TFM Daily Market Summary 08-25-2021


In the past couple of months, soybean oil may be trading more like an energy commodity than an ag commodity. There is a strong correlation between soybean oil and crude oil in price movements, especially since June. Soybean oil has two major uses, edible oil for food consumption, and as a component for biodiesel production. Lately, the market seems to be more focused on the energy side of the uses for soybean oil. The crude oil market has had a correction of recent highs, and bean oil moved right in line. Last week, the energy market traded aggressively and recovered; soybean oil was sold off, reacting to potential biofuels mandate news, and seemed to still stay tied to the movement of crude oil. That may be coming to a change, as global edible oils are at their lowest stock to use ratio in nearly 30 years, the shift may move back to the food usage side. Regardless, the soybean oil market is still going to be supported because of its energy needs or the tight global oil supply.

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CORN HIGHLIGHTS: Corn futures closed firmer today gaining 6-1/4 to 12-1/2 cents as Dec 2022 and Mar 2023 led today’s rally. Nearby Sep closed 6-3/4 higher at 5.51-1/4 and Dec 6-1/2 firmer at 5.51-3/4. A weaker U.S. dollar for the fourth consecutive session along with continued concern that warm weather is pushing the crop toward maturity at a faster than desired pace and consequently, potentially lowering yield provided support. Dec futures again traded back above 5.50 with a high today of 5.55. We are in the fifth consecutive month of Dec futures trading at 5:50. From a big picture perspective, this week’s support is due in part to ideas that last week’s drop off in price was too much, and with lack of rainfall and high temperatures this week prices found new buying. Couple this with a decrease in crop ratings on Monday and you have multiple supportive factors. We also expect that farmer selling remains light on price setbacks. Those who likely want it to sell have done so. For those who have more confidence in their crop than, say a month ago, we will suggest that you now make catch-up sales.

SOYBEAN HIGHLIGHTS: Soybean futures firmed in Sep gaining 9 cents to close at 13.46. After strong gains yesterday, it was good to see a positive finish. Nov gained 1-0 cents to finish at 13.32-3/4. Beneficial rains in parts of Iowa, Minnesota, and Wisconsin were all viewed as helpful to crop production, as was additional rainfall in Illinois. For many, this recent rain event will help to “make” their crop. Yet, parts of the Midwest remain parched while others would prefer less rain as white mold becomes more of a problem. In conversation with producers, we’re getting a sense that many are somewhat concerned yield will not quite live up to earlier expectations. Whether it is recent dry conditions, too hot early in the season, or items like white mold, it is difficult to argue that a 50-bushel per acre yield is at hand, especially with crop ratings down from a year ago. Therefore, this week’s turn higher for price is welcomed likely suggesting price consolidation on the eve of harvest. Whether or not there is enough friendly news to drive prices higher probably depends on exports.

WHEAT HIGHLIGHTS: Wheat led the way lower this morning, initially pulling fellow grains with it. Global veg oil markets pulled soybeans out of the red and tugged on corn but didn’t help wheat today. Sep Chi wheat lost 6-3/4 cents closing at 7.11-1/4 and Dec lost exactly the same amount closing at 7.25-1/2. KC wheat held its own a little better, with Sep down 2-1/4 at 7.02 and Dec contracts losing 2-3/4 at 7.15. The only real culprit for the early sell-off was spillover from Paris Milling futures. With the last 2 trades ultimately posting minor losses, from a global standpoint, demand for wheat is still very strong. We will see if tomorrow’s export report shows any real export business for the U.S., however, with our prices still very overpriced on the global market, it’s not expected to see anything impressive. The trade is mainly focused on Monday’s report from Canada where it’s expected they will make a large slash to production this year due to the weather. The USDA pegged the crop at 24 mmt in the August report, and it’s believed Canada may adjust that to 22.6 mmt – compared to last year’s production of 35.2 mmt.

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John Heinberg

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