TFM Daily Market Summary 11-1-2021

MARKET SUMMARY 11-1-2021

The strong move in fertilizer prices is possibly impacting the acre ratio between corn, soybeans and wheat for 2022. The market watches the corn/soybean ratio, and currently, this ratio is trading 2.23, favoring corn for the planting rotation next spring. A strong demand tone, led by strength in the ethanol market as well as concerns over high fertilizer costs are fueling the strength of corn versus soybeans. In addition, the wheat market has helped fuel the buying support, as all three classes of wheat pushed to new contract highs to start the week, trying to lay a claim to additional acres to be planted in the 2022 marketing year. Soybeans have a less impressive story. Brazil planting of their projected record crop of 2022 soybeans is off to a historically strong start, and demand concerns plague the market, as export sales and shipments are behind the pace needed to meet the USDA marketing year targets. The market is trying to pull as many corn acres as possible this upcoming year; only time will tell if it is successful in that mission.

 

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CORN HIGHLIGHTS: Corn futures continued its sharp climb higher with strong gains of 7-0 to 10-3/4 cents today. December gained 10-3/4 to close at 5.79, its highest close since July 2. Gains of near 25 cents in wheat spilled over to provide support as did strong basis. Positive ethanol margins and talk of European corn being left in the field due to concerns over natural gas price and availability were as viewed as a positive for price.

Depending on how you might draw your charts, prices are at overhead resistance or just above when earlier in the session futures rallied. Some of today’s gains could have been short covering. Nonetheless, between wheat and corn, the market is gaining upward momentum where often, sellers become sparser despite higher prices. At the same time, buyers continue to do what they’ve been doing, that is, adding more long positions. Export inspections at 24.4 mb were termed disappointing with the year-to-date total of 22% from this same time last year. The export market remains relatively slow, which suggests hand-to-mouth buying. Yet with ethanol margins in good shape, we’re seeing strong basis pops in certain parts of the country, as it looks like plants want to make sure they have enough corn lined up for delivery.

 

SOYBEAN HIGHLIGHTS: Soybean futures traded both sides of steady and ended as such. Last week we mentioned how the market would trade higher, then not hold gains. Well, today much the same as futures traded near 10 cents higher but then gave it all back. November futures gained 1 cent, and January lost one cent. Soybean oil was a bright spot, picking up 50 to 70 points, while soybean meal gave up 2.00 to 3.00. Weekly export inspections were also supportive at 83.5 mb, bringing the year-to-date figure to 399 mb, still 37% below this same period last year.

It appears like the trade is interested in buying the row crops but not necessarily the oilseeds. Crude oil prices seem to be stabilizing in the low to mid 80s, providing support but not enough to necessarily push soybean prices higher. A good start to the planting season in Brazil with expectations of more than 50% already planted suggest the end user maybe a more reluctant buyer awaiting inventory from Brazil. Weather will be watched closely as La Nina could mean drier conditions for both northern Argentina and southern Brazil, both key growing areas. Strong upward reversal last week may also be keeping rally potential in check. A slow harvest pace last week was supportive.

 

WHEAT HIGHLIGHTS: Wheat futures rocketed higher today due to a weakening US Dollar, and bullish fundamentals. World supplies are low, and there is general difficulty obtaining wheat. Dec Chicago wheat gained 24-1/2 cents, closing at 7.97-1/4 and July up 19-3/4 at 7.95-1/2. Dec KC wheat gained 20-3/4 cents, closing at 8.06-1/2 and July up 19-1/2 at 7.94-3/4.

Wheat inspections totaled only 4.2 mb for last week and are behind last year’s pace. Despite this lackluster number as well as being technically overbought, all three classes scored double digit gains in today’s session, closing at new contract highs. The front three months on each contract gained more than 20 cents apiece. A weakening US Dollar as the session wore on was helpful but does not totally explain the screech higher today – there are other factors at play. It was noted that Egypt is again tendering for wheat, which is supportive to the market. Saudi Arabia bought 46.6 mb of wheat; though the source was not disclosed, the majority likely came from Australia. Also helping the market is the fact that Paris milling wheat futures are sharply higher and within grasp of all-time highs. Morocco, starting today, has eliminated their wheat import tax. Russian prices continue to trend higher, with this being the fourth month in a row. Drought is still a concern in western HRW wheat areas, and the eastern Midwest has received substantial rain which is making it difficult to plant SRW wheat.

 

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

John Heinberg

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