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Futures

October 16th - Closing Market Commentary

10/16/2020
October 16th - Closing Market Commentary

Grains closed mixed on Friday:

Corn – 1 ¾ cents/bu (Dec @ 4.02)

Soybeans -12 ¼ cents/bu (Nov @ 10.50)

Chi Wheat + 7 cents/bu (Dec @ 6.25 ¼ )

Cdn  $+0.00240 (75.865 cents)

WTI Crude Oil -0.08/barrel (40.88)

Friday’s grain trade had a little something for everyone, as the market had wide trading ranges for all grains (December corn’s range was 7 ¼ cents/bu, November soybean’s range was 22 cents/bu, and December Chicago wheat futures had a range of 15 ¼ cents/bu).  Corn and soybean futures closed near their lows for the day, while wheat futures ended the day in the upper end of their trading range.  Strength in grains were initially tied to ongoing concerns over dryness concerns in South America and in Russia coupled with continued Chinese demand, while weakness came due to weather maps forecasting increasing accumulations of rainfall for Argentina and Brazil.

Grains were solidly higher early in the day, as the USDA Weekly Export Sales Report and some USDA Flash Sale announcements confirmed that USA companies continue to make large sales of grains in export channels.  Soybean sales for the past week once again eclipsed the high end of trade expectations, with 2.6313 million tonnes sold, and 1.59 million tonnes of that going to China.  USA soybean export commitments to all destinations are now 17 million tonnes ahead of “normal” for time of year, with China accounting for 11 million more tonnes than “normal”.  Actual weekly sales data is listed below (in thousands of tonnes):



In addition to the weekly sales data listed above, the USDA also announced Flash Sales for the following business on Friday:

  • 128,000 tonnes of corn to Mexico
  • 175,000 tonnes of soybeans to Unknown
  • 216,150 tonnes of soybeans to Unknown

Corn sales in the Weekly USDA Report were somewhat disappointing, with Mexico, Japan, and China the main buyers of the 655,200 tonnes that were sold.  Year to date corn export sales to all destinations are 16.2 million tonnes ahead of last year at this time, with China representing 10 million more tonnes than they bought a year ago.  Chinese domestic corn prices remain closer to $10 per bushel than they are to $9, so that fact has market bulls optimistic for more business to be done going forward.  Unfortunately, the absence of any new Chinese corn buying allowed the market to drift lower in the last half of the trading day, particularly with another harvest weekend ahead.

Soybeans ended the day weaker than one might have expected, given the robust export sales report and more new business on Friday, some of which has to be assumed to be Chinese buying.  As with corn, we have another USA harvest weekend on tap, but the bigger reason for the slight sell off is the fact that rains are on their way for Brazil and Argentina.  The soybean futures market has rallied almost 2 dollars per bushel in the past 2 months.  Initially, the rally was all about production cuts to the size of the USA crop coupled with the aforementioned massive Chinese bean buying.  But much of the 50 cent rally in soybeans since the beginning of October has been related to dryness in Brazil, and the fact that farmers were/are not planting soybeans, as they wait for rains to support germination.  Delays in planting create an issue with the timing or early harvest of those Brazilian soybeans, which in turn makes USA the supplier of choice for a longer period of time.  The fact is, Friday weather maps show good rains/coverage coming for Brazil, and that led to some profit taking selling ahead of the weekend.  Market direction on Sunday night will be all about how much rain fell, and what those same weather forecasts show for the moisture in the future.

Wheat futures were able to stay positive despite the late weakness in corn and soybeans.  Simply put, all eyes are on European and Russian wheat values at the moment.  EU wheat futures rallied another 7 cents/bu on Friday, right in line with gains in Chicago wheat futures.  There is little time left on the calendar for Russian rains to materialize to allow for crop development ahead of the winter.  Speculation abounds over what that might mean for production numbers out of the Black Sea………..winter wheat acres that do not make it will likely be planted with spring wheat varieties, but any such acres will produce less yield than the winter varieties.  The world is not yet “tight” for wheat supplies, but since Russia has been the sole force that has kept world wheat values under pressure over the past couple of years, a smaller crop there is encouraging speculative entry into wheat futures.  Wanstead Farmers Co-op has bought a LOT of harvest 2021 and harvest 2022 wheat in the past few days, at values well north of 7.00 per bushel (closing values listed below).  With the excellent start that our fall planted wheat has, there are tremendous hedging opportunities out there today!!

After the close of trading, the CFTC released their weekly report on fund positions in commodities, as of close of business Tuesday, October 13th.  Today’s report showed that funds were longer corn futures than the trade expected by 10,000 contracts, funds were less long soybean futures than expected by 13,000 contracts, and funds were longer Chicago wheat than expected by 14,000 contracts.  On the day Friday, funds were thought to have sold 5,000 corn futures (now long 197,000 contracts), sold 10,000 soybean futures (now long 229,000 contracts) while buying an estimated 5,000 Chicago wheat futures (now long 69,000 contracts).

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