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Morning Market Review for Nov. 23, 2020

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Soybeans flirt with $12/bushel benchmark. (Comments are updated by 7:30 a.m. Central Time.)

Corn, wheat follow higher amid steady demand

  • Corn up 4-6 cents
  • Soybeans up 10-16 cents, soyoil up $0.40/lb, soybean meal up $5/ton
  • Wheat up 4-9 cents

*Prices as of 6:55 am CDT.

Corn

Corn futures followed soybeans’ lead higher this morning, with underlying strength coming from tightened supply estimates and steady usage rates. December corn futures rose $0.0575/bushel to $4.29. March 2021 futures added $0.0625/bushel to $4.345.

November’s Cattle on Feed report from USDA found few surprises as the nation’s herd continues to rebuild following September lows. As of November 1, 2020, cattle and calves on feed amounted to 12.0 million head, up 1% from a year prior and setting a new record for November cattle inventory volumes.

Placements were 11% lower than a year ago. October marketings also edged below 2019 totals as enthusiasm for the summer grilling season waned. Nearly 1.9 million head of fed cattle were marketing for slaughter in October 2020.

Rising cattle inventories could help provide more underlying price support to corn futures. But amid declining prices and seasonal consumer reductions in beef consumption, cattle producers may be hard pressed for signs of potential growth in the beef marketing in the short run.

Data released from last Friday’s Commitment of Traders report from the CFTC found speculators backing off their previous highs on corn for the second consecutive week. For the week ending November 17, speculators added 2,180 short positions to shrink their net buying position to 278,889 contracts.

A week of fluctuating corn prices contributed to a mere $0.03/bushel rise in corn futures to $4.2025 by November 17. Despite the decrease in interest from managed money, the funds’ long position remains the second highest on record for the time of year.

But as speculative buyers lost interest in corn, producers ramped up cash sales. In the same time period, farmers added 8,889 short contracts to their portfolio. Their net selling position swelled to 603,771 contracts for the November 12 – 17 reporting week, flirting just below record high short positions for the time of year.

December corn futures are currently trading at an 18-month high. AgMarket.Net’s Jim McCormick points out that December futures prices have risen $1.2825/bushel from its July low. But is the top in? McCormick forecasts stocks to tighten even further due in large part to Chinese demand. But farmers would be wise to make moves to lock in profit margins, he advises in the latest Ag Marketing IQ column.

Soybeans 

January soybean futures prices are currently trading at oversold levels (as shown in attached charts) as the contract flirts with the $12/bushel benchmark. Dry weather concerns in South America continue to fuel worries over global supply and potential demand rationing. January soybeans surged ahead $0.1575/bushel this morning to $11.9675. March soybeans added $0.155/bushel to also land at $11.9675.

December soymeal futures followed suit, rising $5/ton past the $400/ton benchmark to $401.40. December soyoil futures found additional support from shrinking palm oil production in Malaysia, rising $0.40/lb to $39.06.

Despite waning speculator interest in soybeans, managed money funds still set a record high for the time of year with their net buying position on soybeans. For the week ending November 17, the funds trimmed 8,072 long positions from their portfolio to shrink their net buying position to 208,774 contracts.

Technical indicators suggest current contract prices may have started trading at oversold levels around November 10, which may have spurred some speculator doubt in the oilseed. But the January futures contract grew $0.3275/bushel to $11.6975 in the reporting period, suggesting the legs of this rally may stretch out a little while longer.

Despite technical warnings, producer sales remained strong for the November 11 – 17 reporting week, according to the Commitment of Traders data released on Friday by the CFTC. Despite adding 7,737 long positions on the oilseed for the week, farmers notched another week of record-setting soybean sales as prices continued their upward ascent. Selling interest, though strong, eased slightly during the reporting week, shrinking to 384,030 contracts as of November 17.

Wheat

Contract

Price Change*

Price*

Chicago SRW – December Futures

+$0.0875

$6.02

Kansas City HRW – December Futures

+$0.05

$5.5525

Minneapolis HRS – December Futures

+$0.05

$5.49

Wheat prices followed corn and soybeans higher this morning. Despite fears over a potential export slowdown due to looming COVID-19 restrictions, international demand continues to underpin support for the wheat complex. A weaker dollar also helped, as the ICE Dollar Index fell 0.41% to $92.020.

Russian wheat prices eased overnight as export demand waned amid rising global coronavirus cases. Russian livestock farmers begged the government to implement a grain export quota to reduce price volatility after two consecutive weeks of rising prices.

Prices for Russian wheat loading out of Black Sea export terminals fell $0.05/bushel on the week to $6.86. Russian wheat farmers planted a record-setting 19.2 million acres of winter grains this fall despite dry planting conditions, according to agricultural consultancy SovEcon.

With winter wheat planting largely completed across the U.S., all focus will turn to winter wheat emergence rates and conditions in hopes that recent rains will improve growing conditions. As of November 15, 85% of planted winter wheat acres were emerged. Emergence rates for the week rose 6% from the previous reporting period and were 1% ahead of the five-year average.

Rains in the Southern Plains over the weekend could help boost winter wheat condition ratings, however. Good to excellent ratings for the U.S.’s winter wheat crop inched up 1% from the previous week to 46% good to excellent. Conditions have been on the upswing over the past month as cooler temperatures and precipitation aid crop development across the U.S.

Speculators continued a two-week selloff of Chicago soft red winter wheat and Minneapolis spring wheat contracts for CFTC’s reporting week of November 11 -17, according to Commitment of Trader data released last Friday.

On the week, hedge fund managers slashed 14,104 long positions from Chicago wheat, shrinking their net buying position to 14,414 contracts. Speculators have exited long positions on Chicago wheat by a rate of 71% in the past month amid rising world wheat stocks and slowing export volumes due to rising COVID-19 cases across the globe.

Similarly, the funds trimmed 549 long positions from Minneapolis spring wheat contracts to reduce their net buying position to 6,061 contracts. The new alignment on long spring wheat positions marked a four-week low for speculators.

However, the funds can’t get enough hard red winter wheat through contracts at Kansas City. For the week ending November 17, speculators trimmed 2,675 short positions from their net buying position on HRW, swelling it to 47,967 contracts. It marks the funds’ largest long position on HRW since early September 2018 as dry conditions continue to take their toll on the developing winter wheat crop.

Farmer sales on soft red winter wheat and spring wheat eased slightly during the reporting week as futures prices traded sideways. But producers grew their net selling position on Kansas City wheat to a new high for the time of year as drought concerns supported price levels for HRW wheat, even amid slightly lower price movement.

Weather

Scattered showers over the Central Plains will leave a quarter to an inch of precipitation Kansas, Nebraska, and Iowa today, according to NOAA’s short-range forecasts. Snow and rain systems will move across the Central Plains tomorrow and into the Upper Midwest by tomorrow evening. Rain will reach the Eastern Corn Belt on Wednesday, where harvest continues to lag behind the national average due to cool and wet planting and harvesting conditions this year.

Financials

Coronavirus cases in the U.S. rose to 12,249,528 cases as of this morning according to the Johns Hopkins Coronavirus Resource Center. The death toll increased to 256,798 deaths as of press time. The total exceeds the amount of American lives lost in the Revolutionary War, War of 1812, Korean War, Vietnam War, and World War I – combined – by 557 lives.

Happy Monday! If you missed marketing headlines from last week – or if you were out on vacation all week like this analyst – here is a quick recap of the top market movers over the past week. Top stories include an end to corn and soybean harvests, new faces in ag policy amid the incoming presidential administration, and global outbreaks of African swine fever.

U.S. stock futures climbed upwards this morning on optimism over COVID-19 vaccine development. S&P  500 futures traded 0.65% higher to $3,577.25 after a quiet weekend trading session.

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