MARKET SUMMARY 10-29-2021
The energy market, namely crude oil, has been strong, but the market may be signaling a near-term top. Crude oil futures pushed over the $85.00 a barrel level to start the week, but prices have faded off those highs going into Friday’s close. An unexpected jump in crude oil supplies on this week’s EIA report, and the talk of Iran moving back into the oil export market brought some long liquidation of positions, as prices fell back to test support levels. A possible move lower could be in front of the market, but the test of the $80 level was quickly rejected this week as the buyers stepped back into the market. The oil market will be watching the headlines closely next week. The trend is still higher, and looking to test the $90 a barrel level, but short-term pullback would be healthy in a bullish trending market.
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CORN HIGHLIGHTS: Corn futures ended the session higher gaining 1-1/2 to 5-1/2 cents. Dec led today’s gainers closing at 5.68-1/4, while new crop Dec 2022 added 1-1/2 cents to finish at 5.50. Dec 2021 gained 30-1/4 cents as sky-rocketing nitrogen prices have traders expecting there could be a shift to more soybean acres. Money flow into corn this week was noted. This is compared to Nov soybeans, which only gained 15-1/4 cents and is still trading below where they started the month. South American farmers may face supply disruptions, especially with new crop (Safrinha) corn production. Open interest rose this week.
Dec corn futures have finished higher in 5 of the last 6 trading sessions and steady on one day. The biggest drivers are positive ethanol margins (although less this week as energy stagnates) and surging fertilizer concerns. Harvest delays due to wet weather were also supportive. Next week should allow many to move forward with harvest, yet some saturated fields may take longer to dry out. Some support comes from ideas that another bout of high wind the last 24 hours has knocked water-logged/weaker stalks over thus making for a slower harvest. Export sales continue to run at a pace that has us concerned, yet it is early enough in the season that a strong conclusion can’t be drawn as to final export expectations. Importing countries remain mostly hand to mouth. Mexico was a noted buyer this morning.
SOYBEAN HIGHLIGHTS: Soybean futures ended with small gains of 2 to 3-1/4 cents. Jan led today’s gainers closing at 12.49-1/2 and Nov up 2 at 12.35-3/4. For the week, Nov gained 15-1/4 cents, however, is still trading below where it was the first week of October. Today’s range was near 15 cents, yet prices seemed, again, to lack conviction. Expectations for higher carryout and big production out of South America is keeping rally potential subdued. A strong rise in the dollar may have hindered rally prospects today.
It was nice to see soybeans finish the week in positive territory, yet expectations that the November 9 WASDE will indicate carry out close to 400 million bushels is a concern. We have often suggested that if price has an inverse relationship we have carry out. That is, as carry out increases prices generally decrease. Currently, the trend for both is in opposite directions. Lower prices have reflected not only expectations for higher carry out in November but also more supply from Brazil as compared to a year ago. Typically, we don’t believe South American weather in September or October is all that critical. One might compare it to U.S. weather in March or April. Moving forward, however, Southern Hemisphere conditions will become more critical, especially if a La Nina pattern reduces rainfall. The market may take notice quickly. For now, however, there doesn’t appear to be a concern.
WHEAT HIGHLIGHTS: Wheat futures had a mixed to mostly lower close in the face of a sharply higher U.S. dollar. Dec Chi wheat gained 1/4 cent, closing at 7.72-3/4 and Jul down 2-3/4 at 7.75-3/4. Dec KC wheat lost 4-1/4 cents, closing at 7.85-3/4, and Jul down 3-1/2 cents at 7.75-1/4. Dec MPLS had a new contract high close, up 14-3/4 at 10.52-1/4.
Wheat had another bumpy ride today, with Dec Chi matching yesterday’s high of 7.80, yet unable to maintain those gains into the close. The U.S. Dollar Index is dramatically higher today, back above the 94 mark, and reaching levels not seen for the past couple of weeks. MPLS remains the tenacious outsider of the group, managing to obtain double-digit gains in the three front months, with each of them now over $10. Rains today throughout the eastern Midwest likely were a delay for SRW wheat planting, and some might say these areas are now too wet. Next week’s forecast is dry for both SRW and HRW areas, and western HRW areas, specifically, remain concerned about drought. The Buenos Aires Grain Exchange reported Argentina’s wheat crop to be 47% good to excellent, which compares to 14% last year. They also raised Argentina’s wheat crop from 19.2 mmt to 19.8 mmt. The upcoming WASDE report, due for release on November 9, could show lower U.S. export numbers and a higher carryout. Total U.S. wheat export sales are currently down 22% from last year. Paris milling futures did manage to close in the green today, though they are off the highs established on Wednesday.
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Author
John Heinberg