Market Thoughts 09.26.21
Dec corn lost 0’4 this week to close at 526’6. An inside week for that contract after failing to take out both the high and low from previous week, the first time that’s happened since August 2nd. November soybeans gained 1’0 cent to finish the week at 1285’0. Unlike corn, beans did trade sharply lower early in the week, dipping to 1257’4 on Tuesday before recovering balance of week. Dec spring wheat gained 15’4 to close at 916’0 as wheat futures are now up almost 60 cents over the past two weeks.
Unchanged week over week is actually an impressive showing for corn/beans given the fundamental news flow. In addition to harvest pressure and yields generally as expected, another “administration slashing renewable fuels” story circulated, another week of lost gulf shipments and outside markets weighed down with the specter of China Evergrand collapsing. Prices not being sharply lower on the week feels like a win given all that. Regarding Evergrand, the situation doesn’t appear to be steering toward a contagion that spreads to the global markets. (Crude oil and equities have already bounced back above previous Friday levels.) Wheat is primarily responsible for propping up row crops last week with milling wheat prices rallying all over the globe. The main fundamental story was Russia suggesting plans to sharply curtail wheat exports over the next several months. While the likelihood of follow through on that is somewhat suspect, it underscores just how dramatically world milling wheat stocks have diminished in the last six months. This Thursday brings the September 1st quarterly stocks report, typically a major market mover.
Despite the impressive showing last week, beans still appear to have some unfinished business to the downside in the short term, both on a daily chart and with the seasonal comparison to 2011. Nov beans made a summer low of 1240 back on June 17th and last week’s September low of 1257’4 is still well above that level. It would be very unusual for row crops to be showing a textbook price slide into a comfortable harvest and not take out earlier-summer lows in the process. In 2011, beans took out their earlier-year lows a couple days after this date and proceeded to lose another ~100 cents into mid-October. As we’ve noted a few times prior, prices then immediately bounced and beans were almost 200 cents higher by mid-winter. But nonetheless, seasonal/chart suggests more short-term downside risk for beans.
Natural gas prices were again surging higher recently, now at levels only seen briefly during winter cold snaps since the shale boom. It’s of course very bizarre to see prices spiking like this during northern Hemisphere summer. This adds even more strength to sharply higher fertilizer prices and supports the overall inflationary tone of commodities right now.