MARKET SUMMARY 9-13-2021
Natural Gas futures are exploding higher in price, trading to the highest price levels n 8 years. A natural gas futures contract settles for 10,000 million British thermal units, (mmBtu) and its price is quoted in U.S. Dollar and cents per mmBtu. Since the bottom from the COVID Pandemic, natural gas futures have been on a steady climb higher, like the rest of the energy complex. June of 2020, natural gas futures hit a multi-year low at $1.432/mmBtu and began the climb. Only recently, prices have exploded higher, starting with a turning point on the charts on March 15 at 2.422/mmBtu; since then, prices have rallied over 100% higher. The strongest move has happened in the past month, and prices today traded over 6% higher at one time. Natural gas price recently pushed through the highs from 2018, opening the door to challenge the 2014 high of $6.493/mmBtu. Like most of the energy sector, a tight supply picture has pushed natural gas prices higher, and the recent impacts of Hurricane Ida has added the fuel for the recent strong price move as supplies remain tight. It is still estimated that 77% of natural gas production remains closed on the Gulf Coast due to the storm. Domestic demand is growing, and with winter around the corner, the competition for supplies only accelerates the price move. Natural gas in key for heating homes but is directly involved in many industrial uses, and the push in prices will only add to increasing production costs. Prices are still showing no signs of slowing, as this price move still has plenty of upside potential from a fundamental and technical standpoint.
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CORN HIGHLIGHTS: Corn futures weakened on the overnight, and while it tried several times during the session to recover, it never really did, finishing 4-1/4 weaker in December at 5.13-1/4. Nearby September ended the session at 496-3/4, down 6. The last trading session for the September contract is tomorrow, September 14. New news was lacking for bulls despite some positive buy signals on Friday after the market reacted to the USDA report. A friendly reversal, crossover in stochastics in an oversold condition, and the 200-day moving average holding as key support all suggested follow-though buying might occur today. That was not the case. Harvest will gradually pick up steam. So far, we don’t have much feedback from producers on results. We expect that this year’s yield results will be mixed as challenging weather throughout pockets of the Midwest all summer long would suggest less than ideal conditions. Weekly crop ratings indicated that as well with it most weeks indicating 12 to 14% of the crop is poor to very poor. Typically, we anticipate between 4 and 6% in this category. Some private forecasters are suggesting satellite imagery shows a smaller yield. Only time will tell when actual results are had.
SOYBEAN HIGHLIGHTS: Soybean futures ended quietly with November losing 1-3/4 cents to close at 12.84-3/4 after trading both higher and lower. While there is progress in the Gulf and some basis improvement, the effects of hurricane Ida are still being felt, keeping price rallies in check. The key for price direction the next several weeks will be harvest progress and, more importantly, harvest results. As harvest results begin to become known the market will likely take a direction. Carry out did increase to 185 million bushels on last week’s report, a more comfortable number but still tight. If US yield happens to be less than expected, or South America experiences weather issues, prices will waste little time rationing supply through higher prices. For now, as we’ve argued the last several weeks, end users remain hand to mouth and the inability of futures prices to hold gains suggest that both the trade and end buyer remain reluctant purchasing as needed. Historically prices tend to work lower this time of year for at least the next 30 days. Crude oil near 70 per barrel should be viewed as a stabilizing if not a friendly factor for soybean prices as will expectations that the US is the go-to market for soybeans the next several months.
WHEAT HIGHLIGHTS: September futures are officially 24 hours away from expiration. With that said, September Chicago down 1/2 cent closing at 6.74 1/2 and December down 1 1/2 cent closing at 6.87. KC September lost 2 cents closing at 6.74 1/4, and December contracts down 3 3/4 cents, closing at 6.86 1/4. Early this morning, corn and wheat both were down hard, wheat pressured more by spillover from Paris milling futures. The trade was still processing last week’s Stats Canada report that dropped their production numbers, but still not as much as the trade had anticipated. However, as the day progressed mid-morning wheat tried to push back into the green – KC wheat managed for much of the trade but ultimately fell slightly back to net neutral territory by the close. Russian wheat prices continue to rise for 9 weeks in a row, and exports are expected to slow as their export taxes continue to rise, moving from 46.50/mt to 52.50/mt this week. For the bulls, European trade associations lowered their estimate for the EU crop by 2.5 mmt to 143.5 mmt. Global demand is still very strong, with the recent fall in US prices and Russian prices continue to push higher. It will be interesting to see if the US can continue last week’s export sales and garner more business. Weather allowed for winter wheat planting to continue; as of this week, 12% of acres are planted ahead of 5-year average of 8%, and spring wheat harvest is officially deemed finished.
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Author
Bryan Doherty