MARKET SUMMARY 10-07-2021
Oat futures traded to new all-time high prices. The front-month December oat futures traded limit higher on Thursday, closing the 25-cent limit higher to $6.22-3/4, the highest futures prices ever for the cereal grain. The oat market has been dealing with an extremely low production year, impacted by reduced acres and extreme dryness in the oats production areas. The move this week pushed prices through highs established in March 2014. The oat market may be driven by speculator money or momentum trade, as prices have accelerated quickly in the past couple of weeks to these lofty levels. The strength in oat prices has started catching on in the media, with coverage about the prices, the tight supply, and the potential impact for the consumer in the weeks and months ahead due to the fundamental picture in the oat market. The oat market is thinly traded and will be open to aggressive volatility and price movements. Currently, the momentum is higher, but the oat market can quickly change direction and drop in price. In March 2014, oat futures traded to the $6.00 level, the old all-time high, but finished the month down $1.11/bushel from the previous month’s close, and $2.14/bushel off the $6.00 high.
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CORN HIGHLIGHTS: Corn futures firmed late in the session and finished 2 cents higher in Sep as it led today’s late-session comeback. After trading more than five cents lower, corn futures followed soybeans and oats (limit higher) into the close. Export sales at 49.8 mb were termed supportive as well.
Year-to-date sales are 1.046 bb, ahead of last year’s 1.018 bb. Total projected sales are estimated at 2.475 bb. As you can see, the year is off to a good start, however, sales have slowed significantly since mid-summer. Today’s number was supportive and welcomed. As indicated before, the market has moved into a window of time where end users are buying hand to mouth due to high prices and expectations for more inventory availability at likely lower prices during the harvest season. Yet, the markets have been very dynamic over the last year with sharply higher energy, wheat, and oat prices all providing underlying support, as well as competition for corn acres. Fertilizer is now the hot topic as high prices and concerns about supply may mean fewer acres for corn. From a big picture perspective, if fertilizer prices stay high, corn prices will likely need to rally, maybe substantially in order to secure enough acres. Attention will also be focused and Southern Hemisphere crops and how fast soybeans are planted and how many acres. More acres of soybeans could mean more double acres for corn yet input costs may be a problem as well.
SOYBEAN HIGHLIGHTS: Soybean futures firmed late, finishing near the high for the session gaining 5 to 6 cents. Sold export sales at 38.3 mb, along with firmer equity markets, and sharp gains in soybean oil were factors providing support.
Once again, it was the soybean oil market leading today’s rally. This was impressive since the rally came after moderate to strong losses in palm oil. A sharply higher finish in the oat market along with corn prices rebounding may have helped the overall tone for the commodity complex and reason for traders to buy beans. Yet, it may be a little soon to be overly optimistic that the market is about ready to take off. Soybean oil will likely remain the star of the bean complex as the industry grapples with growing energy concerns and the need for biodiesel. Planned expansions or growth to the crushing industry is signaling the longer-term expectation for increased demand. Soybean meal, on the other hand, continues to trade near or at year-low prices. The good news is lower protein prices should keep livestock demand firm and potentially the reason for poultry, hog, and dairy industries to grow.
WHEAT HIGHLIGHTS: Wheat futures had a mixed close, with MPLS being the only class to post gains finishing near 3 cents higher. New contract highs were posted as spring wheat is trying to buy acres. Sep Minneapolis reached a new contract high of 8.24-3/4. Dec Chicago wheat lost 4-3/4 cents, closing at 7.41-1/4 and Mar lost 4-1/4, to end the session at 7.54-3/4. Dec KC wheat lost 3-3/4 cents, closing at 7.41-1/4 and Mar down 3-1/4 closing at 7.49-1/2.
Winter wheat could not hold its gains into the close today. However, the outlier was spring wheat, which made new contract highs. In the EU, Paris milling wheat futures also continue to make new highs. Today, the USDA reported an increase of 12.2 mb of wheat export sales for 21/22. It is expected that in October the USDA will estimate a record low stocks to usage ratio for world wheat exporters. As the world’s largest wheat exporter, Russian news is always relevant, and some analysts believe their wheat seedings could see a reduction of 1-2 million acres due to dryness. Additionally, uncertainty surrounding the outlook on Russian long-term wheat exports remains, with their inflation in September reported at 7.4% (a level not seen since 2016). Egypt bought 240,000 mt of wheat from Russia and Romania in their tender and paid about 5-8 dollars per ton higher than their previous purchases. Some slightly bearish news is that India is expected to export the largest amount of wheat they have in 8 years, around 4.2-4.4 mmt. That does not change the overall global picture of tight stocks and lower production, however.
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Author
Bryan Doherty