Market Thoughts 01.24.21
Current Clients we will be sending out a separate email with the weekly Market Algo readings.
Corn Complex- Technical complex correction with recent longs getting out on Friday with the feel of multiple stop loss orders triggering. Export sales for the week were quite strong keeping total sales over USDA estimates and implying totals over 3.0 bil bushels vs USDA lowering estimates in last WASDE to 2.55 bil bushels. We have seen feeding and ethanol margins weaken, but USDA has already been making cuts in the last WASDE to reflect. Funds net position estimated to drop by 70k contracts by week end. This much similar to beans has been in the long category rather than the addition of new shorts in the market to this point.
Soybean/Canola Complex- Same story as corn for the week with technical correction as funds lifted profits on their long bets. Of interest for the week canola only down $.10/bu in the face of the larger washout in soys. No major fundamental news to note at week end to precipitate market action. Balance sheets for soy and especially US carryout would imply they continue to tighten with continued old crop bean sales. We saw contra seasonal strong sales for 20/21 beans this week as well more 21/22 new crop sales as well. Assuming no major cancellations in the 20/21 balance sheet export pace for beans implies another 450 mil bushels (12.2MMT) beyond USDA projections. If that remains true, we are negative carryout on the US balance sheet, although that won’t technically happen it indicates we need to do more price rationing (via reduced exports or domestic crush) and/or import more beans. Even with record large Brazilian crop likely to come off, it seems we are not going to be growing US or World balance sheets at least until US 2021 crop size is more assured. Funds were estimated to have sold nearly 50k contracts by week end likely pushing their net position below 100k long. We have seen only long liquidation rather than a growth of new shorts in the market.
Wheat Complex- Wheat rode along with the other commodities at week end with losses on the week. Chicago wheat was larger correction on the week, with both KC and Minnie gaining on Chicago. KC wheat complex still concerned with the overall dryness over western half of the belt with no real change to that pattern forecasted. That was not enough to hold against liquidation this week, but still a story to follow. Minnie wheat down on the week as well with funds having pared back some of their speculative bets. We are still of the opinion that we see significant shift out of spring wheat acres in the Dakotas to row crops given forward crop return scenarios.
Outside Markets- Correction in the equities this last week as the market digested some of the first actions of the new administration. Dollar index has held support of the 2018 low to this point. Will continued fiscal intervention be enough to push us below those longer-term support levels around 88 points and lower at 84 points?
See below for seasonal futures overlays for 2021, 2011 and 2008 seasons. As mentioned in previous commentaries correlations to this year are reminiscent of 2011 and 2008 seasons. Following charts are follow up to Dave’s charts from last week but showing July and Dec of each respective year overlayed with year to date 2021 performance.
July Bean Futures Performance- 2021 Orange/2011 Gray/2008 Red
Nov Bean Futures Performance- 2021 Orange/2011 Gray/2008 Red
July Corn futures Performance- 2021 Orange/2011 Gray/2008 Red
Dec Corn Futures Performance- 2021 Orange/2011 Gray/2008 Red