Market Thoughts 4/24/2022
May corn gained 2’6 to finish the week at 793’0. Despite the modest weekly gain, it was a sour finish as corn hit 819’6 on Tuesday and then proceeded to lose almost 30 cents. For some context, there have only been 9 days in history when nearby corn futures traded higher than 819’6 and only two daily closes above that level; all in late summer 2012. May soybeans gained 33’6 to close at 1716’0, a new high weekly close. But similar to corn, beans rallied to 1757’4 earlier, coming within a couple cents of finally making new contract highs, before lose 41 cents to close out the week. May wheat closed at 1160’2, up 15’6. This is a new weekly high close but still a ways from the early March 1211’6 daily high.
Not a lot of fresh bullish news last week but prior stories remain mostly intact – U.S. planting delays persist, winter wheat ratings slid back to record-low, Mariupol appears to have finally fallen and more shelling of Odessa. Soybeans continue to find large counter-seasonal export sales and all oilseeds got a bump from Indonesia, the world’s largest palm oil producer, banning palm oil exports. With the U.S. crop struggling to get planted and trade not even contemplating summer weather yet, fundamentals still lean bullish and most probable that we see significantly higher prices. But our Price Signals are giving us some reason for caution:
New crop corn punched through the Sell Threshold on Tuesday and old crop corn landed just below it and at its highest level since last May 7th. Spring Wheat has been above the Sell Threshold for nearly three weeks, an unprecedented outcome, and Soybeans are back within 10 points of the Sell Threshold. (Only Canola remains a ways below Sell Thresholds.)
Composite (Simple average of all grain commodities) Price Signal
Where would enough bearish news to stop the rally come from? Resolving current bullish factors (crop gets planted, etc.) would be part of it, But the biggest risk is the economy. And given how closely 2022 has tracked to 2008, economic concerns have us on edge. The S&P index closed out last week by recording its largest two day loss since Covid, catalyzed by fears over tech earnings and housing/interest rates. Interest rates have been skyrocketing recently (10 yr treasury shown below) with more increases expected. Meanwhile lumber futures have declined almost 40% since March. The housing situation is certainly different now than in 2008 –a massive housing shortage persists unlike 2008 which combined an oversupply of housing with widespread mortgage fraud. But nonetheless, collapsing equities/rallying interest rates are going to weigh on grains especially if other bullish stories start to fade.
10 Year Treasury