Howdy market watchers. It was a 2020-kind of week that ended on Friday the 13th.
The week was action-packed, starting last Saturday with the first calls that Joe Biden was the next president-elect. While several states have yet to certify results as President Trump files lawsuits over suspected ballot fraud, the numbers seem only to be strengthening for Biden. No matter how this ends, it is likely to be messy and drawn out. A number of world leaders already have reached out to congratulate Biden as president-elect. However, Chinese President Xi has yet to do so with the stakes higher for the P.R.C. should any results be overturned.
With odds leaning to a Biden win, the focus has turned to the GOP majority in the U.S. Senate. Runoffs for the two Senate seats in Georgia that could shift the balance of power are seen as mission critical to market bulls to remain GOP under a Biden victory. The date for the runoff election is Jan. 5, so this will not be known before year end.
The biggest overall market mover this week was the announcement Monday that Pfizer had a COVID-19 vaccine that was 90% effective. Interesting that this major news was released the first business day after the presidential election was called … On the news, the Dow Jones made new highs at exactly 30,000, finishing the week above 29,400.
Cattle futures also surged Monday, gapping higher on the charts back above the $140-level not seen since late September, early October. Much of these gains were given back Friday with charts looking weak into the close gunning to fill the gap at $135.675 on March feeders, down at the 20-day moving average. Live cattle futures also created a gap Monday while breaking the bottom side of the bull channel trendline on Friday. Cash cattle traded to the $1.11 level as cash trends remain positive and beef prices are up to the highest level since Sept. 3.
Despite vaccine optimism, we still are several months away from broader availability. As COVID cases reach new records with states mandating shutdowns again and charts are overbought, we advise caution in the near term on protecting the price on recently purchased stockers and home raised calves going to wheat pasture. The next Cattle-on-Feed report will be released Friday at 2 p.m.
The other big market move this week was USDA’s monthly WASDE and Crop Production reports released Tuesday at 11 a.m. Typically, the November report is less consequential given that it is the end of the crop year. But this is 2020. Yields for both U.S. corn (175.8 bpa) and soybeans (50.7 bpa) were reduced from last month and well below, 2.1 bpa for corn and 0.9 bpa for soybeans, trade expectations. This was the third-largest drop in corn yields for this time of year and the largest drop for soybean yields. This lowered corn production by 215 million bushels and soybean supply by 98 million bushels.
U.S. ending stocks were reduced by 465 million bushels for corn with exports revised higher by 325 million bushels despite lower feed use. Ending stocks were reduced 100 million bushels for soybeans, driven by tighter supply, and there are expectations that the supply side could see further tightening. South American production was kept the same despite slight reductions in Argentine beans as weather conditions have improved. On a global level, ending stocks were reduced for corn and beans versus last month and trade expectations, while there were only minor adjustments for wheat that came in above trade expectations.
In Tuesday’s trade, corn surged 21 cents from low to high ,while beans jumped over 45 cents and wheat followed up 17.75 cents. Managed fund buying took beans to a new record net long in beans and the largest corn net long since 2011. China demand for corn increased 5 million tons as Beijing upped the Tariff Rate Quota by that amount, although the expectation is for this 13 million ton quota to become 22 million tons as pegged by the USDA’s China attaché office in Beijing. With Ukraine’s corn crop seeing big reductions to the magnitude of 22%, it is unlikely that they will be able to fill this growing gap as many in China have threatened. Thus, we are likely to see China demand for U.S. corn increase from here as has been witnessed in surging basis levels in grain sorghum that serve as a proxy for corn demand. After making new highs overnight Wednesday at $4.28 on December corn, futures settled the week back down at $4.10 ½ with the USDA raising farm gate prices at $4.00 per bushel, up from $3.60 last month and $3.56 last year.
January 2021 beans also made a new high at $11.62¼ before settling the week at $11.48 versus USDA’s $10.40 farm price, up from $9.80 previously and $8.57 last year. July 2021 KC wheat failed to break out of the recent range, settling the week just above $5.70. The USDA held wheat farm gate prices unchanged at $4.70 per bushel and $4.58 last year. Overall, soybeans have the strongest fundamentals, followed by corn as a distant second and then wheat following. Wheat supplies under little threat of being too tight to surge itself, but I do expect the KC wheat discount to Chicago to continue to reverse with KC wheat typically holding a premium. Australia wheat production was unchanged in the latest USDA report with some threats continuing to the Argentine crop, with a 1.0 million ton decline in Tuesday’s report. Russia’s wheat crop was increased Tuesday that more than offset declines in the EU. Colder temperatures and snow are coming into the Black Sea region, so we will continue to monitor that area although exportable supplies seem adequate and export quotas non limiting. If selling wheat or contracting new crop, consider re-owning. We do believe these levels are decent areas to add at least some new crop protection. Give me a call at (580) 232-2272 or stop by our office to get your account set up and discuss strategies to protect your exposure to these markets. It is never too late to start and there is no operation too small to get a risk management and marketing plan in place.
Remember, I am on-site at the Enid Livestock Market on Thursday, sale day. If you’re needing seed wheat of any variety, be sure to call Sidwell Seed at (580) 874-2286. We have a wide variety of bulk and bagged seed including WestBred, Limagrain CoAXium, OGI/OSU, Agri-Pro and KWA with multiple pick up points in Kremlin, Goltry and in bags at 81 Feed and Seed in Enid and Medford with advance notice. Wishing everyone a successful trading week.
Sidwell is a Series 3 licensed commodity futures broker and principal of Sidwell Strategies. He can be reached at (580) 232-2272 or at brady@sidwellstrategies.com. Futures and options trading involves the risk of loss and may not be suitable for all investors. Review full disclaimer at http://www.sidwellstrategies.com/disclaimer.
The Link LonkNovember 14, 2020 at 05:00PM
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USDA report yields new highs for corn and beans - Enid News & Eagle
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