TFM Daily Market Summary 09-29-2021

MARKET SUMMARY 9-29-2021

Cotton prices traded to a decade high this week as futures broke through the $100 barrier. Cotton futures have shot higher in price recently, trading through the $100 barrier for the first time in 10 years, as concern regarding supplies of U.S. cotton supports prices. Recent heavy rains in cotton country have threatened the quality and quantity of the U.S. crop in Texas and the Mississippi Delta. The U.S. is the world’s biggest exporter of cotton, and to go with the supply concerns, demand from key cotton importing countries of China, Turkey, and Pakistan, are looking for product. Helping support the mix has been some of the logistical issue of trade as supplies are backed up and not getting to destinations. This has allowed cotton prices to rise 48% this year. The surge in prices has caught some traders in large short positions, and the “short squeeze” has also added to the buying support.

 

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CORN HIGHLIGHTS: Corn futures gained 4 to 6-1/2 cents on mixed harvest results and expectations that tomorrow’s quarterly Stocks report may have a supportive tone. A sharply higher dollar couldn’t hold corn back today. December futures gained 6-1/2 to lead today’s rally, closing at 5.39, its highest close since August 31. December 2022 gained 4-3/4 cents, firming on growing concern that sharply higher fertilizer costs and potential supply availability could influence acreage for next year. The average pre-report estimate for quarterly stocks is 1.167 bb, slightly less than the September USDA Supply and Demand report estimate of 1.167 bb. Considering recent quarterly stocks reports have had a favorable tone, some believe this report may too be supportive. A general belief that usage for corn has been stronger than forecasted coupled with crop production challenges the last two years may fuel this bias. Perhaps more important is continued strong basis levels which suggest supply on hand supplies may be tighter than expected. As for skyrocketing fertilizer prices and crude oil trading near 75.00 per barrel, farmers may be less likely to sell both this year’s crop as well next year’s.

SOYBEAN HIGHLIGHTS: Soybean futures firmed, gaining 5 to 6-3/4 cents on short covering and position squaring in front of tomorrow’s USDA quarterly Grain Stocks report. Front month November lead today’s rally, closing at 12.83-3/4. Today’s trade guess is 172 mb in storage at the end of August. The September USDA Supply and Demand report was 175 mb. Obviously, the market is looking for little new change to supply on hand. If there is to be a surprise, it might likely come from higher-than-expected supply, as both exports and crush slowed during the summer months after high prices rationed demand. Strong price action and what appears to be a crop yielding close to last year, 50.2 bushels an acre, would suggest that, unless significant increases in yield or tomorrow’s figure is surprisingly bearish, supplies remain critically tight. Most farmers will probably suggest guessing yield prior to harvest is challenging at best. Final yield results may vary, sometimes significantly. This season’s weather was one of extremes. Pockets of dry weather or pockets of too wet along with disease issues suggest that crop ratings at 15% poor or very poor indicate the likelihood of national yield surprisingly better that expected is not great. Tomorrow will provide the market with new information, and unless there is a major surprise, tight supplies will be confirmed. Palm oil continues to hover near contract highs confirming limited world inventory of vegetable oils.

WHEAT HIGHLIGHTS: Wheat futures recovered after yesterday’s selloff with support from higher corn and soybean prices and expectations that tomorrow’s report will confirm tightening supply. Dec Chicago wheat gained 3-3/4 cents today, closing at 7.10-1/4 and March gained 3-1/4 cents closing at 7.22-1/4. Dec KC wheat gained 6-3/4 cents, closing at 7.11-3/4 and March gained 6-1/2 cents, closing at 7.20. Tomorrow we get the USDA’s Small Grains Summary, as well as the quarterly Stocks report. The pre report wheat stocks estimate is 1.857 bb. This compares to 2.158 bb as of this time a year ago. US wheat supplies are estimated to be at their lowest level in 8 years. Additionally, the Small Grains Summary is expected to show the lowest US wheat production in 19 years. With the Northern Plains being drought stricken, the Small Grains Summary will give us the first estimate of abandoned wheat acres. Upcoming rains are expected the next few days in the US Southwest Plains and should be beneficial to the HRW crop. Tomorrow will be key not only because of the reports being released, but congress will also vote on whether to raise the debt ceiling. If the vote does not pass, key USDA reports may be delayed. These reports help give the market direction and provide important information – without data it may be difficult for the market to find value. From a global perspective, French ports are filling up with more Chinese boats expected to load wheat; it is unknown if it is for milling or feed. In addition, there is concern over rising inflation in the food and energy sectors, which is predicted to increase.

Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. Stewart-Peterson Inc. is a publishing company. SP Risk Services LLC is an insurance agency. A customer may have relationships with all three companies. TFM Market Updates is a service of Stewart-Peterson Inc. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.

Author

John Heinberg

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