Special Market Update

Grain Market Commentary

Tuesday, November 30, 2021

by Chris Hillburn, Senior Merchant, The Andersons


Markets getting a double dose of macros and unfortunately not good for commodities. Last week news hit that a new variant of the Coronavirus was discovered in South Africa. Another new threat of economic slowdown, lock down, and reduced demand. Result was a classic risk off trade day with the U.S. dollar stronger and a sell off in stocks, oil, and commodities. When in doubt, sell and ask questions later seemed to be the mind set for money flows. The 2nd dose hit today with testimony by Chairman of the Federal Reserve before the Senate Finance Committee. Powell indicating a more rapid tapering of bond purchases by the Fed and indicated it was time to remove the “transitory inflation” phrase from inflation discussion. Markets took this as surprisingly hawkish versus inflation and increases in interest rates coming sooner in an attempt to slow inflation down. Same result as before and another risk off day for stocks and commodities. All this risk off trade keeping U.S. dollar strong. A rule of thumb for dollar strength vs commodity demand is that if the U.S. dollar index is above the 93 level, dollar making U.S. exports too expensive for the export market.


Corn down today due to macros above and losses in the wheat market. Egypt made a big purchase of wheat today, 600k metric tons. All of this business came from Russia, Ukraine, and Romania, as U.S. wheat about $45 a ton higher in the world market. Strong U.S. dollar still a roadblock to export business. Throw in some big estimates for Australian wheat crop and wheat dropped about 30 cts today, corn a follower. Good news for corn is that the support pocket for lead month corn held the $5.60-$5.65 range and then actually bounced off the lows. Technicals indicate we are still above short-term low of $5.57, so market has not moved into a down trend or suffered a complete technical breakdown. Back to range bound markets from $5.50 to $5.95 for March 22 corn. We need to stay above the $5.50 level for lead month futures, which maintains possible higher prices. At this point market unable to take out the $6 futures mark. Inflation still out there with latest inflation numbers showing a 30 year high of over 6% annual inflation. In South Central Nebraska basis levels still historically strong, so cash prices on old crop are very decent.  Covid news and inflation questions adding to uncertainty, so December 21 volatility should be very high. In essence, March 22 corn futures are now the lead month and that contract has moved back into the Dec 21 futures trading range. 


January soybeans traded down 24.5 cts today, as inflation premium being taken out and wheat and corn losses not helping. Latest estimate for Brazilian crop is still very large at 144 mmt, 7 mmt above last year’s crop. Market anticipating a huge crop in SAM so changes in weather could make that market a lot more interesting, not happening so far. Recent lows on lead month soybean futures at $11.81, so support at $12 and then $11.81. Otherwise soybeans are stuck in a trading range from $11.80 to $12.95, and unable to rally above $13. Technically January soybeans could not rally above the 38.2% retracement level, and at this point the recent soybean rally has been the famous dead count bounce. Markets seemingly always rally 23.6% retracement or about 25% off the lows, but that rally is not a trend change. Market would need to rally above the 38.2% retracement or $12.95 - $13.00 to change to an upside trend. Looking at new crop soybeans and corn, the soybean (Nov 22 futures) to corn (Dec 22 futures) ratio is at 2.21. A ratio value of under 2.3 indicates the market is still anxious about corn acres for 2022. 

Stay Safe