Market Thoughts 10.3.21
Current Clients we will be sending out a separate email with the weekly Market Algo readings.
Corn Complex- USDA finished the month out with the quarterly stocks report which has been the subject of big revisions the last few Septembers. This year report came in on the high end of market expectations, but there were no major revisions to previous months. USDA did revise 2020 crop year acres and yield down, likely offsetting some of the implied lower feed demand that we saw towards the tail end of the 2020 marketing year. Much to the opposite of beans below exports for corn have remained decent and likely will see further acceleration into year end as Brazil’s poor safrinha crop fails to satisfy the world market. Funds have continued to grow their long in the corn market in response to this continued tightness in world balance sheets for corn as well as wheat. Brazilian first crop corn is well over 25% planted at this juncture and overall moisture situation is more favorable than last year.
Soybean/Canola Complex- Soybeans received a bit more bearish news coming out of the quarterly stocks report with 80 million bushels more than the trade expected. Besides slightly slowed demand we also saw a yield and acreage adjustment to the 2020 crop. Price action post report was as expected but did hold out okay to finish the week still holding some key technical levels. We continue to see slow exports for US beans with pace running behind upwards of 150 million implied bushels. Brazilian new crop seeding has commenced at a much quicker pace than one year ago and likely means a crop available to the world market almost a month sooner than a year ago. This continues to be a headwind to US export prospects and likely gets the US balance sheet to grow ever larger. Funds have pared back their long from a year ago at this time, although it has grown slightly in the last couple of weeks. Canola market has held its own even with the price decrease in the balance of the oilseed complex. This market has a lot of physical rationing to get to next years new crop, with new crop harvest for this year just finishing up.
Wheat Complex- Wheat complex had a strong week due in part to the final 2021 small grains estimates. With hard winter wheat having production cut some 30 million bushels versus previous USDA estimates further tightening the milling wheat carryouts both in the US and world. KC and Chi led the complex higher with Minnie tagging along with its already known tight carryout levels. Small grains summary only took Minnie production down another 8 million bushels, so no substantial adjustment in that category. Durum production was in line with estimates but still indicating a much smaller crop to work through this year.
Outside Markets- Equities and bond markets continue to be volatile with inflationary pressures seen throughout retail and wholesale markets, while many signs point to consumer spending slowing in the face of these pressures. “Stagflation” may be upon us with many of the available tools for the Fed limited as they have driven interest rates extremely low and have soaked up excess liquidity with QE. The financial engineering has been quite dramatic with trillions of excess dollars looking for returns in the financial system. As we continue to inflate our way out of debt the reality of longer-term systemic inflation starts to set in. Pay attention to the late 60’s and 70’ and how that played out for the agriculture space as we moved into the 1980’s.
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.