• jcrist18

Market Thoughts 10.10.21

Dec corn lost 11 cents this week to close at 530’4. It was an inside week, similar to two weeks ago, as the high, low and close all fell within the prior week’s range. Nov beans lost 3’4 to close at 1243’0. This, along with a daily low of 1231’0, are the lowest levels for that contract since March 30th, just before the wildly bullish planting intentions report last spring. Dec spring week gained 17’4 to close at 946’4. This is a new weekly high for spring wheat, narrowly eclipsing the high from exactly two months ago, and spring wheat now has a double top on the daily continuous chart at 953’0. It’s been an orderly, nearly symmetrical rally for spring wheat since four weeks ago when we noted our spring wheat algo had hit its lowest levels in a year.

Corn and beans feel like they snuck into a party they weren’t invited to and are hoping no one notices…While the fertilizer/energy/inflation story has captivated markets the world over and helped push spring wheat and canola to new daily high closes for both contracts, beans are 40 cents lower and corn only 4 cents higher than two weeks ago, and both actually lost ground last week. We mentioned two weeks ago that beans almost certainly had more downside coming (they hadn’t even traded below the June lows at that time) and despite incredible support from the entire commodity sector, that downside has showed up. Bean fundamentals are a near inverse of this time last year, with every news thread now leaning negative. A stunningly bearish quarterly stocks report coupled with exports already 200 mln bu behind pace due to gulf closures and strong Iowa yields has private analysts upping bean carryouts into the 300-400mln bu range, a level associated with much lower bean futures than we currently have. Corn is on a little firmer ground, and benefits more directly from the bullish fertilizer story, but both commodities act like all that’s preventing another major move lower in the short term is outside market support.

We’ve been discussing the seasonal comparison to 2011 for several months and it is still tracking quite closely.

Wheat on the other hand appears poised to break out higher. Fundamentals have been genuinely bullish and are more so after the Sep 30th stocks report. It feels like the only reason wheat stopped at 953’0 on Friday was to give us a chance to walk back predictions from May about wheat highs being somewhere between 950-1000…Would expect the double top to be taken out early next week and will see what happens from there.

Pictures, not words, regarding the past few days in the commodity markets:

We rarely talk about specific strategies in this space but need to mention the risk management opportunities around new crop corn at the moment. Jory sent out budgets earlier this week, with corn showing impressive profits despite (or because of) current high fertilizer prices. This presents a hedging opportunity one rarely has. A producer can lock in inputs now, and buy Dec 22 corn short-dated February 520 put for around 17 cents currently. This essentially locks in a 520 floor (and with it the impressive resulting margin) until the spring crop insurance price is established, while leaving topside completely open and not creating any delivery commitments.

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