Markets unPACKed: Quieter Summer Session

Quieter Summer Session

 

Frankly, it has been a quieter week in the grain markets, and we are still looking to wheat as the trade of this time.

On Monday, August 2, our technical trader pointed out that wheat was trading at the highest level we’ve seen since mid-May — 30 cents off contract highs put on May 7. As mentioned in our last column, there is fundamentally a different situation for wheat. We looked to 740-750 in Dec Chicago Wheat as the ideal landing spot for the immediate timeframe. On Tuesday, August 3, we saw heavy volume on the open. By the next day, wheat continued to out-perform, nearing Tuesday’s highs — the highest price we’ve seen in almost three months. Wednesday saw some weakness and led us to believe that the market is short. By last Thursday, wheat felt stuck while corn and soybeans moved again. The high of 749 on Wednesday proved to be the level of resistance that brought sellers to move the price lower. In the overnights Thursday night to Friday morning, Dec wheat traded back up to 731-¾.

Essentially, wheat is consolidating closely to its contract highs while corn and beans have certainly moved away from theirs. This is one of many reasons we are focused on wheat as our main play this month. As of Monday, May 9, wheat continues to trade in a tight range at these high prices and we see this as constructive.

The fundamental picture in both spring and winter wheat remains roughly the same. Some updated news from our clients is that they are continuing harvest and still careful to purchase railcars as the yields are not there. They are concerned that rail car prices will jump if corn yield estimates come to the upper range – about 175 bu/acre, with 176.5 bu/acre being the highest projection on the street. These numbers will be included in the August 12 WASDE report. However, these clients cannot afford the latter option of buying cars now, with a possibility of not filling them with wheat.

In corn and beans, the last four months have been ugly with volatility slipping from the market. Will we see volatility come back in the market this month? After harvest? Not for another 10 years? In all seriousness, it has been a very boring trading session this week. The points of interest in the fundamental news could be potential export numbers and lobbying against biofuel usage, from baking companies to electric car projections, by the Biden administration.

For soybeans, until this morning (131k MT), we have not had a flash sale from China since June 24. Yesterday we had a 300k metric ton new crop soybean sale to unknown destination yesterday. It could have been China. New crop Chinese buying is normal for this time of year. Total new crop sales are down 30% this year due to the lack of Chinese buying, and Chinese purchases of soybeans are down 49% this year. Corn purchase numbers are still exceptional after China’s aggressive buying in April.

We could see increased demand from U.S. crops as Brazilian corn crop yield hits a ten-year low. From drought and frost, yields are in trouble and Brazilian farmers are now expecting to harvest 51.6 million tons, almost 19 million tons below the 70.5 million they brought in during the last harvest. This may allow for volatility to return to the corn market while we watch weather forecasts for soybeans ahead of harvest.

 

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