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Market Update

Sep 4, 2020

Agronomy, Crop Management, Grain, Market Update, Soybean, Technology

SOYBEANS

Nov 2020 Soybeans up around 15 cents on the week. Causes are numerous but these are our favorites:

  1. AGGRESSIVE buying from the Chinese (call it 20+ boats sold) as they need the soybeans and call Brazil around 50-60 cents more expensive into China than PNW execution until March when the Brazilian crop should be ready for harvest.
  2. Frost concerns for next week in South Dakota and North Dakota (we are skeptical here).
  3. Further deterioration of US soybean yield ideas in the market, while above 50 bushels/acre are settling in the 50.5/51.5 bushels per acre range from most analysts.

$9.75 level in November Futures still a tough number to breakthrough, it is important technically and simply represents a strong cash number for most of the belt.

CORN

Dec 2020 Corn was down about 1-2 cents on the week on choppy markets and not many new Chinese sales. The market is still grappling with the Iowa Derecho, and you have started to see a few yields from some fields coming off already. The former “BROPHY” yield emails have started to trickle in from the market and first Iowa damaged field came in at 135 bushels an acre. Can’t imagine that was a pleasant time in the combine.

We are assuming no material moves in the corn market until next week’s World Agricultural Supply and Demand Estimates (WASDE) where the market isn’t expecting any major moves from the World Agricultural Outlook Board that produces the WASDE.

MACRO

Both the S&P and the NASDAQ were at all-time highs at the end of August, with tech up significantly on the month. However, that changed quickly as we flipped into September and markets have been substantially down since Wednesday, consistently losing 3-5% on the major indexes. The tech stocks that were at the front of the summer rallies are once again leading the way: Tesla has lost nearly 25% in the last three days, Apple had its worst day since March and other big tech companies like Facebook, Alphabet, and Amazon are seeing big declines.

As markets rallied through the summer, the dollar continued to weaken, hitting deep lows in August as inflationary fears piled up. This week, though, DXY made a quick recovery and gained nearly a full percent Thursday before pulling back a touch. This rebound in the value of USD caused precious metals to lose some of the gains that followed Federal Reserve Chair Jay Powell’s announcement of the Fed’s new outlook on inflation.

Prices on both Brent and WTI were already low heading into this week only to be hit hard by extremely low demand forecasts, sending prices down another five percent on Wednesday and Thursday. With summer ending and the pandemic still very much in control, oil demand is likely to remain low over the next few months. However, these levels do not represent a long-term equilibrium for crude prices. Producers have been disciplined and stocks have been on the decline over the last few months. As such, a demand recovery shouldn’t be bogged down by burdensome global and domestic stocks. Oil demand will recover as people drive and travel more, and the supply chain heals.

NEXT WEEK:

Have a Great Labor Day Weekend!

Grain Team – Aaron, Connor, Dallas, Hank, James, Jenna, Joel, and Kevin