MARKET SUMMARY 11-2-2021
Wheat futures charged to new contract highs on Monday as all three classes of wheat saw buying strength. Wheat futures have been driven by strong global demand in the face of tight supplies, fueling a rally that pushed all three classes of wheat to multi-year highs. Chicago spring wheat futures broke through the $8.00 barrier and traded to its highest point in nine years. Wheat may have become the inflation play, but importers are looking to secure food supplies, and strong technical buying has helped push the futures to these levels. Price action on Tuesday has been soft after wheat prices gained even further in overnight trade, only to soften into the close later in the day. This weak price action could be setting up a bearish technical signal, as the $8.00 levels is acting as strong resistance. The next couple days will be key to see if the wheat market has hit its peak or is just pausing to work even higher.
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CORN HIGHLIGHTS: Corn futures rallied early in the session, gaining 5 to 6 cents. However, they reversed, posting losses of 3 to 6 cents as December led today’s losers, closing at 5.73. Wheat prices, which have been surging, took a breather today also posting hook reversals and finishing with modest loses. A lack of new news, a likely increase in farmer selling, and overbought technical indicators weighed on futures today. Stochastics also indicated a sell signal.
Ethanol margins continue to look positive, but these alone will not be enough to sustain a bull market. At least, not at these elevated prices. Line items increases on WASDE reports might be expected yet higher prices could also curb feed and exports. We have been reporting that farmer selling has generally been light but after a surge in prices of near 80 cents since mid-October, the rally may be viewed as too much too quick leading to an opportunity to lock in some of the best pricing since early July. 2022 is offering opportunity in the 5.50 area, yet farmers seem to be somewhat reluctant with current input costs surging. Despite the higher corn price, balance sheets are challenged for many, even with 5.50 new crop futures.
SOYBEAN HIGHLIGHTS: Soybean futures gained 7-1/4 cents in November, closing 12.44 to 9-1/2 higher in July 2022 to end the session at 12.81-3/4. Strength in soymeal and reversals of long corn short soybeans and long wheat short soybeans was said to be a primary feature with today’s finish. Keeping price rallies in check are expectations for higher carry-out on the November 9 WASDE report.
Harvest rain delays were experienced last week with total harvested acres at 79%, below the five-year average 81% percent. This week’s weather should allow harvest to continue to move along, and the longer-range forecasts suggest there should be little problem finishing harvest within the next two weeks period. Yet, the most recent 6-to-10-day forecast does indicate above normal temperatures that, generally this time of year, is accompanied by most of the Midwest experiencing above normal rainfall. Of real interest will be just how fast farmers make progress this week as they will likely concentrate on soybean harvest over corn. Daily export sale announcements of over 100,000 metric tons have been infrequent suggesting end users are reluctant buyers at higher prices. It also currently appears there is not much of a weather concern in Argentina or Brazil. Therefore, the world is expecting bigger supplies. Consequently, there is not an urgent necessity to buy US product or futures.
WHEAT HIGHLIGHTS: Wheat futures settled with moderate losses today due to the weakness in corn, a strengthening US Dollar, and profit taking after the recent rally. Dec Chicago wheat lost 5-3/4 cents, closing at 7.91-1/2 and July down 2-3/4 at 7.92-3/4. Dec KC wheat lost 8-1/4 cents, closing at 7.98-1/4 and July down 4-1/2 at 7.90-1/4.
Wheat had a lower close in Chi and KC, though MPLS was mixed and able to hold closer to yesterday’s gains. Dec MPLS was unchanged at 10.75-1/2, March was down 3/4 cent, and May was up 1-1/2. The stubbornness of the spring wheat contract indicates that what is upholding the market, low world supply, is not going away any time soon. The US wheat supply situation is not going to improve over winter, as SRW and HRW crops are months away from being harvested. Yesterday the USDA reported 87% of the winter wheat crop is planted vs 88% last year and 86% average. Additionally, they rated the winter wheat crop at 45% good to excellent, which was down 1% from last week. Yesterday’s inspections number was somewhat disappointing at 4.2 mb, with total inspections now at 355 mb. Today Paris milling wheat futures did score an all-time high, taking out the previous high from March 2008. From a weather perspective, the forecast is calling for some rains in the Southern Plains this week. In the Eastern Midwest it is supposed to become drier, but the recent heavy rains have delayed soybean harvest. With soybeans yet left in the field, some of the final plantings of SRW wheat may not take place.
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Author
Bryan Doherty