December soybean meal closed at a new two-year high on a day when the rest of the grain sector closed lower, pressured by row-crop harvest progress and increased chances for rain in Ukraine. The December U.S. dollar index is trading at a new one-month high, offering bearish pressure to Wednesday’s commodity prices.
December KC wheat closed down 7 1/2 cents at $4.84 1/4 Wednesday, keeping a defensive tone since Monday’s big sell-off took nearly all commodity prices lower, including wheat. The irony of Monday’s selling was that it was related to a resurgence of coronavirus concerns in Europe, and wheat is one of the least negatively affected commodities. Markets, including wheat, are emotional, however, and it’s not uncommon for wheat prices to trade in a choppy pattern, as they are doing. In the bigger picture, KC wheat prices have been under bearish pressure throughout most of 2020 and hit a trough in early August after hearing about the likelihood of another record world crop for months. That bearish scenario is still true, but with U.S. winter wheat now being planted for next spring, traders are increasingly starting to look ahead to next year and are seeing early bullish possibilities. Planting conditions in Ukraine and Russia are currently dry, but Ukraine has increased chances for rain in the week ahead, another reason for Wednesday’s selling. Here in the U.S., planting conditions are also generally dry in the western half of the U.S., and La Nina conditions are expected to expand drought into the southern U.S. Plains in the final quarter of 2020. Argentina has also been experiencing drought but is expecting beneficial rains the next five days. From a fundamental view, the price outlook for wheat remains bearish, but next year’s bullish possibilities have helped lift prices and are likely to be a source of support this winter. Technically, the trends remain up for all three cash U.S. wheats. DTN’s National HRW index closed at $4.65 Tuesday, down from the 2020 high of $4.79. DTN’s National SRW index closed at $5.32, down from a five-month high.
December corn ended down 3/4 cent at $3.68 1/2 Wednesday, a third day lower after hitting a new six-month peak of $3.79 1/4 Friday. Corn prices continue to find support from an early count of 859 million bushels (mb) of corn export sale commitments in 2020-21, a total that got bigger again on Tuesday with sales to China and unknown. It is also helpful and a bullish surprise to see Brazil’s FOB corn prices at their highest levels in four years in U.S. dollar terms and 16 cents above those at the U.S. Gulf. This week, however, started with bearish influence from a revival of coronavirus concerns and has stayed lower with harvest conditions looking favorable. USDA said Monday 8% of the corn crop was harvested, but much has likely been accomplished since then, and the seven-day forecast continues to look helpful with warm temperatures and dry weather expected. In South America, producers are eager to get planting and have been helped by recent showers in southern Brazil. Rain in the forecast for central Argentina from Thursday into the weekend is also helpful. On the demand side, the U.S. Energy Department said last week’s ethanol production slipped from 926,000 to 906,000 barrels per day, down 4% from last year’s lower-than-usual week of production. U.S. ethanol inventory inched up, from 19.8 million barrels to 20.0 million barrels, which is still near the lowest in over three years. Last week’s gasoline demand was down 9% from a year ago and remains a limiting factor for ethanol production. Fundamentally, it is unusual for corn price to trade near its six-month high at harvest time, and producer sales are likely being considered. Noncommercials are lightly net long in corn, USDA’s ending stocks estimate of 2.50 billion bushels (bb) is moderately bearish and 14.9 bb of new corn supplies are coming available. Technically, the trend in cash corn remains up with resistance likely near Friday’s close, the same site where prices broke below support back in March. DTN’s National Corn Index settled at $3.41 Tuesday evening, down from its six-month high and 28 cents below the December contract. In outside markets, the December U.S. dollar index is trading up 0.33 at a new one-month high, and most commodities are trading lower.