Grain Market Commentary
Monday, May 17, 2021
by Chris Hillburn, Senior Merchant, The Andersons
Corn
After rallying $1.70 in last 30 days and rallying 56 cts for the week ending May 7th, last week saw the big reversal and a blow off top with July corn ending down 88 ½ cts for the week, closing on Friday $6.43 ¾. Glancing at the overnights from Sunday night, we saw a low of $6.33. Not that long ago we were filling a weekly chart gap on lead month futures from $5.50 to $6.25. Some buying interest kicked in just above that gap. Market giving us a not so welcome greeting to the World of expanded futures positions and expanded limits. Despite all the downward volatility, technically the market is fairly well behaved, retreating to some support levels evident on the charts. Looking back to March 31st planting intentions with its bullish surprise of much lower corn and soybean acres then market expected, July futures rallied from $5.18 ½ to $7.35 high. Last week Market retraced 38.6% initially, down to $6.50 level. When that would not hold Market tried to retrace a full 50% but found support at $6.33.
USDA report cut old crop ending stocks down to 1.257 billion bushels, below the average trade guess of 1.275. Nothing bearish there, export inspections strong this Monday morning and basis here in South Central Nebraska remains historically strong, albeit just a little softer.
New crop corn dropped 93.75 cts last week and down another nickel today. Ending stocks from the USDA were 1.507 billion with a projected stocks to use ratio of 10.2 percent. Average trade guess was for 1.344 billion bushels. Looking at USDA demand base, one could make a good argument for anywhere from 14.6 billion up to 15.1 billion bushels. USDA came up with 14.765-billion-bushel demand, with a drop in export YOY of 325 million bushels from this year. That was the bear that got the market rolling down along with expectations of bigger planted acres numbers coming up in future USDA reports. 50% retracement from the $6.38 CZ21 high is $5.4375, and that did not hold today. Below that is $5.21, 62.8% retrace from the high. Noting overnight lows were $5.27 so market went down and took a look at those numbers.
Inflation remains a question and with old crop corn tight, new crop still needs a good bpa number. Two things kill a bull market, USDA reports and weather. Weather still remains to be seen. Profitable levels in corn for both old crop and new crop, manage risk on new crop with call options still a great way to play the weather markets. With short term trend down expect we would need to see a close above $5.50 CZ21 to get the market started again, with the ultimate target being $6 or north of there on weather.
Soybeans
Soybeans much quieter with funds actually adding to their long positions last week.
Fundamentals still look very strong with USDA projecting new crop soybean ending stocks of 140 million bushels. Add to that announcements of more soybean processing plants being built and no room for weather issues, saw soybeans trying to rally last week but corn and wheat a drag on that market. Closes above $16 on July soybeans and above $14 on November new crop still what the bull needs. Still some bullish retracement number in play with closes above those levels above. All that said, nothing wrong with selling at profitable levels.
Macros
Another high inflation number hit the market last week. Normally this is bullish commodities. Note that funds were not just selling corn and soybeans and wheat, but also selling cattle, hogs, lumber, copper, rice, cotton, oil etc., i.e. big money flow out of commodities despite inflation numbers. Some of the selling did not make much fundamental sense but definitely not an inflation trade but that could easily come back into play. Buy the rumor of high inflation and sell the fact? All weather now.
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Special Market Update - May 17, 2021 - The Andersons Trade Group - andersonsgrain.com - andersonsgrain.com
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