Tuesday, November 30, 2021
RED. That’s what the screens showed today with corn, wheat, and soybeans all closing lower. New concerns on the covid 19 omicron variant spooked all sectors today. Wheat led grains lower by closing 33 to 35 cents lower. Corn closed 14 to 15 cents lower, and soybeans fell 24 to 26 cents. The outside markets also tumbled, with crude oil down $3.30, gold down $11, and the dollar index was down 0.458. The Dow Jones index was down 652 points, while the NASDAQ was down 245 points.
End of the month selling and fund liquidation were the themes today in the grains. Yesterday the funds sold an estimated 40 mln bushels of corn, 40 mln bushels of soybeans, and 50 mln bushels of wheat. Today they sold an additional 100 mln bushels of corn, 100 mln bushels of soybeans, and 100 mln bushels of wheat. That’s alot of fund liquidation in a two day time frame!
New fears of the omicron variant weren’t helped by vaccine maker Moderna. The CEO of Moderena suggested that the first vaccines won’t be as effective on the variant. The markets don’t like to have uncertainty, and that is exactly what we have right now.
Fed Chairman Jerome Powell spoke today in testimony to the US Senate. He stated that it is time to retire the word “transitory” as it relates to inflation. It’s the first time the FOMC has finally acknowledged inflation. All of us in the farm sector have seen rampant inflation, especially on equipment, parts, real estate, fertilizer, fuel, and lumber. The list goes on and on! Expect the Fed to raise interest rates and some expect them to rise closer to 2% in 2022. Another reason for the sell off today!
Crude oil has been in free fall mode since posting a high of $84.97 back on November 10th . The $19 drop in crude oil futures has come as a big surprise to many energy traders who had visions of $90 to $100 crude in the future. As you can see on the chart below, crude oil had a big $10.00 move lower on “Black Friday”, followed by the $3.50 lower move today. Crude oil prices traded within $2.00 of the $62.00 support area today, and at their lowest levels since late August. Hopefully prices at the pump come down to reflect this 22% drop in prices. Lower energy prices, and demand have pressured the corn and ethanol sector these past 2 days.
The soybean crush margins have been beat down hard the last few days. Lower soybean meal and lower soybean oil pressured soybeans as funds liquidate their longs,has spurred some of the breakdown in soybeans. That along with rapid soybean plantings in Brazil is pressuring the soybean sector. AgRural pegs the planting pace in Brazil at 90% complete. Brazil is also getting nice rains in the Central areas, which will really help that crop.
While on the topic of South America, their US equivalent date compared to the US crop is around June 21st today. They still have a large chunk of the growing season ahead, but are entering the time of the season when water needs increase. The funds will keep a very close eye on any potential crop problems, and could start adding to their short position if the forecasts are viewed as negative. For reference, the general rule of thumb is to take our date, and add 6 months and 3 weeks. Below is the US date and South American equivalent. And
Days like today are never fun, but there will hopefully be better days ahead. Many of our producers are busy with fieldwork at the end of November, and it appears the first week of December will be warm enough to still be in the fields. High fertilizer prices and tight supplies of nitrogen should help support the corn market to secure acres. Inflationary fears are not going away, which should also support wheat. The shift to renewable fuel in the future is still in the works, which will mean more soybean acres will be needed in future years. The outlook still looks bright!
That’s all for today. See you here tomorrow.
This material should be construed as market commentary, merely observing economic, political and/or market conditions, and not intended to refer to any particular trading strategy, promotional element or quality of service provided by AgriSource Inc. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. These materials represent the opinions and viewpoints of the author, and do not necessarily reflect the viewpoints and trading strategies employed by AgriSource, Inc.
AgriSource, Inc. is not responsible for any redistribution of this material by third parties, or any trading decisions taken by persons not intended to view this material. It does not constitute an individualized recommendation, or take into account the particular trading objectives, financial situations, or needs of individual customers. Contact AgriSource, Inc. designated personnel for specific trading advice to meet your trading preferences or goals.