Top Farmer Closing Commentary 10-15-21

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CORN HIGHLIGHTS: Corn futures firmed today gaining 6 to 9 cents on good export sales and a broad-based rally in most commodities including crude oil which traded above 82.00, a new contract high for November futures. December futures closed at 5.25-3/4 up 9 cents for the day and off 4-3/4 cents on the week.

What started as a risk-off week in commodities, ended with risk on. Export sales were released today (normally on Thursday but due to Columbus Day, shifted back one day) at 40 mb were termed supportive bringing year-to-date sales to 1.087 bb, as compared to 1.043 at this same time last year. The total sales forecasted by the USDA are 2.5 bb which implies sales are now 43.5% of the projected total. Soaring fertilizer costs and supply concerns have many speculating as to what this could mean for corn acreage in the year ahead. At this point, a number that keeps surfacing is 3,000,000 acres shifted from soybeans to corn. Really, this is anybody’s guess but a reduction of three million acres could tighten carry out toward 1 billion. This would suggest $5 as support for new crop with little weather premium priced in. Other dynamics are input availability such as herbicides and pesticides. This may be a challenge for Brazil and Argentina as well.

SOYBEAN HIGHLIGHTS: Soybean futures ended the week on a firm note, with November futures leading a rally today closing 11-1/2 cents higher at 12.17-3/4. For the week though, November still lost 25-1/4 cents. New high prices for crude oil and a strong weekly export sales figure at 42.2 were supportive. Additionally, announced daily export sales this morning totaling just over 34 mb to China and unknown destinations suggests that futures have gone low enough to spark importing countries to pick up their purchasing pace.

Total sales year-to-date are now 970 mb, well behind 1.584 bb for this same time a year ago. Nonetheless, the trend of exports is picking up in recent weeks. Total sales expectations for the year are 2.090 bb which puts year-to-date sales at 46% of expectations. The gulf should be close to full capacity by the end of the month. The dollar was off again for the third consecutive session. Palm and soybean oil are in strong demand due to tightening vegetable oil supplies and perhaps more importantly increasing biodiesel production. Yield results continued to suggest most are harvesting as expected or better than expected yield.

WHEAT HIGHLIGHTS: Wheat futures rallied today on rumors of China buying, as well as supportive fundamentals. Dec Chicago wheat gained 9-1/4 cents, closing at 7.34 and July up 9 at 7.38-1/4. Dec KC wheat gained 12-3/4 cents at 7.43-3/4 and July up 10-1/4 at 7.45-3/4.

Minneapolis wheat led the way yet again today, reaching a December contract high of 9.80. Paris milling wheat futures are also up the equivalent of 17 cents per bushel, making new highs. Interestingly, Dec Chi wheat ended the week exactly where it started at 7.34 – a nice recovery considering the poor start to the week. Fund selling pushed the market down early after the WASDE report but bullish fundamentals have helped wheat to rebound. Unlikely to change much over the coming months are US wheat supplies which are at 14-year low levels. Rumors yesterday said that China bought 5-6 cargoes of French wheat; some sources say it may be up to 10 cargoes. US 2022 HRW wheat prices are competitive to Europe and the Black Sea. At the current pace, Europe’s wheat exports would be somewhere around 47 mmt. This would suggest a negative carryout (around -2 mmt). Therefore, the market is looking to see a decline in European exports, along with Russia’s export reduction due to their soon to be implemented quota system. The USDA reported an increase of 20.9 mb of wheat export sales, though total wheat commitments are down 20% from one year ago. Drought could remain a concern into 2022 and is just one factor supporting prices.

CATTLE HIGHLIGHTS: Cattle futures saw follow through buying support, as a firmer retail carcass values and a second strong day in equity markets brought some buying strength into the cattle markets.  Oct. cattle gained .225 to 125.975, and Dec cattle added .675 to 130.975.  Feeder cattle finished failed to move higher, with Oct feeders .850 lower to 157.575.  For the Week, Dec Live Cattle gained .725, and October feeders were -1.900 lower.

Outside markets were an influence, as equity markets pushed strongly higher bringing some “risk-on” trade into the cattle complex. December is back challenging the $130 price levels, and finished the week at the top of the trading range, which could open the door for additional follow through buying strength next week.   Most likely cash trade will be put together for the week, with the exception of some clean up trade on Friday. Most trade was capture at the $124 live/$196 dressed levels, mostly steady with last week.  Midday retail values were firmer, supporting the market. Choice carcasses gained 0.97 to 281.29, and Select added .80 to 261.48. The load count was light/moderate at 101 loads. The firm tone in the retail sector helped support prices into the end of the week.  Weekly export sales posted new net sales of 15,700 MT reported for 2021 were up 1% from the previous week, but unchanged from the prior 4-week average. Top buyers of U.S beef last week were Japan, China and South Korea.  Feeder cattle traded lower across the complex. The premium of the futures to the cash index limited the front end of the market. The Feeder Cash Index traded at 153.35, down .66 and a $4.2250 discount to the front-month Oct futures. The strong tone in the live cattle markets help support feeders, but the grain markets catching a bid today, added to the selling pressure.  The cattle market may be building into a trading range, and may be looking for direction overall, but the high-range close on daily and weekly charts should support the market next week on Monday.

LEAN HOG HIGHLIGHTS: Hog futures finished higher to end the week as prices saw moderate to strong gains.  Short covering led by a turn higher in Thursday direct closing cash prices helped support.  Dec hogs are now the new lead month contract, gained .950 to 78.275, closing higher for the first time in 5 sessions.  For the week, Dec hogs lost 3.225 in a pressured week.

December consolidated on Friday, despite the gains, traded within Thursday’s range.  The market is still eying the gap on the charts.  The top of that gap is  at 77.200 on the Dec futures, with Wednesday low at 77.250.  That gap could fill next week, but the consolidation may keep the gap open.  Cash market had a firm close on Thursday, supporting the market today.  Direct trade on Thursday’s close, with carcass based pricing trading $.14 higher, and direct live prices were $2.46.  Follow through cash strength will be key for price direction next week. The Lean Hog Index traded .91 lower to 88.82 trying to tighten the gap with the December contract.  The premium to Dec hogs should help support the front of the market, trading at 10.545 today.  At midday, the retail pork carcass sector was softer, losing 1.07 to 104.99 on good movement of 211 loads. Weekly export sales were strong at 33,500 MT reported for 2021 were up 51% and 9 % from the prior 4-week average. Japan, Mexico and China were the top buyer in U.S. pork last week. Technically, the hog market uptrend is still intact, but prices are filling gaps and firming up the charts.  Prices are now testing the bottom of the range, and will need some fundamental help to turn the corner.  The cash market may be the keys for a true turn higher in prices.

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