MARKET SUMMARY 7-1-2021

Crude oil prices topped $75.00 a barrel on Thursday, the highest price point since 2018 for the energy commodity. Crude prices have gained more than 50% on the year as demand has increased with consumers resuming travel in the recovery from COVID restrictions. Today’s price push has come in advance of the OPEC and Non-OPEC meeting to be held on Friday, postponed from today. Expectations are for the oil producing countries to raise daily output by 500,000 barrels a day but are also expecting a forecast for demand for to outweigh the new supply picture, keeping the overall supply picture tight. Currently, the market is running at a deficit. The new forecast will likely improve the gap, but keep the deficit intact. Crude prices are challenging the 2018 high at 76.90, which could be the next hurdle to prices pushing even higher.

CORN HIGHLIGHTS: Corn futures closed mixed with September gaining 2-1/2 cents to close at 6.01-3/4. July futures lost 0-1/4 cents, and December gained 0-1/2 to close at 5.89, well off its high from early in the session at 6.11-1/4. Prices began the overnight mixed to higher and moved higher during the morning session but soon ran out of steam and began to glide lower for the rest of the day. It appeared that the overnight and morning session reflected short covering and new buying, anticipating prices to continue to move higher today. By the close, however, there was some doubt if prices can make much of a move above 6.00. A long three-day weekend, coupled with the idea that traditionally the 4th of July is a turning point for prices, was likely reflected in today’s trade as traders may had been moving to the sidelines by mid-session. Additionally, producers had two previous opportunities to sell corn when futures were above 6.00. Today was the third time this year and may have had producers more active today to sell. In May-December, futures reached 6.28 only to quickly drop to 5.00, and in June traded to 6.28 before a fast retreat to 5.28. Yesterday’s reports tightened supplies, and the Northwest remains critically dry. Rain events are needed for most of the Midwest in the weeks ahead. The general pattern of dry and hot temperatures in the West permeates eastward but seems to hold in the western Corn Belt for the next 10 days. Most of Minnesota and Iowa and all states eastward are expected to see above normal precipitation July 6-10. The entire northern half of the Midwest is expected be above normal in precipitation. Export sales at 0.6 million bushels was not supportive. The year-to-date total of 2.738 is still outstanding however and is 96.1% of the forecasted total of 2.850 bb. A firmer dollar did not help corn prices late in the session.

SOYBEAN HIGHLIGHTS: Soybean futures lost ground today after strong overnight gains. It appeared as if by midday, traders may have already been squaring their books in anticipation of a long weekend. Markets are closed Monday and will not open until 8:30 central Tuesday. July soybeans lost 3-1/4 cents to close at 14.46-3/4, well off the high of 14.80. November closed 3-1/2 cents lower at 13.95-1/2 will also well off its daily high of 14.23. Soybean meal had a strong session closing 5.27 higher while soybean oil finished steady in July but down well over 100 points in September and deferred months. Yesterday’s reports were very supportive and ultimately would argue that soybean prices could remain well above recent lows for some time to come. Crop ratings are not very good at 60% good to excellent. Prior to yesterday some analysts have suggested there is little to no weather premium in new crop prices. Critical weather yet lies ahead, so we don’t want to make too many assumptions of crop potential. We have heard that many are concerned about plant size. While plant size is important, high yield can come in August if there is enough moisture to sustain the plant in June and July. Small plants can yield high bushel counts. At present given the struggles with parts of the Midwest (mostly in the Dakotas) it is hard to imagine a trendline yield of 51 bushels an acre. We would argue the crop may be lucky to hit 50 bushels an acre given the struggles so far this year. Lastly, the dollar closed firmer again today and is now at its highest level since early April.

WHEAT HIGHLIGHTS: Sept Chi down 14 cents at 6.65 1/2 and Dec down 11 1/4 cents at 6.73 3/4. Sept KC wheat down 20 3/4 at 6.38 1/4 and Dec down 19 cents closing at 6.48. While the USDA planted acreage and quarterly stock reports weren’t as bullish for wheat as they were for corn and soybeans yesterday, with planted wheat acres exceeding analyst expectations at 46.7 million acres, grain traders took advantage today, knowing the impact of the reports will be limited giving back much of yesterday’s gain. Yesterday’s move was much more tied to the rally in corn as there was little in the report to fuel wheat. However, regardless of the report all eyes continue to stay focused on weather. Seven-day forecast expects light to moderate rains around Nebraska and Kansas. However, the northwest Plains continue to suffer hot temperatures and a dry forecast. Today’s drought monitor showed increased levels of drought in the northwestern plains. Globally, wheat is still trending well overall.

Author

Bryan Doherty