Cereal Market Commentary
Tuesday, January 11, 2022
by Rhett Montgomery, Associate Dealer, The Andersons
March old crop corn ended up 1.25c today, closing at $6.01, while December new crop corn closed at $5.5750, up $6.01. half a cent.
The trade continued its choppy action ahead of the USDA WASDE report released tomorrow at 12:00 p.m. EST. The recent trade is indicative of the differing opinions on tomorrow’s report in trading, as well as the importance of this report in terms of setting an overall tone for the market. The big numbers to watch on corn will of course be the national yield estimate, but perhaps more important will be how the USDA compensates for any yield increases/decreases with demand adjustments. It could be argued that the USDA is low on its ethanol consumption, but perhaps a bit high on its export forecast. The current carry is 1.493 billion, a move above 1.5 billion would be bearish and would likely mean a corn price in the low to mid $5 range would be fair. When assessing the potential impact of the postponement on prices, it should be recalled that the trade assumed a potential postponement of less than 1 billion bushels last year to push prices to $7.70 and above. Either way, we’re looking at a little more corn supply in the mix this year. The market will also be watching for any reduction in the South American corn crop, this recent weather warning may be a little early to have a big impact on Brazilian production as the second crop has yet to be planted and is the more important of the two. Conab reduced Brazil’s estimate for today’s -4 MMT to around 113 MMT due to the drought, but it should be noted that this is still a 26 MMT increase year over year. another, and currently of a record.
In technicals, the market tested the $6.00 mark on forward month futures for the 4and straight day today, and regardless of a close of $5.9975 yesterday, managed to close above that mark today at $6.01. The market is clearly unwilling to price corn below $6 today given tomorrow’s report and is ready to wait and see where the balance sheet goes. On a bullish report tomorrow, the upside targets to keep in mind will be the $6.18 mark hit on the 28thand from December, and beyond, the bulls will target $6.30 to $6.40. $6.4050 is the March CH22 corn contract high. Downside support for a bearish report will first be seen at $6.00, below a move back into the $5.80-$5.90 range, and beyond that the bears will be looking at the 100 and 200 day moving averages at $5.64 – $5.60 respectively.
March old crop soybeans closed at $13.8650, up 1.75c. New crop November beans were down half a cent at $13.00.
Today has been a relatively calm day for beans, especially compared to the past few weeks which have seen large ranges as well as a sharp rise in prices, with March beans up over $1.50 since inception. December due to weather concerns in South America. Conab-Brazil cut its soybean estimate today by a few million metric tons, but it still sits at a record estimate. The harvest in Brazil is just starting to start for soybeans. Trade estimates in tomorrow’s USDA report call for a slight reduction in yield, but there are enough demand concerns that the average carryover assumption is 8 million bushels higher. Exports are obviously the primary concern, with the USDA well behind last year’s pace and the pace set by the USDA while entering a period seasonally dominated by South America. While tomorrow’s report will certainly carry some weight, the most important development to watch may be the rains in South America going forward, if tomorrow’s report is fairly neutral I would expect trade quickly back into the weather market as it has been for the past 3-4 weeks.
Technically, the market managed to close above $14 for the first time since June 2021, but couldn’t hold that and quickly fell back to the 13.80-13.90 area. $. Any continued rally from here will target $14, consecutive closes above this mark would make a run to contract highs of $14.35-50 the next target. Support on the downside would be at $13.35 and below the $13 mark where the bears will look for any potential selling fueled by tomorrow’s report.