TFM Daily Market Summary 12-20-21

MARKET SUMMARY 12-20-2021 

Wheat export inspections are lagging well behind last year.  While much of the market focus is on corn and soybean export demand, the wheat market has some work to do to catch up its export totals.  Weekly inspections for last week, released on Monday, put inspections at 7.8 mb.  This puts total shipments at 840 mb for the marketing year, down near 15% from the previous year.  This is disappointing the market, even when global wheat supplies are bullish in the market.  The stronger U.S. dollar and the elevated price for U.S wheat has made it difficult to compete against other global wheat providers.  The recent price break should be helpful and that was noticeable last week as export sales hit a marketing year high.

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CORN HIGHLIGHTS: Corn futures ended quietly, losing 2-1/4 to 3 cents as July led today’s drop, closing at 5.89-3/4. March lost 2-1/4 to close at 5.91 and December 2022 lost 1-3/4 to end the session at 5.44-3/4. A lack of new news, concern Covid is quickly spreading and could slow energy and food demand, and lower crude prices kept prices in check today.

Friday’s high of 5.98-3/4 was the highest price in March futures since August 12. A lack of strong farmer selling, good margins for ethanol, and weather premium for the southern hemisphere is providing support. On the bear side, wheat prices have lost nearly one dollar the past 3 weeks and with end of the year quickly approaching the market could take on a holiday type trade. Export inspections at 39.4 mb were termed supportive. Year to date inspections at 445 mib, or 17.8% of expected new crop exports of 2.5 billion. Weather in the southern hemisphere will become increasingly important in the weeks and months ahead. The big focus will be on double crop corn acres from soybeans. This is still a long way off so not an issue now, however if a net drying pattern develops this will be potentially a big concern as the world may have to ration supply due to weather and potential lack of inputs.


SOYBEAN HIGHLIGHTS:  Soybean futures found support in the form of strong export inspections (61.7 mb) and uncertain weather forecasts for the Brail and Argentine crops. Soybean futures closed 2 to 7 cents firmer with near-by January leading today’s gainers closing at 12.92-3/4. This is the highest close for January soybeans since late September. Traders we again buying soymeal and selling soybean oil.

As dry conditions continue to persist in northern Argentina, demand for soymeal remains strong. Argentina is the world’s largest exporter of soybean meal. Therefore, expect strong crush for meal which leaves the potential for growing supplies of soy oil. Covid concerns continue to resonate from the perspective of lower energy demand and consequently less need for alternative soybean oil as an energy source. Weaker palm oil prices were noted as well reflecting overall concerns that countries may shut down or limit travel in the weeks ahead. Oil lost nearly 100 points today while soybean meal gained over 6.00. Export inspections for the year are at 998 mb, or 48.7% of the yearly expectation for sales of 2.050 bb. Resistance is at the 200-day moving average (13.04) and support at the 40- and 50-day moving averages near 12.50. (Both on the January contract).


WHEAT HIGHLIGHTS: Wheat futures recovered from pressure early in the session which occurred due to lower outside markets and news of covid spreading with lockdowns in Europe. March Chi gained 2-3/4 cents, closing at 7.77-3/4 and July up 1-3/4 at 7.71-1/2. March KC gained 3-1/4 cents, closing at 8.13-1/4 and July up 2-1/4 at 8.03-3/4.

Despite the pressure wheat saw earlier in the session, it managed to have a small but positive close with gains around 2 to 3 cents in Chi and KC. MPLS continues to consolidate with losses of about 5 cents in the front two months today, but still remains above the ten dollar mark in those contracts. Paris milling futures were also under pressure early but managed to claw their way back to a positive close. On a bearish note, Canadian, Russian, and Australian wheat production estimates have all been raised by the USDA. Russia announced that it will lower its upcoming wheat export quota to 8 mmt (vs 9 mmt previously). This quota will take effect Feb 15 and will end in June. Additionally, Russia’s export tax this week is set to reach $94 per metric ton. Both of these efforts are an attempt to curb their domestic food inflation. Russia is not alone – Argentina has limited both corn and wheat export sales to reduce their food inflation as well. The Buenos Aires Grain Exchange is estimating Argentina’s crop at 20 mmt with 65% harvested. According to today’s inspections report, US wheat inspections amounted to only 7.8 mb with total inspections now at 427 mb (this is down 18% from last year). Weather in the US southern plains remains mostly warm and dry with little moisture on the forecast. Strong winds in these areas last week (as high as 107 mph) caused widespread damage to HRW wheat. China is rumored to have been a recent buyer of as much as four to six cargoes of French feed wheat. The US Dollar Index remains above 96, which adds to the pressure seen today.


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Bryan Doherty

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