Market Summary 6-18-2021

The past couple of trading sessions put on a full display of the volatility in the grain markets overall. On Thursday, December corn sold off the 40 cent limit lower as prices broke through technically. This was fueled by a strong move in the dollar, concern regarding ethanol blending requirement changes, and just overall risk-off trade in the commodity markets, as long liquidation and profit-taking took over. Friday brought a quick return as prices traded a 45 cent trading range, and finished 33-3/4 cents higher on the day. On Friday, the market went back to the fundamentals. Overall, corn supplies are historically tight, and weather has been less than ideal in a large portion of the Corn Belt. With overnight rains missing some major growing areas, and forecasts turning drier, the market quickly recouped to Wednesday’s prices, erasing most of yesterday’s losses. Stay tuned, the volatility is not going anywhere, and the weather, news cycle, or other events will bring quick and aggressive price moves.

CORN HIGHLIGHTS: Corn futures recovered today gaining much of yesterday’s limit down move with Jul adding 22-1/4 cents closing at 6.55-1/4 and Dec increasing 33-3/4 to close at 5.66-3/4. As one might expect, changing weather forecasts were a primary feature in this week’s trade. Prices still ended the week with losses, but today’s gains were helpful. Jul lost 29-1/4 cents for the week. Dec lost 43.5. Highlights for the week are crop ratings dropping 4% to 68% good to excellent along with expectations that ratings will be down again on Monday due to continued hit or miss rain and warm temperatures. Forecasters are confident for rain next week, but some have reduced the amount and this, in part, was responsible for today’s rally. A sharp rise in the U.S. dollar was also a factor in yesterday’s sell off. In fact, by some accounts, yesterday was nearly a perfect storm for a limit-down move as a negative technical chart, a rise in the dollar, expectations for rain, a poor export sales number, and heavy managed money liquidation pressured prices. Next week could be volatile as the dependency on weather becomes more and more critical.

SOYBEAN HIGHLIGHTS: Soybean futures, after suffering historic losses yesterday, rebounded today gaining 66-1/4 cents in Jul to close at 13.96-3/4 and Nov adding 60-1/4 cents to close at 13.13. For the week, Jul soybeans lost 1.12-1/2 while new crop Nov lost 1.25-3/4. A sharp rise in the dollar this week along with continued fallout from the USDA report which indicated a rise in carryout coupled with technical selling and calls for soaking rains in parts of the Midwest all weighed on futures. It was not that the USDA report was so negative, it was that it sent a signal to the market that demand is slowing and that high prices have likely created an environment of less demand. A very sharp selloff in the soybean oil market this week led the soybean complex weaker. Soybean meal hit its lowest price since mid-fall this week. On a positive note, today’s turnaround in price came on the heels of an export announcement of 400,000 metric tons to China for October delivery. In theory, that is new crop, however, to get soybeans in the pipeline it may require more old crop to fill the order. Expect nothing less than continued high volatility. Tight supplies create an environment where, at this time of year, the market movement will likely hinge on every weather forecast. This week’s dive in prices was in part due to reasons we mentioned above but also to a broad-based sell off in commodities as the tone from the Federal Open Market Committee was much different and signaled the likelihood of higher interest rates which had traders buying the dollar and selling almost everything else.

WHEAT HIGHLIGHTS:  Wheat prices recovered from Thursday’s selling pressure. Jul Chi up 23-3/4  cents at 6.62-3/4  & Dec up 21-1/2 cents at 6.71-1/4. Jul KC wheat was up 21-1/2 cents at 606-1/2 & Dec was up 21-1/2 cents at 6.26-1/4. For the week, July Chi was 18 cents lower and the KC Jul contract was 31-1/2 lower. Wheat saw buying support from other grains to end the week. Harvesters are facing another day of triple-digit temperatures in the southwest Plains, however, crops are in pretty good shape in Kansas, even dealing with difficult weather during the growing season. Harvest pace limits the price gains in the wheat market. The drought monitor continues to show severe to exceptional drought in the northern Plains with little chance for rain in the 7-day forecast. The spring wheat crop is a concern and some acres are being evaluated for harvestability if any.  The weekly crop rating for spring wheat will be anticipated again on Monday afternoon, and another dry weekend will support prices overall. Demand is still lackluster for wheat, and the recent surge in the U.S. Dollar Index is not helping against global competition. With harvest going on, wheat will likely be a follower of other grains in the near term.

Author

Bryan Doherty