal prices led to another day of losses for soybean oil and the soybean complex. It has been nothing less than a disappointing week for Nov soybean futures which first failed to break above moving averages on Monday and then have since lost 60 cents from the high on Monday. Rumors of China buying U.S. beans have failed to stimulate any type of price recovery. We are believing more and more that end user posturing is to buy only as needed, at least for now. And, without follow-through buying on positive days such as we saw last week when futures were over 0.40 higher, traders are quick to exit longs or establish short positions.
WHEAT HIGHLIGHTS: Sep futures, on thinning volume, lost 5-3/4 cents closing at 7.01 and Dec lost 8 cents closing at 7.14-1/4. KC Sep lost 10 cents closing at 6.95-1/4 with a volume of only 76 contracts today, and Dec contracts lost 8 cents at 7.04. Markets were pressured today from other markets and fund selling. Even though the risk to the wheat market specifically is minimal, the stalls in Gulf exports from Hurricane Ida spilled over into wheat today. Despite prices being down this week in the wake of the hurricane & aftermath, wheat is still staying above support levels. Much needed rains are headed toward southern Plains, including Kansas. Global demand still remains strong, however, it’s worth noting that Algeria recently deferred from buying French wheat over quality concerns and poor test weights. SovEcon dropped Russian production numbers again, down to 75.4 mmt (still 3 mmt more than USDA’s current projection). However, on the bearish side, Ukraine crop is projected to be 80.6 mmt compared to last year’s 65 mmt.
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Author
John Heinberg