MARKET SUMMARY 11-4-2021
The soybean market has been working on a downtrend since posting highs in June, and price may be ready to break. The soybean market posted strong losses on Thursday, as prices broke through technical support levels and seem poised to challenge the recent September low as the market is looking towards next week’s USDA WASDE report. The demand for U.S. soybeans is concerning. As the South American crop has mostly gotten off to a good start, the market is concerned the importers will buy enough U.S. soybeans to get through until the cheaper, fresh Brazil supplies are available. Weekly export sales reported today totaled 1.8 MMT, which is good, but not enough as current sales are 33% behind last year, and the time window is closing. U.S. crush for soybean meal and oil will be strong but may not be enough to cover the loss of exports. On the supply side, the concern is the crop size could increase in the USDA forecast, only adding to a growing supply picture. The report next week will help set the goal post going into the end of the year, and the market is concerned about both sides of the balance sheet adding to a potentially growing supply picture.
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CORN HIGHLIGHTS: Corn futures finished lower for the third consecutive session, following sharp losses in soybeans and weakness in wheat. Good weather conditions in South America were noted as well. Export sales remain active but not bullish. December closed at 5.59-1/4, down 4-3/4 cents, and Dec 2022 down 2-3/4 at 5.43-1/2.
The weather forecast continues to suggest above normal precipitation next week, which implies the remaining unharvested corn could be standing in the field after next week. Export sales at 482 mb were termed neutral to slightly friendly. Year-to-date sales are 1.221 bb compared to last year’s 1.306 bb for this same week. The USDA current projection for exports is 2.5 bb, which means sales are closing in on the 50% mark,1.250 bb. We are not seeing much in the way of concern with current South American weather. Scattered rains are expected in Brazil this week, suggesting planting and growth will stay on or ahead of schedule implying more double crop corn acres than a year ago. The implication is that importing countries may stay with a more hand-to-mouth buying approach unless crop concerns in Brazil or Argentina warrant otherwise.
SOYBEAN HIGHLIGHTS: Soybean futures suffered sharp losses as long liquidation occurred after sell stops were trigged when support was violated on charts. Talk that China is said to be buying or at least inquiring about Brazilian soybeans, which are more competitively priced than US beans, was the catalyst behind today’s drop. Export sales at 68.5 mb were solid and supportive, yet the market was looking beyond this figure. November futures lost 22-1/4 cents to finish at 12.09-1/4 its lowest close since mid-October.
Export sales year-to-date are 1.187 bb, well below last year’s 1.779 bb. This coupled with traders likely following the market with sell stops (triggers points that sell if prices are dropping) accelerated the down move once prices broke support. The bigger perceptive concern of more production in both South America and the US in the year ahead all helped to push prices lower today. We like the demand as of late, yet its form is still on an as needed basis. A less than stellar report from the U.S. Census Bureau regarding biodiesel exports indicating declines in September versus August didn’t help the market today either. Next week’s WASDE report is expected to show increasing carryout. Bottom line, supplies are snug yet growing and the big picture fundamental argument doesn’t have anything new to offer buyers.
WHEAT HIGHLIGHTS: Wheat futures again struggled to hold gains into the close, as weakness was seen across the grains markets. This is likely a continuation of yesterday’s risk off session as well as technical selling. Dec Chicago wheat lost 7-1/4 cents, closing at 7.73-3/4 and July down 7-1/2 at 7.79. Dec KC wheat lost 4-3/4 cents, closing at 7.86 and July down 5 at 7.78-3/4.
Today the USDA reported an increase of 14.7 mb of wheat export sales, with Mexico as the top buyer. The current export estimate for 21/22 is at 875 mb, but shipments to date have been behind the pace needed to meet that goal, with total sales down 22% from last year. The high price of US wheat is likely contributing to these poor export numbers. Pressuring wheat today was the sharply higher US Dollar, which is back above the 94 mark and near the recent October 12 high. News surrounding Australia’s wheat crop could be considered bullish – they have been getting a lot of rain, especially in the east. This may be affecting their crop in terms of quality and disease issues and may also be slowing harvest. Though likely not a direct impact to the wheat market, there is also news out of China that they are in for very cold and snowy conditions – rare for this time of year. With electrical shortages already a problem for their country, demand for all commodities might temporarily decrease, which may have ripple effects in the US. In other world news, Russia has put a quota in place on fertilizer exports for the next six months and China is already slowing their fertilizer exports. Combined, those two countries account for 40% of the global fertilizer trade, meaning already high prices might go higher. From a weather standpoint, the US should be mostly dry for the next several days or so, which should aid the remaining winter wheat planting.
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Author
Bryan Doherty