MARKET SUMMARY 8-17-2021
Crude oil prices could be at a crossroads as demand concerns weigh on the oil prices. On Wednesday, crude oil futures were trading 1.5% lower, challenging long-term support, and most recent lows near the $65.00 a barrel level. This is the third time the prices are challenging this level, and the possibility of a break lower towards $60, looks like a strong possibility. The Energy Information Administration (EIA) report today did reflect a drop of 3.2 million barrels in U.S. crude oil inventory, slightly larger than expectations, but the concerns regarding rising COVID cases and a stronger U.S. dollar index were enough to outweigh the positive news. COVID is the elephant in the room and has traders most concerned regarding the possible loss of demand. The positive EIA report should help put a floor under the oil market, possibly holding the $65. A price break below may be more technically driven than fundamentally. The price action the rest of the week into next will be key, as charts are looking weak overall on the technical side.
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CORN HIGHLIGHTS: Corn futures traded in a sideways pattern most of the morning trying to find direction. New news is sparse, and exports remain sluggish, yet prices are holding. Sep futures closed 3-1/2 cents higher at 5.61-3.4 and Dec up 1-1/2 at 5.65. An increased chance for moisture later in the week and weekend could provide some benefit to crops. The Pro Farmer Crop Tour estimates yield in Indiana at 193.48, in line with the USDA’s 194 and Nebraska at 182.35 versus the USDA at 186. We expect the tour and subsequent USDA reports will find mixed results. Some parts of the Midwest have had outstanding weather and will have excellent yield. Timely rains have kept much of the crop in good shape and if additional rain is had in late August and early September this could potentially add more yield. On the other hand, pesky dry conditions, as well as outright drought in the northwest, continued to limit yield potential, and ultimately this will mean a national yield likely close to last month’s estimate near 175 bushels an acre.
SOYBEAN HIGHLIGHTS: Soybean futures finished weaker with Sep losing 10-3/4 to close at 13.58-1/4 and Nov down 8-1/4 finishing the session at 13.53-1/4. A firmer U.S. dollar and congestion at Chinese ports could be a concern for bullish traders. Ships will be slow to unload as a heightened protocol for COVID-19 is a growing factor and, in part, may have contributed to today’s losses. On the other hand, for the ninth day in a row announced export sales were noted indicating a continued and growing demand for new crop soybeans. Weaker meal and soybean oil prices are suggesting end users may be waiting until new crop supplies are more plentiful. Much like the corn market, soybean futures continue to trend in a range-bound fashion. We don’t anticipate end users making a significant push for supplies prior to harvest, which means limited upside. China, however, has started to buy, a good long-term signal and reason to believe there is limited downside. Perhaps they are concerned with supply limitations in the western U.S. and therefore the need for longer shipping time as beans may have to come from the central or even eastern U.S.
WHEAT HIGHLIGHTS: Sep Chi up 2-3/4 cents closing at 7.37-1/4 & Dec up 2-3/4 cents closing 7.51-1/4. Sep KC wheat up 7 cents at 7.23-3/4 & Dec up 7-1/2 cents closing at 7.36-3/4. Exports are expected to stay light as the U.S. has pushed above world values, which will likely limit exports until world values catch up. Fundamentally speaking, the situation for wheat is still pretty bullish. U.S. ending stocks of HRW wheat are still projected at their lowest levels in 7 years. That combined with the USDA’s lowest estimate of wheat stocks for the top eight wheat exporters in 14 years. There is rain projected for Montana & the Dakotas which will be pretty worthless for current spring wheat crops but should help future U.S. white wheat crops. Paris milling futures continue to trend higher lending support to our wheat futures as well. Global markets are still reacting to the USDA’s estimate of the Russian crop last week.
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