This Week in Commodities 10-1-2021

Corn moves higher this week

Front month December corn futures were 14-3/4 cents higher this week to close at 541-1/2. December of 2022 futures were 26-3/4 cents higher this week to close at 531-1/2, a new contract high close. The corn market remains in a short-term uptrend as harvest continues to progress across the Midwest. Strength in wheat on Friday managed to close the market 5 cents higher to end the week. This week was the highest weekly close for the corn market since late August. For the month of September, front month corn futures were 2-1/2 cents higher.

Thursday’s grain stocks numbers were considered bearish compared to pre-report estimates, but the market’s resilience to close just slightly lower while soybeans were in free-fall was a supportive sign. Corn stocks as of September 1 came in at 1.23 billion bushels; this was above the average estimate of 1.15 billion bushels. Beginning stocks are now 36% below last year, which is a positive factor, but corn disappearance for the June to August timeframe came in at 2.87 billion bushels as compared with 3.08 billion last year. Market attention will continue to be on yield reports as harvest pushes on as well as looking ahead to the October 12th WASDE report which will more than likely bring an adjustment to the national corn yield estimate.

Soybeans fall on bearish grain stocks number

Front month November soybean futures shed 38-1/2 cents this week to close at 1246-1/2. November of 2022 futures shed 14-1/2 cents this week to close at 1239-3/4. The selling after yesterday’s USDA quarterly Grain Stocks report pushed the market down to the lowest level since June 17. December meal also closed sharply lower on the day and down to the lowest level since November 4. Soybean stocks as of September 1 totaled 256 million bushels. This was well above the average estimate of 174 million and above the range of expectations of 145 to 202 million. The news was very bearish and showed a dramatic slowdown in demand for the last few months.

A shortage of available coal supplies and strong demand from manufacturers are pushing Chinese energy prices to record highs, causing widespread power issues. At least half of the soybean crushing plants in northern and northeastern China have been shuttered due to the outages according to Reuters. As a result, soybean meal prices are spiking higher, adding to the challenges faced by Chinese hog farmers already facing poor margins.

All three wheats higher this week

December CBOT wheat futures added 31-1/2 cents this week to close at 755-1/4. December KC wheat futures added 39-3/4 cents this week to close at 759-1/2. December spring wheat futures added 13 cents this week to close at 929. US wheat stocks, according to Thursday’s USDA grain stocks report, as of September 1 totaled 1.780 billion bushels. This is well below the average estimate of 1.855 billion. This is the lowest September 1 Grain Stocks report for wheat in the last 14 years. The Small Grains report showed US all wheat production at 1.646 billion bushels, which was below the average estimate of 1.682 billion. This is the lowest all wheat production number in the last 19 years. With the move higher, wheat charts are now into overbought territory similar to levels seen in mid-August before an 80-cent correction. Get current with sales if not already.

Dairy Markets Post Big Week

The Class III market ended the month of September with a strong move higher, highlighted by a $1.23 move up in the second month November contract. This rallied the Q4 average 91 cents and to its highest point since mid-July as well. There was some obvious follow-through once the Q4 average chart broke its downward trendline on Tuesday this week, a resistance point that has been in place since prices peaked last May. The block/barrel average pushed back up near its May highs, finishing Friday at $1.7975/lb after a 1.625 cents drop from Thursday’s trade. The 2021 high is at $1.82375/lb and a breach of that level could open up the topside. Spot whey pushed up to $0.58/lb this week, jumping to its highest level in more than three months. The retest of the top of the range for cheese prices remains the most critical element of the market at the moment.

Class IV futures remain at a pivotal point as the November contract traded to $17.35 yesterday, settling back 6 cents during Friday’s trade. The push to $17.35 yesterday was the third highest the second month Class IV contract has traded since October of 2014, matching a push to $17.35 in June of 2017 and just beneath a move to $17.41 in May of 2015. If that contract can make a notable push in to the mid-$17.00 area this month, the potential for a technical follow through closer to $20.00 is possible. The market has garnered support from a spot powder market that continues to push to fresh 7-year highs, while spot butter remains flat and range-bound. Fundamentals for the butter market have improved slowly and may get the Class IV market out of its long-term range sometime soon.


Keegan Madigan

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