Midday Comments: 11/2/2020

Grain opened lower on Sunday night & maintained losses thru the electronic session as traders pared long positions ahead of Tuesday’s election & energy prices came under renewed pressure.  Soybeans led corn & wheat lower as soyoil succumbed to crude oil’s dive below $34/barrel for the first time since May on news that Great Britain would join France, Germany & Italy in partial economic lockdowns to contain rapidly rising cases of COVID-19.  With international travel & worker commuting likely to suffer from reduced energy consumption, corn, soybeans, soyoil & energy commodities were all under pressure.  Economic uncertainty combined with Friday afternoon’s CFTC Commitments of Traders data to spur follow-thru selling.  The Disaggregated Combined Futures & Options CoT report indicated that managed trading funds continued to add ownership of corn, soybeans, soymeal, soyoil, hard red winter & hard red spring wheat & were only minor sellers of soft red winter wheat in the weekly period ended Oct. 27.  Being so heavily long, funds were vulnerable to changing sentiment or fundamentals.  At the 7:45 am pause in electronic trading, Dec. & March corn futures were each 5.5c lower, Jan. beans were down 9.25c, March beans were 7.5c weaker, Dec. soymeal had ticked $0.10/ton lower, Dec. soyoil was down 0.31c/lb., & Dec. & March SRW wheat were each 4.5c lower.  
 
Grains pared overnight losses in the opening moments of Monday’s regular trading session after USDA reported another sale of 2020/21 US corn to unknown destinations & crude oil gradually retraced losses.  The 10 am release of USDA’s Weekly Grain Export Inspections report for the week ended Oct. 29 took some of the steam out of the rebound, however.  Inspections of corn (28.409 mb), milo (3.718 mb) & wheat (10.548 mb) were well below the 47.2 mb, 5.4 mb & 17.9 mb of inspections, respectively, needed weekly to reach USDA’s current export forecasts for those commodities.  Although soybean inspections (76.528 mb) were still robust, they were the least in four weeks, & total inspections of the four major grains reached a 5-week low.  The fact that USDA upwardly revised the previous week’s inspections totals by 1.753 mb on corn, 0.336 mb on milo, 5.673 mb on beans & 1.316 mb on wheat offered some support. With 9 weeks now completed in its 2020/21 marketing year, cumulative corn inspections (270.4 mb) are at a 2-year high.  At week #9, cumulative soybean inspections (309.4 mb) are the highest ever by 63.0 mb! Year-to-day milo (25.1 mb) are a at 5-year high & cumulative wheat inspections (417.9 mb) are at 3-year high 22 weeks into its marketing year.   China was again a huge player in last week’s grain exports..  It was the top corn (13.005 mb) & soybean (54.796 mb) & the only milo (3.718 mb) destination.  Wheat inspections were low in part because China took no US wheat last week.  Traders shook off the modest export data by late in the morning.  With wheat providing the leadership by 1:05 pm, Dec. & March corn futures were down 1.5c, Jan. beans was 4.75c lower, March. beans was down 3.5c, Dec. soymeal was $3.70/ton lower, Dec. soyoil was 0.44c/lb. lower, Dec. soft red winter wheat was up 7c & March SRW wheat 5.75c higher.
 
Recapping Friday’s action, corn & soybeans gave back half of their Thursday night gains, & wheat reversed overnight gains to losses on Friday morning as risk-off trading in outside markets & rainfall in previously dry wheat production regions prompted month-end selling pressure. On Thursday night, corn futures were 2-4c higher, beans were up 5-10c & wheat was 1-3c higher as traders clawed back some of the mid-week price carnage.  Speculation that the recent sell-off may have gone too far too fast bolstered sentiment, but the last trading day of the month & the uncertainty of US election results encouraged position adjustments.  Evidence that the La Nina weather pattern could bless central & northern Brazil with good growing conditions, but limit rainfall in southern Brazil & Argentine particularly supported soybeans.  Grains eased from early session highs as crude oil struggled to its lowest weekly close since May 29, equity markets plunged to the largest weekly loss since March 20, & the US dollar again worked higher week.  At Friday’s close, Dec. corn futures were unchanged, March corn gained 1.75c, Nov. beans rose 4.75c higher, Jan. beans rallied 5.75c, Dec. soymeal was up $1.70/ton, Dec. soyoil was 0.55c/lb. higher, Dec. soft red winter wheat declined 5.25c & March SRW wheat lost 3c.  After peaking at fresh 15-month highs on Monday, weekly continuation corn charts posted a potential key-week downward reversal & lost 20.5c loss, soybeans tumbled to a 27.25c weekly loss & SRW wheat plunged 34.25c lower for the week.  Monthly charts painted a more optimistic picture. Continuation corn charts jumped 19.5c to a 15-month-high close, beans surged 33c to a 52-month high, & SRW wheat climbed 20.5c to a 64-month-high close. 
 
Taking a closer look at Friday’s CFTC report, fund managers have been net buyers of corn for twelve straight weeks since Aug. 4,, bringing their net long position (+276,325 contracts) as of Oct. 27 to the largest since July 21, 2015.  Funds have been net buyers of soybeans in ten of the most recent 11 weeks, resulting in the largest net long position (+232,717 contracts) in 3 weeks at Tuesday’s close.  Funds also owned a 5-week-high net long position in soyoil (+94,426 contracts), & the largest net long in soymeal (+84,279 contracts) since June 12, 2018.  Despite selling a net of 832 contracts last week, funds still owned the second-largest net long (+48,896 contracts) in SRW wheat since Feb. 18.  After four straight weeks of buying in HRW wheat & a third consecutive week of buying HRW wheat, funds owned their largest net long position (+41,410 contracts) in HRW wheat since Sept. 11, 2018 & their largest net long (+8,877 contracts) in HRS wheat since Aug. 8, 2017.  In the six non-HRSW grains, managed funds owned 1,132,794 long positions & only 238,132 short positions as of Oct. 27.  The resulting 5.8317:1 long/short ratio in those grain contracts was the highest since Sept. 23, 2012.  Funds have been more bearish towards grains 89.78% of the time since the Disaggregated data series began in June 2006.  When faced with deteriorating chart signals & long-delayed rainfall finally arriving in Russia, Ukraine & the UIS southern Plains, funds realized they were on the wrong side of the short-term trend. 
   
In export news, USDA announced on Monday morning that 8.031 mb of 2020/21 US corn were sold to unknown destinations.  On Friday, the farm agency reported that 4.464 mb of 2020/21 US soybeans were sold to unknown destinations.
 
Locally, corn basis was 1c lower, soybean basis rebounded 4c higher & wheat basis was steady on Friday. It was a tough week for cash prices, however. Corn plunged 34c lower, soybeans dove down 38c & wheat slid 21c lower last week as renewed competition from Illinois River grain terminals, a rise in barge freight costs & sharp losses in futures were a three-strike punch to cash prices.
 
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"Closing Comments" are written by David Marshall, First Choice Commodities LLC, Nashville, IL.  To learn more about his farm marketing advisory or commodity brokerage services, contact him at dmarshall@firstchoicecommodities.com or call (618) 327-4370 (voice/fax) or (618) 314-0918 (cell). This commentary is not intended for specific trading strategies. We strive to insure this information is reliable, but we cannot guarantee its accuracy or completeness.  Commodity trading involves risks. You should fully understand those risks before trading.