Corn, soybeans trade in backwardation pattern Friday

Corn, soybeans closed mostly lower Friday.

On Friday, the CME Group’s farm markets signal that they want the farmers to sell now vs. in the future.

Backwardation is the term used to describe a market that has higher nearby futures contracts vs. the contracts that represent months further out in the year. So, for example, today’s March corn futures contract is higher than the December contract. It’s happening in the soybean complex, too.

At the close, the March corn futures finished 1 1/2¢ lower at $5.48 1/2. May corn futures closed unchanged at $5.47 1/2. New crop December corn futures closed unchanged at $4.51 1/4. 
 
March soybean futures closed 5 3/4¢ lower at $13.66 3/4. May soybean futures closed 3 1/2¢ lower at $13.65 1/2. New crop November futures closed 3/4¢ higher at $11.61.

March wheat futures finished 3 3/4¢ higher at $6.41 1/4. 

March soymeal futures finished $2.60 short term lower at $430.50.

March soy oil futures closed 0.28 lower at 44.66¢ per pound.

In the outside markets, the NYMEX crude oil market is $0.77 per barrel higher (+1.37%) at $57.00. The U.S. dollar is lower, and the Dow Jones Industrials are 94 points higher (+0.30%) at 31,149 points.

Jack Scoville, PRICE Futures Group, says that the markets are fairly calm, ahead of next week’s USDA Report.

“A quiet day for me today. We are a little higher across the board, and I think we are generally anticipating bullish WASDE numbers on Tuesday.  Not much to say, otherwise, about the market today,” Scoville says.

On Friday, private exporters reported to the USDA export sales of 101,600 metric tons of corn for delivery to unknown destinations during the 2020/2021 marketing year.

The marketing year for corn began Sept. 1.

Al Kluis, Kluis Advisors, says that the markets are taking a pause. 

“After Thursday’s USDA Export Sales report showed massive export sales – which had been expected – the grain markets traded higher and then lower with a mixed close in a low volume. It was a catch-your-breath kind of day,” Linneman stated in a daily note to customers.

Kluis added, “The purchases from China are not just a one-year wonder. The odds are high that they will be active buyers of U.S. corn, soybeans, wheat, and sorghum again next year as they attempt to rebuild critical grain reserves.”

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Thursday’s Grain Market Review

On Thursday, the CME Group’s farm markets finished mixed.

At the close, the March corn futures settled 2¢ lower at $5.50. May corn futures finished 1¼¢ lower at $5.47½. New-crop December corn futures ended ¾¢ higher at $4.51¾. 
 
March soybean futures settled 1¾¢ higher at $13.72½. May soybean futures closed 1¾¢ higher at $13.69½. New-crop November futures finished 4¢ higher at $11.60¼.

March wheat futures settled 10¾¢ lower at $6.37¼. 

March soymeal futures closed $2.40 short term lower at $433.10.

March soy oil futures finished 0.46¢ higher at 44.94¢ per pound.

In the outside markets, the NYMEX crude oil market is $0.59 per barrel higher (+1.06%) at $56.28. The U.S. dollar is higher, and the Dow Jones Industrials are 273 points higher (+0.89%) at 30,996 points.

Separately, the USDA’s Weekly Export Sales Report Thursday shows very strong demand figures for corn and soybeans.

  • Corn = 7.43 million metric tons (mmt.) vs. the trade’s expectations of 6.45 to 8.0 mmt. Of the total, China was the biggest buyer at 5.86 mmt.
  • Soybeans = 1.45 mmt. vs. the trade’s expectation of 600,000 to 2.0 mmt.
  • Wheat = 736,600 mt. vs. the trade’s expectations of 250,000 to 700,000.
  • Soybean meal = 346,100 mt. vs. the trade’s expectations of 100,000 to 350,000 mt.

Bob Linneman, Kluis Advisors, says that the trade action in the silver market could shift to the grain markets. 

“On Wednesday, the silver futures market rallied back. That helped the entire commodity complex. After a lower open, grain prices turned and closed higher. The key price support levels held on the sell-off on Wednesday,” Linneman stated in a daily note to customers.

Linneman added, “The rain now in Brazil will not only delay the soybean harvest but will have a big impact on when the double-crop corn gets planted – and the final yield.”

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Wednesday’s Grain Market Review

On Wednesday, the CME Group’s close higher.

At the close, the March corn futures closed 9¢ higher at $5.52. May corn futures settled 6¾¢ higher at $5.49. New-crop December corn futures finished 4¢ higher at $4.51. 
 
March soybean futures closed 16½¢ higher at $13.71. May soybean futures finished 16¾¢ higher at $13.67½. New-crop November futures settled 5¾¢ higher at $11.56½.

March wheat futures closed 3½¢ higher at $6.48¼. 

March soymeal futures finished $7.50 short term higher at $435.50.

March soy oil futures closed 0.16¢ higher at 44.48¢ per pound.

In the outside markets, the NYMEX crude oil market is $0.92 per barrel higher (+1.68%) at $55.68. The U.S. dollar is higher, and the Dow Jones Industrials are 102 points higher (+0.07%) at 30,790 points.

Jack Scoville, PRICE Futures Group, says that the markets are reacting to liquidation of positions by speculators.

“We have been going through a spec long liquidation phase, but now it is time to buy before what should be bullish export sales tomorrow and neutral to bullish WASDE on Tuesday!  Spec and some commercial buying I think,” Scoville says.

Bob Linneman, Kluis Advisors, says that the trade action in the silver market could shift to the grain markets. 

“The extreme volatility in the silver market may shift over to the grain markets. If silver prices continue lower, funds may reduce risk and position size. That could result in the liquidation of their long positions in the grain markets. As someone who was trading during the silver meltdown in 1979 to 1980, I will never forget how when silver prices collapsed, the entire commodity complex turned lower. That is not a price forecast, just a caution signal for the grain bulls to think about,” Linneman stated in a daily note to customers.

Linneman added, “I am watching the lows from earlier this week. If they are taken out, then corn and soybean prices may move down and test the two-week lows in the corn and soybean markets. The key short-term price levels I am watching are $5.39 for March corn and $13.41 for March soybeans.”

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Tuesday’s Grain Market Review

On Tuesday, the CME Group’s farm markets ended lower.

At the close, the March corn futures finished 6¼¢ lower at $5.43. May corn futures closed 6½¢ lower at $5.42¼. New-crop December corn futures ended ¾¢ lower at $4.47. 
 
March soybean futures closed 10½¢ lower at $13.54¼. May soybean futures closed 11¾¢ lower at $13.50¾. New crop November futures finished 3½¢ lower at $11.50½.

March wheat futures finished 6¼¢ lower at $6.44½. 

March soymeal futures closed $2.50 short term lower at $428.00.

March soy oil futures settled 0.65¢ lower at 44.32¢ per pound.

In the outside markets, the NYMEX crude oil market is $1.16 per barrel higher (+2.17%) at $54.71. The U.S. dollar is higher, and the Dow Jones Industrials are 592 points higher (+1.96%) at 30,803 points.

Private exporters reported to the USDA export sales of 115,000 metric tons of corn for delivery to Mexico during the 2020/2021 marketing year.

The marketing year for corn began Sept. 1.

Bob Linneman, Kluis Advisors, says that investors want to see if the markets pull back through today.

“Could we see grain prices consolidate through Tuesday? The sole reason could be that the funds want to avoid making a big move that will be reported on the Friday afternoon Commitments of Traders report. The recent price action does not quite translate to traders’ idea of sub-8% stocks-to-use ratio in corn and sub-3% in soybeans,” Linneman stated in a daily note to customers.

Linneman added, “Crude oil pushed to new highs overnight. March crude is now at the highest level since February 20, 2020 (on the continuation chart). The next upside target would be near $65.65. If crude is preparing for a bull run, will ethanol be able to follow the same path?”

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Monday’s Grain Market Review

On Monday, the CME Group’s farm markets finish mixed.

At the close, the March corn futures finished 2¼¢ higher at $5.49. May corn futures settled 1¢ higher at $5.48. New-crop December corn futures ended 1¼¢ higher at $4.47¾. 
 
March soybean futures settled 4¾¢ lower at $13.65¼. May soybean futures closed 4½¢ lower at $13.62¾. New-crop November futures closed 11¢ higher at $11.54.

March wheat futures closed 12¢ lower at $6.51. 

March soymeal futures closed $0.50 short term lower at $430.50.

March soy oil futures finished 0.35¢ higher at 44.97¢ per pound.

In the outside markets, the NYMEX crude oil market is $1.45 per barrel higher (+2.78%) at $53.65. The U.S. dollar is higher, and the Dow Jones Industrials are 307 points higher (+1.03%) at 30,289 points.

Britt O’Connell, ever.ag, says that the markets have had a quiet session to start the week.  

“Corn and soybean markets started the overnight session high with March corn establishing a new high at $5.55 before moving lower. As we move toward midsession, old-crop and new-crop markets are lower in both commodities. We’ve mentioned that volatility will likely remain a fixture in our marketplace, and today it is showcasing that very thing. China’s corn purchases last week must have gotten others into the mood of buying. This morning, it was announced that Mexico, typically our largest corn purchaser, stepped into the market and bought 126 mmt of old-crop corn. Another familiar face in the mix was Japan, recording a 110 mmt buy.”  

O’Connell added, “It’s worth noting that Brazil is getting a lot of rain right now, slowing down harvest and delaying its massive 8.5 mmt of soybeans that are set to leave the port in the month of February. Pair that with a trucker strike that started today, and time will be of the essence – lost days cannot be regained, especially when you’re aiming at record exports,” O’Connell says.

On Monday, private exporters reported to the USDA the following activity:

  • Export sales of 125,730 metric tons of corn for delivery to Mexico during the 2020/2021 marketing year.
  • Export sales of 110,000 metric tons of corn for delivery to Japan during the 2020/2021 marketing year.
  • Export sales of 133,000 metric tons of soybean meal for delivery to the Philippines during the 2020/2021 marketing year. 

The marketing year for corn began Sept. 1; soybean meal began Oct. 1.

According to the Wall Street Journal’s Weekly 72 Winners & Losers list, the corn market was up 9.29% last week, the best performing financial instrument on The Street last week. Corn’s performance was followed by COMEX Silver up 5.34% second best; wheat up 4.49% was the third best. Last week, soybeans were up 4.44%.

Bob Linneman, Kluis Advisors, says that investors want to see if the markets can repeat last week’s strong performance.

“Grain prices finished out last week on a high note. Corn was up over 45¢ while soybeans were over 50¢ higher for the week. The front end of corn is leading the way; new contract highs were hit overnight. Soybean prices need to surpass the high from last week before any momentum traders will be willing to step in on the long side. The key area to watch is $13.95 for March soybeans,” Linneman stated in a daily note to customers.

Linneman added, “The massive corn sales logged last week forced many analysts to sharpen their pencils and figure out how the balance sheet will look for U.S. corn going forward. Many in the industry expect USDA to increase exports, but by how much? And how quickly will they do it? Knowing what we know today, it is not hard to take the stocks-to-use ratio below 9%.”

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