Corn trades back above resistance

December corn futures added 30-1/4 cents this week to close at 568-1/4. July corn futures added 27-3/4 cents this week to close at 578-3/4. The December 2022 contract made a new high closing price today of 550, up 17 cents for the week though down slightly from yesterday’s high of 553-1/4. The market is expecting to see a decline in 2020 acres as input costs climb. Corn prices were firmer this week on strong ethanol demand and a lull in harvest pressure. While corn harvest is advancing ahead of the 5-year average, it has ground to a halt in parts of the Corn Belt, where over the last week a band from eastern Nebraska to Indiana saw up to 4 inches of rain. Harvest delays have supported prices not just here in the US, but also in Europe, where French farmers have recently been told to cut down on drying the corn due to the energy crunch there, so are left to let it dry in the field. The delay in the corn harvest increases the risk of yield loss and lower global production estimates. After surging through resistance at the 100-day moving average on Wednesday, the December futures contract closed at its highest level since mid-August. The next level of resistance is 573, the close on August 12, and then 584 which is the 62% retracement of the selloff from the May high to the September low on the December 2021 contract.

Soybean prices mostly sideways as Brazil crop progresses

November soybean futures added 12-1/4 cents this week to close at 1235-3/4. July soybean futures added 19 cents this week to close at 1273-1/2. Private exporters reported selling 354,350 metric tons of soybeans to China and unknown destinations. Weekly sales were down from last week. Domestic processors have picked up the slack in demand and basis is improving.

Brazil’s soybean crop is off to a good start at 38% planted and more than 60% planted in the main growing region of Mato Grosso. The majority of Brazil has ample moisture and the soybeans should germinate well. However, Argentina remains dry. October rainfall was just 1.77″ versus 3.7″ average – similar to 2009. South America’s crops are just getting started and there is the looming threat of La Niña. NOAA has said that La Niña conditions have developed and expects it to continue with an 87% probability between December 2021 and February 2022. Brazil crop watchers are concerned because this would suggest that they could experience warmer than normal December temperatures and drier than normal January and February. The USDA is estimating Brazil to have a 144 million ton crop.

Spring wheat makes new 10-year highs

December CBOT wheat futures added 16-3/4 cents this week to close at 772-3/4. December KC wheat futures added 11-3/4 cents this week to close at 785-3/4. December spring wheat futures added 39-1/4 cents this week to close at 1052-1/4. The US Dollar Index shook off yesterday’s weakness to finish at fresh two-week highs and this kept pressure in the wheat complex. Despite this, the Kansas City and Minneapolis futures made new contract highs. The Minneapolis spring wheat contract continued to increase its premium over winter wheats which is at its highest level since June 2011. The drought in the US and Canada Plains this past season, as well as smaller crops out of the EU and Russia, has continued to push prices higher in an effort to curb demand. Wheat world exporter combined stocks-to-use ratio has been estimated at a record low. The next objective on the Minneapolis contract would be to test the June 2011 high of 1120, with winter wheats being distant followers as the price spread could increase to more than $3.

Milk Mostly Higher to End Week

Class III futures were two-sided to end the week with the Q4 contracts lower and most 2022 contracts higher. The November contract was $1.08 lower this week, but still 27 cents higher for the month within a $2.08 range. While the volatility for the November and December contracts has been amped up, the 2022 average quietly crept higher this week with a close at $18.43. This is a 64 cent jump for the month of October and provides some good opportunities to start putting a floor under milk prices for the coming year. The block/barrel average has been disappointing since posting a new 2021 high on Monday, falling almost a dime since then to close at $1.7475/lb today. Barrels closed at a 14.50 cent premium over blocks which is the fourth largest premium of barrels over blocks in more than a decade. Whey prices tacked on 1.25 cents this week to move to $0.63/lb, continuing to be a positive force on Class III prices.

The Class IV market has now seen its second month contract close 12 of the last 13 weeks higher as the November contract pushed to $18.50 by Friday’s close. That makes for a 21-cent rally on the week and an impressive $1.15 higher for the month. Along with some technical follow-through after breaking to seven-year highs, the spot markets have remained supportive with spot butter pushing to $1.94/lb, an increase of 10.5 cents on the week and its highest level since early June of 2020. Spot powder prices were up 2 cents this week to close at $1.5575/lb, a new seven-year high. While both classes of milk continue to benefit from lower milk production, strong exports, and an overall inflationary theme for commodities, Class IV milk looks like it is poised to lead market direction for the first time in many years.