Market Thoughts 03.21.21
Current Clients we will be sending out a separate email with the weekly Market Algo readings.
Corn Complex- Two face trade in corn this week with old crop gaining on the week while new crop worked lower from new highs set the previous week. Old corn on the week retested the $5.30 level but rallied for the week supported by another round of Chinese corn purchases (3MMT=150million bushels). Trade reaction to the announcements was quite muted and we failed to make new highs. Our firm belief is the market has been trading these export levels and now is in a prove it mode to see if we can physically export these sales before the end of the marketing season. As of now the trade will need to see a minimum of 25 million bushels weekly to China for the remainder of the marketing season to cover their purchases, this does not count any additional liftings for the rest of the world exporters. Exports sales for this week were decent but did not include any of the announced Chinese business and that will officially hit next week’s report. Ethanol margins have improved with stocks a multi-year lows as we move into the spring and summer travel season.
Soybean/Canola Complex- Similar trade in beans as in corn with old crop trading back towards the highs for the week while new crop traded back into the middle of the range it has been in for the last couple of weeks. For the first time in quite a few weeks we did see canola correct off its highs as the risk off day on Thursday propelled all markets lower. Soybean sales and shipments are being eclipsed by the South American crop as that crop hits its main stride. Productions expectations for SA beans continue to hold steady even with dry and wet pockets seen in Brazil and Argentina. Chinese bean crusher margins have been struggling even with cheap Brazilian beans. As mentioned in the previous weeks we have seen some ASF resurgence in China and the market is weighing how big of an impact that will have on overall soy and soy product demand.
Wheat Complex- Wheat continued a bit of slide on the week with KC taking the brunt of the move with the significant moisture seen thru the KC belt that gave that complex the biggest loss on the week. MGEX and Chicago both fell but not to the extent of KC, with MGEX complex still holds a weather and acreage premium as the market waits for the end of the month acreage report. We had another decent week of export sales across the complex. HRS keeps getting nice weekly sales with this week seeing a nice chunk to China. The Russians were out mid-week with rumors they could pull export taxes but would have to see their domestic wheat and flour situation be satisfied before that would happen. Assuming these export taxes remain in place the market for June/July/Aug will be looking for replacement bushels versus those that Russia would normally be executing in that time frame.
Outside Markets- US dollar strength was the name of the game this week. With the ebb and flow that complex dictating flow in the commodity and equity markets. Equity markets continued to make new or new highs on the week. Even with chatter about new Covid variants worldwide, the market continues to have bull horns for renewed consumer confidence and spending coming into the spring.
Acreage and Stocks Report- The quarterly acreage and stocks report will be March 31st. This report will likely be setting the tone for the balance of the spring growing season and likely create quite a bit of price volatility. Although the acreage report will be most talked about, stocks reports for the last year have been where USDA has been adjusting for an apparently much smaller 2019 crop. Could we see some opposite move with 2 years of sub-par prices and now prices at 8-year highs? One can imagine that farmer’s may have filled bins in the last 18-24 months and those bushels may have not been accurately report for in the on-farm stocks numbers due to non-reporting etc. Could those bushels show back up now with those bushels flushed into system with higher prices? Not saying this will be the case, but one can use the March 2013 stocks report as an example where market expected tighter stocks, but USDA came in nearly 400 million bushels higher than expected due to demand cuts on higher prices and a tendency to find stocks when prices are higher.
On the acreage front although quite the battle still to be had for many of the crops one thing to keep in mind is, we had multiyear high amounts of fertilizer and fieldwork done last fall in most of the corn belt. Where I sit here in Nebraska nearly every field as I travel looks to have the planter ready to pull right in when conditions are ready. Many of my contacts in NE and IA and the Midwest in general seem to indicate a typical corn/bean rotation with slight tendency to be higher on corn acres. Two points to this comment, with the fall fertilizer done and price ratios although slightly favoring beans, I don’t believe it has been enough to pull acres away from corn acres that have been planned since last fall. Most producers would not go plant beans over the top of pre-fertilized acres especially at current fertilizer prices. Secondly farmers with good spring field conditions will be able to pull right in and plant and that tends to create an environment for corn acres to meet or exceed prospective planting intentions.
This material should be construed as market commentary, observing economic, political and/or market conditions, and not intended to refer to any trading strategy, promotional element, or quality of service. Information contained herein was obtained from sources believed to be reliable but is not guaranteed as to its accuracy. These materials represent the opinions and viewpoints of the author.