MARKET SUMMARY 11-29-2021
Live cattle markets may be battling seasonality, as prices turned over to start the week. April live cattle have been strongly supported in recent weeks, as prices have pushed to new contract highs in trade last week. An improved cash market, strong beef demand, and technical buying has helped support the market overall. On Monday, prices started the day with the same strong action, establishing a new contract high, only to turn over and finish the day with triple-digit losses. April cattle posted a bearish key reversal on the charts, trading toward the bottom of the daily range, and trading outside the high and low price range from Friday. This is a strong technical topping signal in a market that was trading in an over-bought status. The concerns regarding the new COVID strain may have weighed on the market with some potential longer-term demand concerns. Seasonally, cattle markets typically post a near-term top, as prices historically trend lower into the expiration of the December contract later this month. Typically, live cattle market trends softer going into the middle of December and establish an end of year low. With the market over-bought, today’s move may be the beginning of that process. One day doesn’t make a turn, but the price action on Monday needs to be watched for potential follow through going into the rest of the week.
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CORN HIGHLIGHTS: Corn futures gave back Friday’s gains, plus a little more. Growing concern that a new Covid mutation could slow demand had corn, as well as many other commodities, on the defensive. First notice day for December corn is tomorrow. This may have created some liquidation early in the session, yet Dec bounced back late finishing 5-3/4 cents weaker at 5.81, well off the low of 5.76-1/2. March lost 9-1/2 cents and Dec 2022 lost 5.56-3/4.
On Friday, prices were hit hard early in the session as a new Covid strain could potentially jeopardize world trade. Corn futures, along with energy, took a major hit. Yet by day’s end, futures rallied back, closing in positive territory, a strong sign. Follow through today, however, was non-existent. We also anticipate that farmer selling picked up as well. Futures are trading at the end of November where they were at the beginning of the month. Export inspections at 30.2 mb were termed neutral to slightly negative. Year to date, inspections are behind last year’s pace by 17%. Weaker wheat and soybeans also pressured corn prices.
SOYBEAN HIGHLIGHTS: Soybean futures slipped, losing 10-3/4 to 11-1/4. January closed at 12.41-1/2, down 11-1/4 and November new crop 2022 closed 11-1.4 lower at 12.29. Soybeans followed other row-crops lower. Weather in South America looks mostly good for northern and central Brazil, but the southern regions and Brazil are turning drier. Meal futures lost 5-7.00 and oil down 50 to 70 points.
Although soybean prices have been somewhat volatile, futures really aren’t making much of a move in either direction. At current price levels, it should be anticipated that a dollar trading range is more the norm than not. As we look ahead to the next several weeks, the key will be southern hemisphere weather. A la Nina weather pattern continues to be of primary focus, as this could lead to drier conditions during the critical growing season for both southern Brazil and northern Argentina, key growing regions. For now, however, the weather looks conducive and there doesn’t seem to be much threat in the near term forecast. Attention will also focus on how quickly the crop matures and whether export activity will gradually shift to Brazil where it could likely be exports are in the pipeline for shipping by mid to late January.
WHEAT HIGHLIGHTS: Wheat futures suffered heavy losses today, in part due to the news that Australia raised their wheat crop to a record 34.4 mmt vs the USDA’s estimate of 31.5 mmt. Dec Chi lost 18 cents, closing at 8.07-1/2 and July down 16-1/2 at 8.17-1/2. Dec KC lost 11 cents, closing at 8.54 and July down 11-1/4 at 8.37-1/2.
After opening higher, the strength in Chi and KC wheat dwindled throughout the day. The news out of Australia that their crop will be record large comes along with a forecast for drier weather this week after being plagued by heavy rains. There have been concerns surrounding the quality of their wheat because of wet conditions – as much as 30% of the crop could be used as feed wheat. However, with word that harvest conditions are improving and yields will be good, this didn’t seem to matter to the market today. With all that being said, there is still concern about global availability of high quality milling wheat, which should help to support Minneapolis futures. Adding to pressure today in the wheat market is the fact that the US Dollar is above 96 points and rising. Additionally, Argentina’s wheat crop is 33% harvested and the Buenos Aires Grain Exchange raised their crop estimate to 20.3 mmt vs the USDA’s 20 mmt. US futures were not the only market to take a hit today. Paris Milling wheat futures also saw big losses – December in particular closed sharply lower, at a level not seen in almost three weeks. Fundamentally, there are reasons to remain bullish – US conditions have been mostly dry and winter wheat may see a decline on this afternoon’s crop condition report.
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Author
John Heinberg