Grains closed higher on Friday:
Corn + ¾ cent/bu (Dec @ 4.23 ¼ )
Soybeans + 3 ½ cents/bu (Jan @ 11.81)
Chi Wheat + 1 ½ cents/bu (Dec @ 5.93 ¼ )
Cdn $ -0.00185 (76.365 cents)
WTI Crude Oil +0.52/barrel (42.42)
Grain futures were able to eke out a positive close, but ended the day well off of their earlier highs. Corn had traded up as much as 5 cents/bu, soybeans up as much as 19 ¼ cents/bu and Chicago wheat up as much as 6 ½ cents/bu. The inability for grains to hold onto and/or build on their large overnight gains are attributable to three main factors:
- There were no significant USDA Flash sale announcements attributed to China this morning, despite rumors of massive buying earlier in the week. The trade was looking for confirmation of said business
- Heading into the weekend, there could be changes to South American weather forecasts, and some longs were obviously more than willing to take profits by selling some of their futures position, just in case weekend rains exceed forecast totals, or if forecasts get wetter
- Global and USA concerns over rising COVI-19 infection levels continue to be a cloud hanging over the market, as threats of lockdowns to contain the spread of the virus become reality in States like California, Illinois, Iowa, and Minnesota. Shutdowns are most likely to impact USA domestic ethanol demand, but there is some chatter about select importing nations potentially restricting the import of goods from countries with high infection rates in attempts to prevent the “importation” of the virus. Yesterday, the USA hit a record with 204,179 new COVID-19 infections (although not a record, 1,999 new American fatalities were attributed to the virus).
On Friday, the USDA did announce Daily Flash Sales of corn to Mexico for 158,270 tonnes and for corn to an Unknown destination for 131,000 tonnes. All totalled, that amounts to 11.4 million bushels of corn being sold. There were no Flash Sale announcements for soybean business.
Corn values refuse to turn lower, despite the aforementioned concerns about potentially dropping demand for ethanol in the USA. The fact that domestic Chinese corn prices continue to trade for over $10 US per bushel has traders salivating at thoughts of some big export business in the not too distant future. Chinese import volumes are difficult to project at the best of times, particularly for corn, since the Communist government wants to become self sufficient, and sees high domestic prices as the trigger to motivate their farmers to grow more corn. Argentina is a big player in the world corn market, and the overall dryness in that region is also underpinning corn prices.
January soybean prices got very close to the psychological $12.00 per bushel price early Friday (traded to a high of 11.96 ¾ ). The market was definitely disappointed by the lack of any export sales confirmations for beans today, and that fact actually allowed futures to briefly dip into negative territory, after earlier trading almost 20 cents/bu higher. There are rains in the forecast for Brazil and for Argentina, which have market bears looking for the market to weaken. While most South American growing areas will get some rains in the next 10 days, the reality is that Argentina and some parts of southern Brazil are chronically dry, and the current rains forecast, while beneficial, do not “break” the drought in those areas. Argentina’s soybean crop is currently pegged at 32% planted, versus 29% on average for this time of year.
Wheat values were higher on support coming from the stronger corn and bean markets. Not a lot of wheat news on Friday, as European and Russian prices were basically unchanged. There is some talk that rains forecast for the USA Southern Plains over the next 5 days will not provide nearly the volumes or coverage that was forecast earlier, which leaves wide swaths of the USA Red Winter Production areas with big moisture deficits going into it’s winter dormancy. Final yield numbers are impossible to project at this early date, but suffice to say that the current conditions for the bulk of hard red winter acres in the USA are less than ideal at the moment.
On Friday afternoon, the CFTC released their report on fund positions in commodity futures as of the close of business on Tuesday, November 17th. Friday’s report showed that funds were a little longer corn futures than expected (by 9,000 contracts), funds were a LOT less long soybean futures than the trade expected (less long by 45,000 contracts), and funds were less long Chicago wheat futures than expected (by 13,000 contracts). On the day Friday, funds were thought to have bought 2,000 corn contracts (now long 268,000), bought 2,000 soybean contracts (now long 214,000), and bought 2,000 Chicago wheat contracts (now long 14,000 overall).