TFM Daily Market Summary 7-23-21


After a difficult start to the week, equity market rebounded aggressively and even established new record highs. The S & P 500 futures start the week with a 67-point drop, Trading to its lowest point in over a month at 4224.00. The market was reacting to new concerning news regarding the Delta-variant of COVID, and a sharp selloff in oil prices, triggering a technical breakdown. This turn into only a test of trendline support, as the rest of the week, S & P 500 futures have climbed higher, and setting new contract highs on Friday afternoon. From high to low, this week’s move was nearly a 200-point swing in the S & P 500 futures prices. The equity markets are still being supported by the Fed and monetary policy, and the market is looking toward earning season with some optimism. At least at this point, any sharp breaks in the equity market turn into reasons to buy the dips until something fundamentally changes in the market’s tone.

CORN HIGHLIGHTS: Corn futures plunged on Friday, ignoring hot and dry in the 6-to-10-day forecast. Some longer-range models are putting increased moisture chances in their outlook for 11 to 15 days as well as focusing on a lack of exports. September futures closed 17-1/4 lower at 5.47-1/4 and December down 18-1/4 at 5.43. For many, rain 10 days from now could be too late. Farmers affected by lack of moisture are recognizing crop stress has already lowered yield potential. Yet, coming into this week 65% of the crop was rated good to excellent, and while more rain is needed for crop growth and maturity, it is not nearly as dire in the central and eastern Midwest as it is in the western and northwestern regions. Yet, we are somewhat surprised at the weakness today. It appears that technical trading developed for the second day in a row and perhaps more so from computer generated trading, which often seems to sell on a forecast for rain. Our point, these computer-generated models may not consider just how important moisture is at this time of year if rain does not materialize. Projected carryout remains snug. Excellent looking corn in parts of the Midwest will make up for losses elsewhere, yet in our view, the USDA is too high at 179.5 yield per acre, so to make up for all losses is not likely. Weakness in soybeans and wheat were also noted today and may have spilled over into corn as managed money reduces long positions in agriculture crops. Traders may also have been reluctant to carry long positions into the weekend recognizing how brutal prices fell apart after the 4th of July and again on June 10 when prices rallied late in the week on a dry weather forecast, only to be smashed on Monday. December futures lost 4-3/4 cents on the week posting a weekly hook reversal, not the most positive signal.

SOYBEAN HIGHLIGHTS: Soybean futures were the recipient of bear spreading, as nearby August futures lost 15.25 cents, closing at 14.01 and November down 10-1/2, closing at 13.51-3/4. Soybean meal lost between 9.00 and 10.00 per ton, while soybean oil gained 60 to 115 points. Continued rhetoric from China indicating less demand for beans due to reducing usage doesn’t seem to make much sense. Yet in recent weeks, the bean market has shrugged off dry weather concerns and focused attention more on lack of export activity and a smaller crush. In other words, generalized assumption that whether would take a path for the better and yield meet USDA projections. With another bout of hot dry weather in the western half of the Midwest, we’re beginning to doubt if projected trendline yield can be attained. Better genetics have allowed the bean plant to struggle through dry weather during portions of the growing season and then end up yielding well on timely rains in late July or August. For many, rain is becoming a must case scenario this season, or yield numbers will decline rapidly on lack of moisture. The most recent 6-to-10-day forecast indicates below normal precipitation and above normal temperatures for the entire Midwest. Longer range models are showing more generous chances of rain and that is likely why beans lost ground this week. As mentioned in the corn report, it will take more than a forecast for rain to change the fortune of many farmers who have been struggling with hot and dry conditions.

WHEAT HIGHLIGHTS: Sept Chi down 7 ¾ cents at 6.84 & Dec down 8 cents at 6.93 1/2. Sept KC wheat down 7 3/4 cents at 6.46, and Dec down 7 1/2 cents, closing at 6.57 1/4.Today, wheat was more of a follower of the corn and soybean sector than to have any real reason to be down on its own fundamental merits. Winter wheat should have made good progress this week with much of the production areas being dry this week. However, hot and dry have been the talk of the spring wheat market for the past 2 weeks and will likely continue to do as minimal rains are expected next week, followed by 90–100-degree heat. There are rains built into the extended forecast that might finally offer a lifeline to crops, but 1-2 rains cannot counter the damage and crop loss from a season of drought. It will not be shocking to see Monday’s crop progress report reflect a declining good/excellent rating below the already dire 11% rating we saw this week. US HRS wheat supplies are also apt to be tight all season long, which leaves plenty of room for them to move upward from here. We’ll see what next week brings, the weather is likely built into the wheat market for now. Traders may see sideways trade until closer to the August 12 report, where the trade will wait and see if the USDA does indeed reduce the US wheat production estimate further. It would be hard to imagine they don’t, but we have seen stranger things in USDA reports.


Bryan Doherty

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