This Week in Commodities 11-12-2021

Corn makes a run at recent highs

December corn futures added 24-1/4 cents this week to close at 577-1/4. Rumors popped up this week that China was buying corn from Ukraine, which sparked to the market. Price action on Thursday was weak after prices attempted to retest their recent highs. On both Thursday and Friday, front month corn futures tested but failed to close above the 200-day moving average; this sideways trending line limited the rally to start November. A weekly close above this level would open the door to a retest of the $6 per bushel area, while failure at the 200-day means a continuation of the sideways price action.

Corn prices in China have pushed to multi-month highs even as harvest has continued to press on. A recovery in energy prices has increased corn drying cost and helped corn futures move higher as well. New crop futures on the Dalian Exchange have rallied nearly 9% in the last month to their highest level since June. Prices of wheat have also climbed on strong demand from milling plants and the livestock sector. With record corn yields here in the US, we will need record demand to keep carryout levels in check as we head into 2022.

Soybean prices rally after WASDE report this week

January soybean futures added 39-1/4 cents this week to close at 1244-1/4. China imported just 5.1 million tons of soybeans in October; this is the lowest monthly total since March of 2020. Poor crush margins have continued to limit demand this fall. China’s October soybean imports were down 25.7% from September and were 41.2% below a year-ago. Through the first 10 months of 2021, China has imported 79.1 million tons, down 5% from the first 10 months last year.

Brazil is expected to produce a record soybean crop of 142 million tons as planted acreage is forecast 400,000 hectares higher than previously thought according to Conab. Brazil’s soybeans were 67% planted as of a week ago; this compares with 56% last year. This year’s planting pace is the second fastest ever, only trailing the 2018/19 growing season. In Mato Grosso, Brazil’s largest soybean planting region, over 95% of the intended soybean acres have been planted. This rapid pace is not only good for soybeans but should set up the second crop corn for success. It is estimated that 92% of the second crop corn will be planted in the ideal planting window.


Winter wheats close above $8 this week

December CBOT wheat futures added 50-1/2 cents this week to close at 817. December KC wheat futures added 54-1/4 cents this week to close at 833. December spring wheat futures added 40-1/2 cents this week to close at 1050. The US dollar continued its push higher this week, trading to its highest levels since July of 2020. This is a bearish influence on the wheat market and should continue to be monitored. The reduction in estimated wheat exports for the current marketing year in the November WASDE is a trend that could continue if the US dollar continues moving higher. A rallying dollar makes US exports less attractive to foreign buyers. With this week’s rally, all three wheats are in extreme overbought territory and at risk of a major pullback. This week was a major seasonal top for cash spring wheat prices; get current with recommendations if not already.


Class III gives back gains on Friday

The second month Class III December contract was up 49 cents this week through Thursday’s close, but Friday’s trade gave almost all of that back with a 46 cent lower close. Spot cheese was down 5.625 cents today but still up 8 cents on the week. However, the block/barrel spread has widened back out to a 25.25 cent premium of blocks over barrels, moving back near an extreme level and representing a 39.75 cent swing from the recent inversion. Spot whey finished the week at $0.67/lb and is approaching its 2021 high from April 20 at $0.7025/lb, but milk prices have been somewhat ignorant of this market. The 2022 milk contracts remain strong with an average of $18.59 for all 12 months, up 20 cents on the week.

The Class IV market continues to hang in strong with the second month November contract falling just 2 cents this week, just the second lower weekly close for the second month contract in the last 15 weeks. Spot butter closed 1.5 cents higher on the week at $1.95/lb, which makes for three weeks in a row with a close between $1.93/lb and $1.95/lb as the market struggles to find buying beneath the psychological $2.00 mark. Power prices were down 2 cents on the week to $1.55/lb but remain near their recent seven-year high. The strength in the spot markets, highlighted by very strong butter exports, continues to support the Class IV market at levels it has not seen since 2014.


Keegan Madigan

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