Rose on Grain – Corn, Soybeans and Wheat Continue to Surge

January 18, 2021 6:35 pm
Published by

Louis W. Rose IV

Corn:

CME Mar corn futures gained 35¼ cents on the week to finish at 531½.  Our proprietary model (timely predictions available in our complete weekly report) called for a finish on the week that was to be near unchanged to higher Vs the previous Friday’s settlement, which proved to be correct.  However, we did not recommend trading this bias ahead of the WASDE report’s release.

The corn market was higher on the week, on a supportive to bullish Jan WASDE report, strengthening US export sales, concerns about South American production, weakness in US currency, and in effort to compete with soybeans for 2021 planted area.

In its Jan WASDE report, the USDA reduced its 2020/21 domestic carryout estimate 9% Vs the Dec report to approximately 1.55B bu.  A reduction in estimated yield (and production) accounted for the balance sheet adjustments.  Aggregate world carryout for 2020/21 was projected 2% lower Vs Dec at 11.17B bu.

Domestically, prices have risen higher than immediately warranted by official S&D balance sheets in effort to compete with soybeans for 2021 acreage.  While sowing across major US producing areas is still a while out, sowing of the southernmost US crop will commence next month.

Net export sales and shipments were higher Vs the previous sales period at approximately 57M and 58M bu, respectively.  Sales and shipments were ahead of the weekly pace required to match the USDA’s downwardly revised export projection.  The US is 70% committed and 26% shipped Vs the USDA’s target; sales are well ahead of the average pace while shipments are well off their longer-term pace.

Internationally, recent precipitation across key producing regions and nations of South America has helped the early corn crop.  However, dryness across Argentina and southern Brazil persists, with estimates of this season’s production continuing to move lower.  Conab modestly reduced its Brazilian production estimate Vs its Dec estimate.

CFTC Commitments of Traders data for the week ending Jan 12 (futures only) showed that the trade trimmed its aggregate net short position to approximately 3.81B bu while large specs increased their net long to around 1.8B bu.  The spec futures position remains stacked heavily bullish and seems vulnerable to liquidation.

For an in-depth analysis of CFCT data see our weekly CFTC analysis and commentary.

For this week, the weekly technical analysis for and money flow into the Mar contract remain bullish, with the market notably overbought.  US export data, crop news out of South America and the Black Sea region (corn and wheat), and speculation regarding 2021 planted area are likely to prove major market-moving factors this week for corn, beans, and wheat.

Soybeans:

CME Mar soybeans gained 42 cents last week to finish at 1416¾.  Our proprietary model called for a finish on the week that was to be near unchanged to lower Vs the previous Friday’s settlement, which proved to be incorrect.  However, we did not recommend trading the model’s bias last week.

CME soybeans finished higher on most of the same factors that affected the corn market, strong NOPA crush figures, and in attempt to entice large US planted area in the spring.  An expectation of further tightening of a historically bullish domestic balance sheet also spurred prices higher.  Strong NOPA crush data also likely prompted the market higher.

In its Jan WASDE report, the USDA projected of 2020/21 domestic carryout 20% lower Vs Dec at a historically low140M bu.  The reduction in the carryout estimate came per a modest decrease in the production projection and a modest enhancement to the export projection. Aggregate world carryout for 2020/21 was projected 2% lower at around 3.1B bu.

Domestically, current price levels are prompting US producers to plan on sowing record acreage to soybeans in 2021 - and the domestic market needs the acres!  Sowing across the southernmost production areas (Mississippi, Louisiana) will commence next month.  NOPA crush for Dec was more than 183M bu, well ahead of pre-report expectations.

Net export sales and shipments were notably higher Vs the previous assay period at approximately 33M and 75M bu, respectively.  Both sales and shipments were well ahead of the average weekly pace required to match the USDA’s upwardly revised export projection.  The US is 92% committed and 68% shipped Vs the USDA’s target; both figures are well ahead of the expected pace at this point of the season.

Internationally, as with corn, continued rains across South America (mostly Brazil) have bolstered production potential while Argentina and southern Brazil remain mostly dry.  Conab trimmed its production estimate Vs Dec, but production continues to be estimated a record high level.

CFTC Commitments of Traders data for the week ending Jan 12 (futures only) showed that the trade trimmed its aggregate net short position to approximately 1.6B bu while large specs reduced their net long to around 753M bu.  The spec futures position, as with corn, remains stacked heavily bullish and seems vulnerable to further liquidation/profit-taking.

For this week, the weekly technical analysis for and money flow into the Mar contract remain bullish with the market tremendously condition.

CME Wheat:

CME SRW Mar futures gained 36¾ cents last week to settle at 675½.  Our proprietary model called for a finish on the week that was to be near unchanged to higher Vs the previous Friday’s settlement, which proved to be correct.  However, as with corn and beans, we di not recommend trading this bias last week.

CME SRW futures moved higher in sympathy with corn and on a mildly supportive Jann WASDE report, despite weakening US export data and the market’s overbought condition. Droughty conditions across the Southern Plains, concerns regarding the Black Sea crop (and exportation thereof), and weakness in US currency likely also helped prices move higher.

In its Jan WASDE report, the USDA projected of 2020/21 domestic carryout 3% lower Vs Dec at around 836M bu.  Aggregate world carryout for 2020/21 was projected approximately 1% lower at a still bearish 11.6B bu.

Domestically, early season condition ratings remaining a concern, with producers across many areas wishing for increased insulation and from snowfall.  The Southern Plains (especially Texas) remain dry and are expected to see only modest precipitation this week.

Net all wheat sales and shipments were lower Vs the previous sales period at approximately 8M and 13M bu, respectively.  Both sales and shipments were off the average weekly pace required to meet the USDA’s target.  The US is 79% committed and 55% shipped Vs the USDA target.  Sales and shipments are ahead of the average long-term pace for this point of the season.

Internationally, concerns persist across much of the balance of the Black Sea region, with rumors of a Russian export tax levy increasing.

CFTC Commitments of Traders data for the week ending Jan 12 (futures only) showed that the trade trimmed its aggregate net short position to approximately 514 bu while large specs cut their net long to around 57M bu.

For this week, the weekly technical analysis for and money flow into into the Mar contract remains supportive to bullish with the market remaining in an overbought condition.  The 600, 575 and 550 levels are downside targets while 7000 is likely to evince staunch, if not insurmountable, resistance

Have a great week!

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    This post was written by Louis Rose