Market Thoughts 9.4.20
Corn Complex- Corn traded range bound on the week with a slightly lower close on the week. The big story for the week was funds were showing slightly net long for the week. Funds have covered nearly all their short here going from nearly 200k contracts short at the beginning of August to slightly long now. Amazingly this massive short covering has only resulted in a roughly $.30/bu price rally, back up to basically summer highs. The outright long in the market has barely moved here while the short has been driven out. What will it take for the long to want to increase their positions beyond current levels? USDA is in late this next week with the September WASDE. Current market estimates show corn yield somewhere between 175-179 for most private analysts. Even taking low end yield forecasts and a decline in harvested acres and keeping current demand it still is tough to come to carryout number much less than 2.1-2.2 billion bushels, still one of the highest carryouts on record. One demand area to watch is ethanol crush. The industry has done a decent job balancing production in the face of reduced demand, but summer driving season coming to an end and the continued loss of major commuting miles in the US will we see gas demand ever make it back to pre-Covid highs. This loss in demand could be a 500-million-bushel change to the balance sheet as the year goes on.
Soybean/Canola Complex- Soys continued to move higher on the week led by continued fund buying in the bean complex. CFTC report indicated a total long in the market at of 162k, with the outright long growing on the week by 45k contracts. Many private analysts still think 50+ bushel national yields, which would still leave carryout somewhere within the 400-500-million-bushel range. Chinese purchases have been leading this market as well with a big export program on the books currently. Estimates are we see Chinese buying up into the 1.28 to 1.47-billion-bushel level. We will need all of that as USDA has bumped exports over 2.1 billion bushels for the upcoming season. The market has also been pricing in a bit of early dryness in South America bean crop, but still far too early to determine how that plays out. It is estimated that South American producers have sold between 40-50% of the next years crop already, which is substantially more than usual at this point in their marketing year. This is due to high board prices combined with weakened currency. This will encourage high seeded acres as producers compete for these higher prices.
Wheat Complex- Wheat complex has also been the beneficiary of a short covering led rally in all three complexes, mostly in sympathy with the corn and bean rallies. World wheat numbers still are heavy on the balance sheets. Much of the higher cash market movement we have seen is the market pricing, is dislocations of smaller European crop (specifically French) and larger Russian crop moving into some non-traditional markets. It would appear for most; the spring wheat crop is nearing completion of harvest with most areas of ND having decent but not record-breaking yields. Quality has remained decent through most areas with some isolated cases of higher ergot. KC wheat will be of interest to watch as areas of dryness will need moisture to encourage seeding. July KC futures did bounce over $5.00 briefly during the week as signal to producers to seed some additional wheat acres.
Outside Markets- Equity markets took a bit of break this week after their rip higher over the last couple weeks. Oil markets still are subdued with continued weak world demand for oil and energy in general. US dollar index made some short-term lows and bounced back to near the 93-point level.