Market Thoughts 9.20.20
Corn Complex- Corn complex ended higher on the week drug along by the bean and wheat complex to some extent. Managed money net position is around 58k contracts long. Most of the net long has continued to be short covering with little new long fund money entering the market. Even in the face of beans doing what they have done, the funds seem hesitant to jump in front of a 2.5 bil estimated carryout. Corn export sales were strong at just over 63 million bushels, although it did not eclipse the prior week sales of over 70 million. Chinese sales comprise about 360 million bushels (8.8MMT) to this point in the year. Of interest this week we started to see early harvest results across the Midwest. Many areas early on are reporting yields at or above expectations. This includes many droughty areas in IA and NE where sub 200-bushel corn was feared but many areas at this early point still point to yields above 200.
Soybean/Canola Complex- Soybeans continued to add to the rally this week. As mentioned in last weeks commentary we have entered what many would consider the more disorderly phase of the rally with bigger moves as you near topping action. Funds indicated by week end estimated around 230k net long. Record position net long on the report is just over 260k contracts. Export sales on the week were 90 million bushels with much of that announced to China/Unknown over the course of the week. Combined sales to China/Unknown at this point is around 950 million bushels. Most of the trade assumes a total Chinese program in the 35-40MMT (1.28-1.47 bil bushel) range. Much like corn we have many of the yield reports for early beans across the Midwest being better than expected or record for some areas in instances. Would say early ratio is about 7:1 on better than worse reports to this point. Will this trend continue as harvest progresses? It will be interesting to watch. Canola also has moved up with soys as well. One area to focus on is new crop opportunities for 2021 canola as cash well over $17.00/cwt should be attainable.
Wheat Complex- All three wheat complexes had a nice move to end the week with it being led by Chicago wheat. Concerns about dryness in the Black Sea region continue to edge to the forefront at crop there is being seeded into dry ground and needs moisture before mid-Oct to establish and defend against the colder winters there. With the new influx of fund money, we could see a push in Chicago complex back towards the $6 level. Minneapolis wheat moved with the rest of the wheat complex on the week. Of note the fund short that had been residing in the Minnie complex is nearly gone.
Outside Markets- Crude continues range bound with levels holding right around $40/bl still. Friday afternoon CFAP2 was announced with indications of another large payout of government dollars to producers of nearly all stripes across the nation. I’ll spare the details, but row crop producers are guaranteed $15/acre on all seeded 2020 acres- note no payment on PP ground, and payments based on their market price-APH formula could be substantially higher in many areas. Tacking that onto harvest rally prices here, it will be interesting to see how producers view these new tranches of payments. Ethanol had a bit of a victory with EPA announcing it was not going to exempt any of the gallons for small refiners that had been presented to them.