Mark Hanson

Oct 22, 2020

Mark Hanson

 

Highlights

  • Surprise…there still is no stimulus agreement.  Both Pelosi and Mnuchin saying there is still is more work to be done.  While the goal remains to get a deal done before the election, it is becoming much more difficult to achieve that.  Sticky points include the language providing national strategic testing and contract tracing plan and more safety planning for schools.

  • After the rain and snow that is moving through the upper Midwest into the eastern Corn Belt, the north and western growing regions turn drier again.  There is some concern about the northern winter wheat region given the low temps forecasted.  This will slow/halt germination and potentially experience winter kill.  None of this will be known for certainty until next spring so this will give the market some talking points for the winter months.

  • Crude oil is trying to hold the $40 range showing small gains this morning of 34 cents.  The RBOB/Ethanol ratio has fallen from 1.10 to 0.755 since mid-July which largely due to the rising ethanol prices (up 38%) along with a 10% reduction of gasoline prices.

     

    Corn

  • Corn basis throughout the regions are showing some volatility as the market tries to cover when farmer selling is light.  In the past 2 days, the posted bids in St Louis have firmed 11 cents and there are reports of central Illinois processor pushing their Dec/Jan posted bids by 10 cents to get some coverage.  As we near the holidays, we likely will see additional volatility where more coverage is needed.

  • The CZ-CH carry continues to narrow to 2 ½ cents.  If the lack of farmer selling continues, this could force this into an inverse.  Taking a cautious approach on CZ short positions is recommended as we near first notice day next month.

  • Technically, there is a resistance point that we held yesterday at $4.1375 which was a 50% extension from the 8/10 low to the 9/18 peak that preceded some consolidation before the Sept 30 stocks report.  This is not strong resistance point but needs to be broken and held if a larger rally develops.  The market is overbought with an RSI of 75% so it is possible to see some consolidation first but $4.00 will be difficult to break given the strength in the cash markets.

 

Outlook: Corn are mixed this morning with little fresh news.

 

Oilseeds      

  • Beans are largely done but the recent snowstorm may have affected 10% of the remaining crop in the upper Midwest.  Normally this would not be as concerning since we are still in October but with the market still not fully covered and the continued strong export demand, every bushel counts now.

  • Basis remains strong in the east.  In January, the posted basis levels in St Louis is +43F and Owensboro is +40F.  Processors are holding flat with their posted bids but that could change as we near the holidays.

  • Crush margins continue to be strong on the front end with Dec at $1.29, Jan at $1.14 and Mar at $1.08.  The inverted structure likely will keep protein availability only in the nearby slots.

 

Outlook:  Beans are called 2-3 higher this morning.

 

Wheat

  • There are rumors that Mpls feed wheat may make its way into the SRW deliveries given the large price spread.  Overall, the wheat rally has made prices unattractive both domestically and internationally.  SWW remains very competitive however and has gained attention in the feed wheat export markets.

  • Black Sea seeing slow farmer selling as the market has gotten bullish with the drier conditions.  Turkey removed its 45% import tariff on wheat which could stimulate some Black Sea buying.

  • Algeria bought 500-600,000 optional origin wheat at $275.50 to $276 CNF.

 

Outlook: Chicago wheat is call 3-5 lower, KC wheat 2-3 lower and Mpls wheat steady to 2 higher this morning.