TFM Daily Market Summary 1-4-2022

MARKET SUMMARY 1-4-2022

While milk futures prices have been strongly moving higher, a trend in fluid milk sales to the consumer is still concerning. Fluid milk sales were declining about 2% annually prior to 2020, and an adoption of “stay at home” lifestyle during COVID breakout briefly halted the decline. In 2021, milk sales began falling again into the longer-term declining pattern. Due to inflated numbers of sales in 2020, the decline is pushing 4% in 2021. As the country has gotten back to a more mobile type of society and eating at home has lessened, the shift away from milk usage has been noticeable as milk competes against other replacement products. Despite the weaker fluid milk sales, the strength in the dairy market has come from product demand as cheese, butter and dry milk powder are seeing strong international demand.

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CORN HIGHLIGHTS: Corn futures again started with strength after the pause session. This time, however, they continued higher, unlike yesterday, and finished with sharp gains of 8 to 20-1/4 cents with Mar leading today’s gainers closing at 6.09-1/2. Growing weather concerns in South America, good margins for ethanol, and short covering were noted features today.

Managed money, according to the latest Commitment of Traders report, is net long 373,00 contracts as of last Tuesday. What may have likely happened the last several sessions is a pickup of farmer selling late last week and then some exiting of long positions by traders. With the forecast continuing to suggest warmer and drier in parts of South America and soybean prices shooting higher, corn futures after finding support at the 40-day moving average, moved higher buying noted today. There may have been short-covering as well. After the first of the year weather becomes increasingly important for South American crop production with some private analysts beginning to downgrade both corn and soybeans. Lastly, corn may have found some spillover support as higher soybean meal prices suggest feed buyers are covering needs.

 

SOYBEAN HIGHLIGHTS: Soybean futures rallied on the heels of growing weather concerns, short coving, soy-meal strength due to lysine shortages, and higher energy. Jan futures closed 34-3/4 cents higher and Mar gained 34-1/4 firmer to close at 13.89-3/4, its highest close since June 11.

The inverted head and shoulders formation indicated a topside objective for Mar near 14.00 with the contract high of 14.45-1/2 as the next potential target. Private forecasters continue to downgrade the Brazil and northern Argentina crops which is keeping bullish traders active. We want to be cautious not to argue weather conditions are affecting all of the crop growing regions, however, key areas in southern Brazil and northern Argentina are showing impact. A change in the forecast or actual rainfall over the next week may quickly spell a top for prices. However, for now, the trend is higher and the price pull-back late last week proved nothing more than a buy opportunity.

 

WHEAT HIGHLIGHTS: Wheat futures rallied today with spillover help from corn and soybeans. Mar Chi gained 12 cents, closing at 7.70 and Jul up 11-1/4 at 7.66-1/4. Mar KC gained 12-1/2 cents, closing at 8.04 and Jul up 12-1/2 at 8.01-1/2.

With limited bullish news in the wheat market, it seems that today’s gains came with the assistance of corn and soybeans. A high U.S. dollar, slow export pace, and uncompetitive prices have been weighing on U.S. wheat futures as of late. But the rally today in the aforementioned grains seems to be due, at least in part, to South American weather concerns. Though not directly affecting wheat, the Parana ag minister in Brazil stated that their soybean yields could be down as much as 39% (10 mmt). This helped soybeans to rally today and wheat came along for the ride. Also helping today were the poor reports of winter wheat crop conditions. The USDA reported Kansas winter wheat conditions at only 33% good to excellent and Oklahoma conditions at a dismal 20% good to excellent. The Illinois soft wheat crop is rated quite a bit higher at 75% good to excellent, though that number is down from November’s 79%. Current U.S. weather likely keeps KC wheat the most well supported due to the dry conditions that have been plaguing the southern Plains.

 

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 the 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

Bryan Doherty

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