Top Farmer Closing Commentary 10-18-21

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CORN HIGHLIGHTS: Corn futures firmed today, finishing near the high of the day, gaining 7 cents in December to close at 5.32-3/4 and 4-3/4 cents in Dec 2022 to end the session at 5.27-3.4. Higher energy prices and stronger ethanol margins, as well as short covering helped to buoy prices today. Today’s trade activity was impressive considering expectations are for 55% of the crop to be harvest as of Sunday and a week of good harvest weather is expected.

Export inspections at 38.4 mb were termed neutral. As the gulf becomes more operational, we expect increased sales and inspections. Total sales are estimated at 2.5 bb. Inspections year-to-date are just over 160 mb, a pace that currently would not meet the USDA sales projection. It is early in the season and between the gulf slow-down and end users switching to a buy as needed practice we are not surprised to the slow start of the inspection year. Wheat prices edged higher and remain supportive as does the concern that new crop corn prices are not high enough to reflect fertilizer costs. Yet, the upside is likely limited as farmer selling will pickup if prices move much higher. Over head resistance is first at the 60-day moving average, 5.36, and then at 5.50 a level prices failed to breach in late September and early October. New crop will likely need to reach 5.50 in order to encourage enough panting for 2022.

SOYBEAN HIGHLIGHTS: Soybean futures edged higher today, closing firmer for the third consecutive session. November gained 3-3/4 to close at 12.21-1/2. Strong gains in soybean oil after palm oil made new contract highs and longer-term implications of growing demand from biodiesel prospects provided support, as did the idea farmers are quickly moving in the direction of finishing harvest. A strong weekly export inspections figure was also viewed as supportive, confirming loadings at the gulf are close to resuming full capacity.

Export inspections at 84.4 mb were well above weekly projections to meet the current USDA total sales expectations of 2.090 bb. The 10-day moving average acted as over-head resistance. 65% of the crop is expected to have been harvested as Sunday. A week of good harvest weather should have many finishing soybeans. The likeliest scenario we see developing is rangebound between 12.00 and 12.50 until more news gathered regarding China, South American weather, and export sales. For now, farmer selling is slow on price dips and end user buying is picking up. We are concerned that new crop (2022) could come under pressure on expectations of more acreage due to sky-rocketing fertilizer costs.

WHEAT HIGHLIGHTS: Wheat futures ended the session with modest gains, still riding the coattails of last week’s WASDE report. Dec Chicago wheat gained 2-1/4 cents, closing at 7.36-1/4 and July up 1-3/4 at 7.40. Dec KC wheat gained 5-1/4 cents, closing at 7.49 and July up 4-1/4 at 7.50.

This morning, most markets were down on news that China’s Q3 GDP data was lower than expected. This offered some weakness to global equity markets and likely rippled through to other markets. Wheat did manage to recover and though Chi and KC wheat did manage to close higher today, the gains were moderate. The recent star of the wheat complex, Minneapolis, did not perform as well today, with losses of a penny or two. That contract did manage to make nine year highs last week, and the approach towards the $10 mark should help support Chi and KC. Paris milling wheat futures also continue to make new highs, though the gains were not held into the close of trading. Rumors continue to circulate that last week China bought up to 10 cargoes of French wheat, with a smaller purchase of US SRW wheat to boot. In Russia, wheat export prices are higher for the 13th consecutive week. Currently the managed funds are net long Minneapolis and KC, but net short Chi wheat. The La Nina weather pattern is intensifying and will likely produce drier than normal weather conditions in 2022 across the US Southern Plains.

CATTLE HIGHLIGHTS: Cattle futures finished lower in a quiet trading session to start the week, supported by the prospects of improved retail demand going into the Holiday season, but cautious overall of the direction of cash trade and outside markets.  Oct. cattle lost .525 to 125.400, and Dec cattle dropped .550 to 130.425.  Feeder cattle finished lower, with Oct feeders 1.825 lower to 155.750. 

December stays held in around  the $130 price levels, and but failed to push higher after a strong close last week.   Cash trade stayed typically quiet on Monday as show lists and bids are still being put together.  The majority of cash trade will likely hold off until the second half of the week.  Midday retail values were mixed, but the firming tone that started at the end last week supported the market.  Choice carcasses slipped .29 to 279.95, but Select added .83 to 261.45. The load count was light at 47 loads. The afternoon close in retail prices will have a big impact on the start of the trading session on Tuesday.  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 has been trending lower, but still holds a large discount to the front-month Oct futures. The weak tone in the live cattle markets helped pressure feeders, and the grain markets catching a bid today, help add to the selling pressure.  The lack of follow through in the cattle market to start the week was disappointing, and a weak close could signal that cattle may be at the top of the range.  Prices are starting to trend higher, but prices may be more choppy in the near-term, and watching the fundamentals closely.

LEAN HOG HIGHLIGHTS: Hog futures finished higher to start the week with moderate gains.  Short covering led as prices consolidated, trying to push higher.   Dec hogs are now the new lead month contract, gained .950 to 78.275, closing higher for the first time in 5 sessions. 

December hogs tried to climb higher, but stayed mostly rang bound with a mid-range close on Monday.  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 this week, but the consolidation may keep the gap open.  Cash market will still be a key to the hog market overall.  Direct trade on Friday closed softer, and that limited gains for the session today.  The Lean Hog Index traded 1.23 lower to 87.52 trying to tighten the gap with the December contract.  The premium to Dec hogs should help support the front of the market, trading at 8.840 today.  At midday, the retail pork carcass sector was firmer, gaining 5.84 to 107.16 on good movement of 156 loads.  The improvement is both cash prices and retail carcasses getting some footing would go along way of bringing buyer back to the hog market. 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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