Agri Blog

Wetter weather and end-of-week profit-taking dominates price action

Prices are lower on first notice day for August futures. Wetter weather and end-of-week profit-taking dominates price action. Oilshare sees profit-taking, while other spread trade strengthens.

Grains: Corn prices rally but lack conviction, with ideas that funds may sell rallies on the possibility of record yields from the eastern cornbelt. Wheat prices are lower but trades in the upper portion of its range. Lower crops from Russia and Canada will underpin the market on breaks of size. Higher prices are now seen in the Black Sea on production worries. The final tour yield for all spring wheat was calculated at 28.9 bpa with hard red spring wheat at 29.1 bpa from over 257 samples drawn, and durum wheat at 24.3 bpa with over 15 samples. These yields were the lowest since 2008.

Beans: Processor bids for beans are lower on talk that crushers are taking more down-time due in August due to lack of supply. Soyoil futures back and fill today, but remain strong as the trend is for higher US capacity to expand sharply into 2024 on higher state and federal mandates for renewable fuel, with a catalyst being favorable tax credits. Existing petroleum refineries could be converted to renewable fuel sites. US soyoil use in biofuels is forecast by the USDA to rise from 9.0 bln lbs in 20/21 to 12.0 bln lbs in 21/22. Though lower today, oilshare trend continues firm, particularly with these facts against the backdrop of new cases of ASF in the Dominican Republic.

As to ASF, the Domican Republic is restricting pig shipments and mobilizing the military to contain the spread of African Swine Fever, the Ag Ministry stated yesterday, as the US and Mexico tighten border checks to avoid infections.

STORIES
Brazil’s corn imports could triple in 2021, as written in a Reuters article. Brazil usually imports 1.0 to 3.0 mt of corn/yr with most trucked from its neighbor Paraguay. However, Paraguay also was impacted by the same weather, (drought and freeze), so Argentina will have to fill in for this need. Meatpacker JBS has already purchased 30 vessels of Argentine corn and more will have to come to feed livestock. Brazil’s SECEX reported that they have already imported 1.1 mt of corn so far this year, which may increase to 3.5 to 4.0 mln tons before the end of 2021.

WEATHER- Rains crossed the Midwest Friday bringing with it a break from the oppressive heat. In Illinois and Mo. the temperatures will return to an average to just below average range, with scattered rains throughout the weekend. The western cornbelt will also see heavy rain south over the weekend. Favorable conditions are in the Delta for beans. Weather today is bearish.

ANNOUNCEMENTS
Russia’s Black Sea wheat prices were higher on lower production forecasts as hot and dry conditions impacted yields. Russia’s 12.5% wheat offer prices increased by at least $7/mt and could move even higher. Ukraine prices followed with 11.5% bids for Sep. gaining around $3-$5/mt. The agency Prozerno cut its estimate by 3-4 mln mt to 77/78 mln mt.

Argentina’s wheat was damaged last week by cold, but not enough to alter the outlook for a 19 mln tonne forecast, as reported by the BA Exchange.

EU raised its forecast for wheat for 21/22 to 127.7 mln tonnes vs. 125.8 mln tonnes mo ago, and vs. 117.2 mln tonnes in 2020/21.

DELIVERIES
August
beans: 0 (none expected)
meal: 6 (200-400 expected)
soyoil: 1 (500-700 expected)

Calls are as follows:
beans: 13-15 lower
meal: 1.20-1.50 lower
soyoil: 85-95 lower
corn: 5-6 lower
wheat: 6-8 lower

Outside markets find Asian shares lower and set for the worst month since March 2020. US stocks are down 100 pts with the crude oil market slightly lower at $72.93/barrel, and the US dollar trading down to 91.78.

Tech talk: Large sideways chop continues, and is not surprising that we see end of week profit-taking on these rallies. November bean prices reach new highs at $13.80 before selling off towards the low which could be back towards $13.50/$13.55. All in all the path of least resistance has been higher, and think that pullbacks are still good for owning into August. December meal trade has been sideways all week from $355.00 to $365.00. However, the major direction here is lower, and would look for a better chance of breaking down towards key support from $353.00 to $355.00. The December soyoil chart is in its corrective pattern after reaching highs just over 65c. Visual trendline support is located at 6250c, and think we have a good chance of seeing it during the session. If we go there, would elect to cover a partial short as this chart remains strong.

December corn trade is compact, forming a wedge with big picture boundaries marked by support at $5.30 and resistance at $5.73. On opening weakness, prices probably go to visual support at least for the day which crosses at $5.24 to $5.45.

December wheat prices reach a high at $7.18 3/4 which is major resistance before entering into corrective price action. On opening weakness the market could test $7.03 first support, and then $6.95. If prices cannot stay under $7.00, the path of least resistance would be higher suggesting we target $7.25 again.

SEP/DEC CORN: The Sep/Dec corn spread has been in a major downtrend from June until now. A visual downtrend channel is now guiding price action as prices printed a trade into a small carry this week. This low matches price action established back in December 2020, at which time the market rallied sharply to its high inverse of 35c. Conditions are oversold at 31%, which is not that extreme in the big picture or calling for a correction. Prices may chop around within the channel, but time to buy when the exit is to the upside. If wanting to buy the spread, watching is probably the best policy, though certainly matching last year’s lows seems to complete a cycle.

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