MARKET SUMMARY 12-06-2021
The USDA weekly export inspection for soybeans has been on a strong clip recently, but will it be enough to recover from the slow start? Last week, soybean export inspections totaled 2.25 MMT or 82.6 mb, which is a very solid number for the week of the marketing year. The peak of inspections, which is during this time window, matches some of the highest year-over-year totals, as U.S. exporters try and catch up for the shipped bushels they lost as the Gulf recovered from the post damage due to Hurricane Ida. With both U.S. shipment and sales running behind last year’s pace, the major window for shipping U.S. soybeans is starting to close and time moves closer to the harvest of the potential record Brazil soybean crop. The key in the weeks ahead will be the length of time the U.S. can mark favorable shipment totals, even when the South American soybeans are also in ports ready to ship.
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CORN HIGHLIGHTS: Corn futures ended the session mixed, with nearby Dec losing 2-1/2 cents closing at 5.83-1/2 and Dec 2022 gaining 0-1/4 cents to end at 5.52-1/2. Prices slipped after the market came out of the pause session at 8:30 when wheat and soybean prices came under selling pressure, yet managed to claw back late in the session. Export inspections at 29 million bushels were termed a disappointment with the year-to-date inspection pace trailing a year ago by more than 15%.
As indicated in previous reports, the weather forecasts for the Southern Hemisphere will become more and more important in the days and weeks ahead. While there is no immediate threat to the crop, forecasters continue to point toward net drying conditions in northern Argentina as well as southern Brazil, key regions that could be affected by the La Nina weather pattern. Farmer selling remains somewhat light and basis levels remain firm as ethanol margins while slipping slightly last week, continued to run significantly in the positive column. Prices are moving nowhere fast but consolidation after a recovery from a harvest low could be considered supportive. If prices were to break overhead resistance in the Mar contract near 596 a potential rally to 6.25 is possible.
SOYBEAN HIGHLIGHTS: Soybean futures ended with losses of 0-3/4 to 5-3/4 cents, as January led today’s declines. Nov of 2022 closed at 12.33-1/4, down 0-3/4. Export inspections at 82.5 mb were termed supportive. Year-to-date inspections are now at 864 mb, still over 20% below last year at this same time. Keep in mind, high prices likely have end-users buying only as needed. While demand is strong, the form of buying has changed from a year ago when China front-loaded purchases on value purchases. Buying as needed is how end-users address high prices in hopes futures purchases will be at lower prices.
Like the corn market, new news was lacking allowing prices to drift. Export inspections were supportive as were higher energy prices, yet futures failed to make much of a move upward. Weather conditions in the Southern Hemisphere are mostly conducive, but growing concern over La Nina would suggest prices are well supported. While futures did make some recovery late in the session, we were still surprised they ended lower, as we couldn’t come up with good reasons for prices to decline other than weaker meal. One thought is that end of last week gains were too much too quick so traders who are long-term bearish may have been sellers. Farmer selling may have increased. Nonetheless, it does appear the market is currently supported. Soybean meal was the loser today giving back 3.00 to 6.00 while soybean oil gained near 70 points. Traders were likely buying oil and selling meal.
WHEAT HIGHLIGHTS: Wheat futures had a two-sided trade with a mixed to mostly higher close. Without much news for direction, wheat seems to be consolidating into a trading range. Mar Chi gained 2-1/2 cents, closing at 8.06-1/4 and Jul up 4-1/2 at 7.98-3/4. Mar KC lost 1-3/4 cents, closing at 8.22-1/2 and Jul up 2-1/2 at 8.15.
A relatively quiet close comes after a day of trading both sides of neutral for all three wheat classes. With the exception of old crop KC, all three contracts were able to claw back to positive territory. That being said, a head and shoulders pattern is forming on the Mar KC chart which points to a downside objective around 7.50. The technical trend remains down for KC as well with both stochastics and the RSI slipping lower. It is worth noting that technical analysis is more of an art than a science, and wheat remains supported by solid fundamentals. The recent hostility between Russia and Ukraine could lead to a spike in wheat prices. Russia is the world’s largest wheat exporter and Ukraine is not far behind. Any conflict between the two could disrupt their logistics and exports. Additionally, there was talk last week that Russia may limit wheat exports to 9 mmt starting in February; this could help U.S. exports longer term but could be bearish shorter term as Russian exporters flood the market prior to the start of the quota. In terms of weather, the U.S. southern Plains remain dry, Russia is drying out a bit, and parts of South America (southern Brazil and northern Argentina) are also getting drier as La Nina takes effect. Eastern Australia is expected to also turn drier this week, but wet conditions have taken their toll and will increase the amount of wheat used for feed. Today’s weekly inspections report was disappointing and showed wheat inspections at only 9 mb, with total inspections now at 410 mb (down 17% from last year). The monthly WASDE report is due for release on Thursday, which might show an increase in carryout due to lower exports.
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Author
Bryan Doherty