Roundup: CBOT agricultural futures trade flat
Chicago (US), September 26: Chicago Board of Trade (CBOT) agricultural futures traded flat amid rising energy values in the past week.
As U.S. stock market is struggling with a correction due to uncertain congressional tax policy, Chicago-based research company AgResource expects that hedge funds will see raw material futures as an increasing popular investment in the fourth quarter of 2021.
Corn ended flat. There will be no shortage of corn or feed supplies in early and mid-autumn, but AgResource suggests that extreme U.S. and exporter balance sheet tightness lies ahead.
Yield data so far in the United States and Ukraine have been disappointing relative to U.S. Department of Agriculture (USDA) forecasts. Massive improvement in combined data is needed to justify current USDA yield forecasts. Without yield improvement, exporter corn supplies will be lowered by another 6-10 million tons, which in turn pulls exporter corn stocks/use in 2021-2022 to a record low.
Rising energy prices support enlarged ethanol production. Feed wheat and South American corn are no longer major competitors for world feedgrain market share. Corn remains an evolving bull market, and risks lean heavily to upside. A close above 5.40 dollars will attract new buying.
U.S. wheat futures ended the week higher. China this week joined other importers and end users in becoming more active in securing forward coverage.
CBOT wheat's chart remains one of higher lows as importers use all breaks to add to forward coverage. Importers are only covered through late autumn/winter, and the EU and Black Sea's ability to dominate trade in 2022 will be eroding as supplies dwindle and Russia's export tax rises further.
Additionally, soaring fertilizer prices and drought across the Southern Plains raise doubts of a production gain in 2022. And a projected rally in CBOT corn prices will add another bullish dynamic to global wheat cash prices once the U.S. corn harvest is more than 50 percent completed.
A test of 7.40 dollars for Dec. wheat is projected in the next 30 days. AgResource holds that ultimately, CBOT wheat will reaches 8.00 dollars for a lasting seasonal high in early 2022.
Soybean futures traded in another narrow-ranged week and were a penny higher at Friday's close. Gulf cash markets have come back in a hurry and are nearing pre-hurricane Ida levels, while domestic processor demand remains strong due to lofty cash crush margins. Early soybean yield results are falling well short of a year ago. The bulls are awaiting next week's Grain Stocks report and additional harvest data for purchases.
Export commitments to China are behind last year due to negative summer crush margins and reduced government buying. However, Chinese feed demand is likely to exceed last year.
AgResource stays bullish as we expect the U.S. balance sheet will tighten in the coming months.