Market Thoughts 03.14.21
***What Matters When You Market II – Reminder to Save the Date, June 24th, 2021 – Knight’s Lodge, Riverdale, ND***
***Lighthouse Labs Algo Update will be sent out shortly***
Corn lost 6’4 to close the week at 539’0, making it two consecutive weekly losses for the first time since early August (immediately before the rally kicked off). May beans posted new contract highs at 1460 on Sunday night before selling off and closing down 16’6 for the week at 1413’2. May spring wheat lost 11’4 to close at 633’6.
Tuesday’s March WASDE Report:
The March report is typically pretty tame as the USDA usually gathers up March Stocks Report data before making meaningful changes. A recent string of wild USDA reports has us leery but Tuesday’s report fit that script with no changes to U.S. carryouts for corn, beans or wheat. Perhaps the most noteworthy number was another 3 mmt decrease in world wheat carryout, attributable to increasing wheat feeding globally in response to higher corn prices.
The USDA report gets some credit for last week’s red ink as it was slightly bearish against trader guesses. But the main driver appeared to be mid-week forecasts that were wetter for ARG and dryer for BZL. ARG bean crop size is still a question mark, with private estimates much lower the USDA’s March guess. And rains have been slowing bean harvest in BZL and threatening timely planting of second-crop corn. These forecasts should help on both fronts. Stories have been increasing about ASF outbreaks in China again, something that would not be friendly and needs to be monitored closely. Weekly export sales have disappointed recently and there hasn’t been a flash announcement of a Chinese purchase in several weeks. It’s not getting much print but the Dollar held key support and has been climbing for three weeks. And given new crop price levels, it’s likely we see big acres for both corn and beans in the March 31st Planting Intentions report. The fundamental news that fueled this rally for several months – Chinese exports and South American weather – is running out of steam and a fresh catalyst is probably needed for grain to press to new highs.
Corn has managed to keep holding above key support around 530 / 50d ma but a deeper correction is certainly in store if that price level gives way early next week.
That said, bean carryout is likely headed even lower given outstanding export sales on the books, oilseed oil prices are at or near all-time records, ethanol margins have been surging and we’ve seen impressive corn export shipments the last two weeks. As noted in the Labs update, our algo reading for beans is the lowest it’s been since early August before the rally started. And it remains a curious Managed Money situation as bean net long has been falling since October even as prices have climbed and corn has remained flat during same timeframe. We don’t have an explanation for this but in any event there’s plenty of room for managed money buying if there’s a spark. Stuff noted in previous paragraph is probably enough to keep things trading sideways/lower into spring but there is little margin for error in the 2021 growing season and trade will be looking to aggressively buy any sign of trouble with the U.S. crop.
New multi-year highs for both last week; bean oil up over 210% since August…