Market Thoughts 09.04.22
Dec corn gained 1’4 to close near unchanged at 665’6. Futures traded to 683’6 on Sunday night, highest daily level since mid-June, then proceeded to fall all the way to 654’0 before recovering to end near the middle of the weekly trading range. Nov beans lost 40’4 to close the week at 1420’4. Since posting record weekly gains in late July, beans have basically traded sideways in a somewhat wide range between 1375 and 1490 for five straight weeks. Dec spring wheat lost 19’4 to finish the week at 890’0. Wheat managed to trade all the way to 944’6 on Monday before losing more than 50 cents by Friday’s close.
“While the longer term potential remains quite high for a significant price move, apart from whatever happens tonight/tomorrow, we’re skeptical of how much further prices advance in September.” That one sentence from last week’s commentary was useful then and still adequately characterizes our thoughts on this market. Futures did top out during the Monday session and trade significantly lower after. Why? For the past couple months, grain fundamentals have been dominated by two competing headlines; corn conditions deteriorating and Chinese/global economic problems. Last week focus returned to economic worries and enough so that it overshadowed the prior week’s yield concerns. Going forward,corn is set for record- tight stocks to use, fertilizer prices have been skyrocketing with potential for significant shortages this spring, Ukraine’s ag ministry announced a 2023 wheat crop projection of just 15 million metric tons, (less than half of the 2021 crop and even smaller than this year’s crop) and South America forecasts a high probability for La Nina conditions this winter. All of that means high potential for significant price gains down the road. Last week though, that didn’t matter and bad economic news coupled with how unprecedented it is for grains to rally from high prices in September means it probably doesn’t matter this week either; making last week’s highs a good hedging opportunity.
This isn’t a perfect proxy for China’s economic woes but below is Chinese Yuan (their currency) overlaid with Crude Oil since 2010. The Yuan has been in a freefall recently and after last week’s losses is now at its lowest level since the height of Covid.
Revisiting all three crops’ seasonal comparisons; none of them rallied past this point into September.