Mid Week Comments
Trade Shifts - 01/19/21
Changes are occurring in our world, with trade shifts starting to have an
impact on grain prices, along with the typical weather we deal with.
Weather forecasts have pushed back to less precip in the next 7 days,
with below normal precip now forecast for both Brazil and Argentina, with
temps above normal in Argentina, but below normal in Brazil. That will
stress crops more in Argentina especially. However, offsetting some of
that bullish change over the weekend is an improving precip forecast for
the 8-14 day in Brazil, with above normal precip and normal temps
forecast for that time period. But will it ever materialize??? Often
this year, the 8-14 day forecast was better, but it never seemed to
materialize - at least not yet. Argentina has a similar 8-14 day
forecast as in the next 7 days, warm and dry. The forecast is actually
somewhat supportive to grains.
Soybean prices were lower the past few days due to concern over Chinese
demand, as a severe virus outbreak in Hebei province triggered a
lockdown. China hog production was down 3% last year along with hog
slaughter, although the Dec. hog herd was up 10% from September at 406
million. There is talk that disease in Matto Grasso, Brazil will drop
soybean production there, with many expecting SAM soy production to be
down 6-8 MMT from USDA's 181 MMT guess.
Russia put a $1.65 export tax on wheat exports after March 1, giving
wheat prices a solid boost in overnight trade. Traders are talking a
shift of up to 6 mmt of Russian wheat export demand shifted to other
origins, including the US which could push CBOT futures to $7.50.
Corn demand might be 450 mb higher than USDA's last guess, dropping
carryout to 1.1 billion instead of the 1.552 USDA put out in Jan. Many
traders think corn could test $5.70-$6 as SAM might not be able to meet 9
MMT (give or take 1 mmt) of its current demand. Argentina is talking
about a corn export tax in their socialist country - how would you like
to be a farmer there??? Ukraine and Russia (former communist states) are
also talking about a corn export tax. Wow!!! Socialists can think of
all kinds of ways to raise money for the government - but not the farmers
who produce the product in demand. So when prices could be good and give
farmers a profit, the socialist government taxes it away. SAD!
But the bullishness overall of this market for US producers is certainly
alive and well. Technically, there really isn't much resistance above
the current market. When the market is rising at this level, it usually
doesn't stop until it is near the all time highs. Going up, corn has
resistance at $7.65, $8, and $8.44 and going down also including $5.51
and $5.70. Its notable we've only stopped at these levels stated above
on weekly charts once in 6000 years!!! So we can hardly call them
"significant" resistance points. Same for soybeans, with resistance (in
uptrends) at $16.63 and $17.95; going down we have support for rebounds
at $14.50 (hit twice in history), $15.28, and $16.20. Every soybean
resistance going up has only been hit once in 6000 years; only $14.50 has
been hit twice going down (the others only 1 in 6000 years). So
essentially up in these stratospheric levels, we don't have any
significant support OR resistance. This makes for an extremely unstable
and even less predictable market.
But one thing is certain: Selling when prices are in the stratosphere
under great uncertainty is EXACTLY what Pro Ag wants to do - as it means
you are selling at HUGELY profitable levels. We would also encourage at
least some grain be held for the upside targets mentioned above ($16.63+
soybeans, $7.65+ corn). Note old crop has arrived at great price levels,
but new crop is far from these levels. More patience is urged on the new
crop at this time.
While the rest of the exporting world is practicing their ridiculous
socialist policies of limiting or taxing exports on the year their
farmers can make a little money, as least that hasn't happened in the US
(yet). With a new Democratic (illegitimate??) government coming in,
perhaps they will join the socialist crowd of governments restricting
exports??? That hasn't happened in the US since Jimmy Carters ill-advised
Russian Grain Embargo in 1980 - which started an exodus of US farmers
into Brazil to produce soybeans. Brazil since has become a soybean
exporting giant - the largest in the world. Yes, government decisions do
have world impacts!!!
Ray can be reached at email@example.com.
Ray is President of Progressive Ag Marketing, Inc., a top Ranked
marketing firm in the country. See http://www.progressiveag.com for
rankings and link to data from Top Producer Magazine and Agweb.com.
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