• jcrist18

Market Thoughts 11.06.22

Dec corn gained a quarter cent last week to close at 681’0. Ukraine news did vault corn up to exactly 700’0 on Sunday night but futures slid the rest of the week and managed to land right back in the same range. Somewhat bewilderingly, every single weekly close for Dec corn has been within a 10 cent range for the past two months. Soybeans broke out higher last week with January futures gaining 62 cents to close at 1462’2. This was the highest weekly close for the Jan contract since August, with beans now up exactly a dollar since a mid-October low. Dec Spring Wheat gained 9’4 to finish the week at 954’4. Spring wheat has been consolidating similar to corn for the past five weeks with closes all between 945 and 964, but unlike corn having a lot more fun in the process. This week, wheat futures added 45 cents through Tuesday then proceeded to drop 60 cents by Thursday’s close before rallying 20 cents on Friday.

Corn continues to fiddle while Rome burns, netting a weekly change of exactly one tick. This despite an astonishing amount of meaningful new fundamental developments. This week featured of course Russia pulling out of the Ukraine export deal then jumping back in. But also, Brazil’s far-left former president won that country’s election, prompting farmers to strike and blockade roads (and suggest a military coup), Australia’s large wheat crop was severely damaged by excessive rains, another Fed meeting/interest rate hike, China provided a list of Brazilian companies officially approved for corn export, rumors swirled that China was easing covid restrictions followed by senior Chinese health officials saying that is incorrect followed by them saying hey maybe we are now. Tough to sit here today and net out the ultimate impact of all those stories along with the November WASDE report this week which could further reshuffle stuff. That said, we’re still partial to the idea that corn failing to have a correction during harvest and the impressive basis surge we’re seeing as harvest winds down suggests that corn goes higher much easier than lower this winter.

Worth noting here though – there have only been two other years with Dec corn futures anywhere near this level in November – 2011 and 2012. Both years featured the exact same sideways trade during October/early November while neither contract managed to rally back anywhere near summer highs. Seasonal comparison suggests corn continues to trade sideways/lower through the early winter and likely only rallies significantly if another major western Hemisphere weather issue develops.

Soybeans are following our script nicely, having now rallied 100 cents since this commentary made a detailed case for a harvest low/post-harvest rally in early October. Impressive recent export sales and strong shipments out of the PNW are helping as is the political uncertainty in Brazil and extreme drought in Argentina. But the most bullish thing going for beans right now is product demand – soybean crush margins have reached absurd levels of profit as meal and oil prices surge.

Bean oil is up almost 20% since October 1st while soybean futures are only up 7%.

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