Market Thoughts 11.01.20
Corn Complex- A correction week for corn as funds pulled back on some of their bullish bets across the commodity sector. Front month corn contracts took the brunt of the pullback as that is where funds had been placing their bullish bets. Nearby spreads had narrowed to almost no carry early in the week, before breaking some at week end. Funds paired the net long back from nearly 275k mid-week back to estimated 225k by end of week. Export sales continued to fire on all cylinders with over 88 million bushels sold for the week. At current sales pace would indicate total export sales at just short of 2.8 billion bushels vs USDA estimates of 2.3 billion bushels. One note of interest this week was USDA World Ag Board data users conference, where USDA indicated they will not adjust official Chinese import figures until it is announced they have officially expanded their TRQ (non-tariff) allocations. Will bear watching going forward if this number is forced to change even if there is no official Chinese announcements on TRQ’s. Export shipments for corn maintain pace right around the 5-year average, US corn program ramps up mid to later in the marketing year. Thursday morning was also had a large flash sale of corn to Mexico that will show up in next week’s export report. Expectations are high that USDA will be forced to downgrade Ukrainian production into the low 30 MMT range as yields to this juncture have been disappointing. Argentine crop size was downgraded 2MMT due to dryness concerns across much of their growing regions.
Soybean/Canola Complex- Soys started the week higher but could not find new buying early in the week. Option expiration the previous Friday combined with first notice Friday of this week contributed to price volatility as fund longs took profits. Funds longs have been bouncing around the 220k to 230k long position for the last couple of weeks as it seemed they were unwilling to initiate much new length at the current price levels. We still look at needed SA production and how any small shortfall there negatively impacts world oilseed balance sheets. SA producers were slow to get the bean crop in but have made quite good progress thru end of October catching up to nearly to normal pace in the key producing regions. Of note this week, Dalian (Chinese) soybean futures had not weakened in the face of lower prices here in the US. As mentioned, two weeks ago, new crop bean futures will have to do a decent amount of work here in the next couple of months to move acres back toward that new crop balance sheet.
Wheat Complex- As the other commodity complexes did for the week, we saw a pull back in the wheat complex as markets digested somewhat wetter forecasts for Black Sea regions along with overbought conditions. Funds pared back some of their bullish bets in the wheat complex at week end, but still maintain sizeable net long positions in all three complexes. Export sales were solid again this week even with the elevated prices seen in the US. All wheat export sales are ahead of USDA pace around 4% for the year.
Outside Markets- Equities were in profit taking mode on the week with expectations of volatility surrounding the presidential election this upcoming week. Commodity producers do need to keep an eye on the US dollar index as it broke back into the 94 point range after spending the last couple of months bouncing between 92-93 points. Strength in the dollar could be potential headwinds for US commodities upcoming. Euro took a beating this week as many European countries went back to various states of lockdown due to large increases in Covid-19 cases.