Market Thoughts 12.6.2020
PLEASE NOTE we have decided to move our annual grower event from January 14th, 2021 to June 24th, 2021. Increasing Covid cases and increasing restrictions designed to combat them make it difficult and perhaps impossible to hold an in-person meeting in Bismarck in January. Networking, socializing and relationships are inseparable benefits of our grower events and as such we’ve elected to delay instead of hosting a virtual meeting. And with no meeting this winter, we will be periodically featuring short videos on new business developments and important marketing education topics. Like us on Facebook, Follow us on Twitter and/or Subscribe to our YouTube channel to view this content and stay informed on other happenings at Lighthouse.
After making a new contract high at 439’4 on Sunday night, March corn lost 13’2 to finish the week at 420’4. Beans came within 1 cent of matching last week’s 1200’0 contract high before falling 28’6 to end the week at 1163. March spring wheat lost 19’4 to close at 550’4.
We were concerned a couple weeks ago that the rally was on shaky ground and this week’s price action gives further reason for caution. Beans have rallied for 3 ½ months and gained about 40%, very similar to the time/percent of 2016 and 2012 bean rallies from start to finish. Recently though, the two stories most responsible for this year’s run, massive Chinese demand and dry South American weather, have each failed to provide fresh news. The upcoming week is a critical one as corn has now breached trendline support with beans preparing to do the same. Friday’s selloff was largely due to lack of confirmation of rumored new Chinese purchases. Managed Money is still sitting on large net long positions and as Friday demonstrated, they’re getting antsy and need to see more Chinese business get done. After an incredibly complex year for commodities (and everything), it really does look that simple to us right now. It’s tough to see rows crops pushing to new highs in December without additional confirmed Chinese business or a major deterioration in South American weather.
That of course has some implications for old crop marketing but no matter what happens in the short term, new crop still seems very probable to trade higher at some point. New crop corn and beans are both trading at significant inverses (lower prices) than old crop. Each will enter the growing season with its tightest stocks/use in over a half decade. Exporters are already looking for new crop bean offers, something we’ve never seen before. One of our well-connected trading partners indicated China was “in already” for major purchases next year. New crop milo bids, an excellent gauge of Chinese demand, are incredibly strong right now. Seasonally there has not been a single instance in the past fifteen years where corn/beans made crop year highs already (or even close to now) and this doesn’t seem like year to break that trend.