John Wesley Willson

Jul 27, 2021

Highlights

Equity markets were marginally lower for the day, as the S&P 500 broke its 5-day streak of higher settlements. As several tech companies continue to announce earnings, it would appear that the market is operating under a” buy the rumor, sell the fact” pattern. Extreme volatility continues in the agricultural commodity space as fund liquidation continues on declining seasonal prices and crop conducive weather runs. The dollar continues to retreat lower after nearly making a double top. A potential life raft for the Ag Space as exports remain unimpressive.

  • The CDC announced that vaccinated individuals begin wearing masks indoors in high COVID transmission places, signaling a growing concern surrounding a 4th wave.
  •  The NASDAQ Golden Dragon China Index has declined over 15% in the past two sessions. This is the biggest decline since the 2008 financial crisis.
  • More rains are forecasted for parts of China which haven’t seen rainfall totals this high in over 1,000 years. This has the potential to drastically effect both the hog herd and their ability to warehouse grain.
  • Outside markets as of 3.34 PM Central: Sep crude oil at $71.93 up $0.02; U.S. Dollar index at 92.4640 down 0.1850; Gold at $1799.90 up $0.70; Dow at 35,058.52 down 85.79 points. 

 

Corn

Corn futures started out the session strong on lower than expected conditions. The strength continued into early Tuesday as the market pushed through the major resistance at $5.52 and reached and intra-day high of $5.60’6. The rally was short lived however, running out of steam in part due to a cooler noon weather run. On the close, December futures settled beneath the resistance at $5.46’2. Until more threatening weather maps surface, expect to see any higher prices faded by the managed money crowd who are watching the seasonal trend closely.  

  • Closes: Sep at $5.48’6 down 1’0; Dec at $5.46’2 down 0’4; Mar at $5.53’6 down 0’6.
  • Crop conditions for corn are now below the 5-year average.
  • Basis levels are weakening, which gives the market additional motivation to sell any rally's.
  • Spreads: U21/Z21 2’6 inverse, Z21/H22 7’4 carry, Z21/K22 11’6 carry.

 

Oilseeds

 Soybean futures saw wild swings as well, with the conditions dropping 2% as opposed to the average trade guess of steady. This sparked a sizeable rally past the resistance levels that we noted yesterday. However, like corn, these levels were not held into the close. November soybeans traded back below the $13.75 and $13.67 levels respectively. With much cooler temperatures forecast in early August, soybean futures will remain under pressure until either the weather worsens or another catalyst such as bean oil breaks out higher.

 

  • Closes: Aug at $14.18’2 up 5’4; Sep at $13.67’0 up 4’4; Nov at $13.59’4 up 1’6.
  • Soybean conditions were below the 5-year average, with the poorest crops residing in North Dakota, South Dakota, and Minnesota.
  • Soybean oil has recovered nicely after showing signs of a more significant break. If futures can hold a close above 65.00, that would open the top end of the range and potentially new highs.
  • Spreads: Q21/X21 58’0 inverse, U21/X21 7’2 inverse, X21/F22 4’6 carry.

 

Wheat

Both the KC and Minneapolis wheat contracts managed to stay in positive territory after what was a very volatile session. All three wheat classes were up early as they were carried higher by stronger corn and soybean futures. As the session went on, prices began to fade and long buying exhaustion tails were left on most wheat charts. The technical outlook for wheat remains less than stellar, as well as the tendency for seasonal pressure to begin mounting this time of year. By and large, the wheat will remain a follower of corn at this point in the year and that could point to a weaker tone in the near-term.  

  • Sep closes: Chicago at $6.74’4 down 2’4; Kansas City at $6.41’4 up 2’4; Minneapolis at $8.78’2 down 0’4.
  • The spring wheat tour is currently taking place and has confirmed devastatingly low yields the further west you go into North Dakota. In places that yield 80bpa many years, the participants are coming up with yields of only 30bpa.
  • Spreads: Chicago U21/Z21 10’0 carry, Kansas City U21/Z21 11’4 carry, Minneapolis U21/Z21 10’2 inverse.