MARKET SUMMARY 9-20-2021
Chinese economic concerns pushed equity markets lower, possibly signaling a potential long-awaited correction. In Monday afternoon trade, E-mini Dow futures traded over 1,000 points lower as news of the Evergrande company in China is hitting financial issues. The is a large property development in China, and the possibility of this company’s failure has spooked international markets. Asian markets started the selling on the overnight trade, and when U.S. markets opened on Monday morning, the pressure in U.S. markets continued. Futures prices gapped lower and have traded through the 100-day moving average for the first time since last November. Concern regarding the Chinese economy and the ripple effects are a part of the selling pressure. In the United States, the concern regarding the debt ceiling debate, growth in COVID cases and inflation concerns may have the market ready for some additional correction. The May lows around 32,900 points looks like a target, or a test of the 200-day moving average just below that level could be in order. The last strong pullbacks turned into “buy the dip” mentality, as prices quickly climbed back and set new highs. That will need to be seen, but in the short-term, the market may be due for some additional selling pressure.
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CORN HIGHLIGHTS: Corn futures started much softer, as a “risk off” session developed overnight on growing concern with China economics. Specifically, a large company, Evergrande, a real estate conglomerate is in financial trouble. Reports suggest the company is $300 billion in debt and is likely not to make interest payments to major banks today in addition to bond payments that are due tomorrow. A stronger US dollar was noted. Futures experienced double digit losses early but managed to finish 5-1/2 cents lower in December 5.21-3/4 and 4-1/2 weaker in March to end the session at 5.29-3/4. Export inspections were 16.9 million bushels, less than the weekly average of 47.6 mb needed to meet the total projected sales of 2.475 bb. Cumulative sales for the 2021-22 marketing year have reached 38.7% of the current USDA forecast compared to the five-year average of 24.9%. The trade is beginning to anticipate the Sept 30 Quarterly Stocks report. Expectations are in the area of 1.187 bb. More estimates in the days ahead could shift this figure. Wet weather is keeping some out of the field over the next couple of days, but after that, it looks like a generally warm and dry pattern will allow harvest to greatly pick up its pace. One item that continues to surface is tar spot and just how profound the impact could be this year. While we don’t want to be “Chicken Little”, we’ve heard enough reports from producers to make us believe this is a greater than first anticipated problem, more impactful than in a typical year.
SOYBEAN HIGHLIGHTS: Soybean futures traded weaker throughout the session, as growing economic worries as well as a conducive forecast for harvest pressured prices. Weaker energy and a stronger dollar were also noted as was downward pressure in most all commodities. A resumption of exporter activity at the Gulf this week along with rising costs for barge freight, were viewed as supportive. Nonetheless, futures traded weaker today ending the session with November losing 21-1/2 cents to close at 12.62-1/2. With the price of Chinese soybean futures trading to new highs, it appears that there should be demand there. China’s markets are closed for holiday. Today’s export inspection figure was 10.1 mb, considered neutral to negative as the weekly average for the year needs to be near 40 million. Weakness in the stock market and concerns of economic crisis in China is reverberating through world stocks and commodity prices. Soymeal finished with losses of over 2.00, and oil was off by 138 in the October.
WHEAT HIGHLIGHTS: Dec Chicago wheat lost 8 cents today, closing at 7.00-3/4 and March lost 8-1/4 cents, closing at 7.11-1/2. Dec KC wheat lost 13 cents, closing at 7.00 and March lost 12-3/4 cents, closing at 7.09. The grain markets seemed to have a risk-off day. A lower stock market, higher dollar, lower energy, and lower commodity prices weighed on the grains. There is concern that China’s Evergrande Group, a massive real estate conglomerate, will collapse. They are $300 billion in debt and are reported to have missed a major debt payment. With stakes in everything from video streaming to agriculture, their demise could burden China’s economy and have ripple effects throughout the world. Looking specifically at wheat, on September 30 we will get the USDA’s small grains report, in which they will issue their final wheat production estimates. The Ukraine wheat harvest is reported to be complete with production at 33mmt. It is starting to rain in parts of Russia, which will continue to improve conditions for winter wheat planting. Argentina’s wheat crop needs more rain but strong odds of a La Nina weather pattern this year could mean adverse growing conditions in that part of the world. Here in the US, warm and dry weather in the southern plains should help winter wheat plantings. Wheat inspections totaled 20.7mb, slightly above the pace to meet the USDA’s estimate of 875mb.
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Author
Bryan Doherty