MARKET SUMMARY 9-15-2021
The crude oil market is showing bullish strength and is poised to challenge the most recent contract highs. On Wednesday, crude oil futures traded over 3% higher and broke out technically, potentially opening the upside, trading to its highest level since July. The strong move higher today allows charts to break through key resistance and the trendline that was working over the top of recent highs. Technically, the key will be follow-through buying in the upcoming sessions. The strength in the markets was fueled by the weekly Energy Information Administration (EIA) reports reflecting tight energy supplies. The report showed a greater than 6 million barrel weekly drop in domestic crude supplies, making this the 6th consecutive weekly decline. The 6.4 million barrel drop in supplies nearly doubled expectations. The impact of Gulf storms has added to the supply shortage, but overall reduced U.S. production has only tightened the picture. The potential is still there for a push back to contract highs from early July because the tight supply picture still looks concerning, and forecasts for a strong demand tone should support prices. The potential second leg of this crude rally may just be beginning, as some analysts are talking about the prospects of $100 crude this winter.
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CORN HIGHLIGHTS: Corn futures firmed on the overnight with follow-through buying noted after a strong close on Tuesday. Dec futures led today’s rally closing 13-1/4 cents firmer at 5.40-3/6. Dec 2022 gained 5-1/4 to close at 5.07-1/2. Technical buy signals and increasing confidence, the Gulf is angling toward resumption of normalized loadings. Some early yield results are indicating mixed to disappointing. We caution to not get too far into the analysis of the crop from very early feedback, yet results so far suggested a universal above-average yield expectation is unlikely. On the contrary, pockets of disease and dry weather-affected crops may limit yield. The bottom line is that it creates another layer of uncertainty that in a more normal weather year may not exist. Overhead resistance lies at 5.45 Dec, the bottom of an upward support channel line that was violated when prices broke underneath this line. The 50-day moving average is at 5.45 and 100-day at 5.55, traditionally more challenging moving averages for the market to move above. Ethanol production is on the rise this past week with inventories declining, also supportive.
SOYBEAN HIGHLIGHTS: Soybean futures followed the corn and wheat markets higher finishing the session with Nov gaining 12 cents to close at 12.94-1/2. Jan closed 11-3/4 cents higher at 13.03-3/4. Meal lost near 2.00 while oil gained near 150 points, gaining for the second session in a row. Exports canceled and moved to Brazil are a little concerning but not overly problematic. Delays to shipping due to Hurricane Ida and a lack of soybeans in the supply pipeline are likely reasons for this most recent change. Yet, from one perspective; does it really matter whether the beans are sold from the U.S. or Brazil at this time of year? Probably not at this time of year. Brazil has very little soybeans to market, and most likely they are helping meet the needs of China which has logistical concerns due to lack of U.S. beans in the supply pipeline, as well as problems in the Gulf. Every bushel sold now means one less later. The market seemed to share that sentiment today, shrugging off what appeared to be negative news and finishing with double-digit gains.
WHEAT HIGHLIGHTS: With Sep futures officially out the way, the new official front-month Dec gained 11-1/2 cents closing at 7.12-1/4 & Mar up another 12-1/2 cents closing at 7.23-3/4. KC Dec contracts traded in line with Chi today posting a 14-1/4 cent gain, closing at 7.16 & March gaining 14 cents closing at 7.24-1/2. Wheat started the morning off strong and never lost momentum. Concerns over tight supplies of milling quality wheat, along with still an extremely tight stocks-to-use ratio have the bulls feeling more confident. Paris milling futures gapped higher on Monday and have continued to push higher today and yesterday. Lower U.S. spring wheat production is expected, as more abandoned acres are likely to be found, combined with shrinking French, Canadian, and Russian crops have the buyers coming back to the wheat market. Up until recently, Australia which is believed to produce a near-record crop this year is currently reporting 40% of all acres are too dry & 25% of Argentina wheat acres are in a similar state. Not all are in favor of the bulls. News today that Brazil’s wheat harvest could produce a record number. Ukraine’s crop raised to 31.2M tons versus 30.5M tons last month. It’s still a very long time between now and next harvest, all of these projections and increases & decreases will continue to push on a market that’s already very volatile.
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