Market correction holds, with bullish news

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(Farm and Dairy file photo)

The U.S. Department of Agriculture supply and demand report came and went last week, and traders searched for any hint of change in the numbers that would affect their trading.

Wheat

Real results were seen only in the wheat market, and that was more from crop estimates than from the USDA reports. Analysts are telling us that the wheat crop worldwide may have some supply problems in the new year, even as this year we were flush with supply. Russia, Canada and the U.S. are all expected to have lower production.

In the U.S. and Russia, it is because of crop problems, but in Canada, it is because of competition from Canola acreage. The U.S. has issues mostly in the spring wheat crop, which is seeing decreased acres projected, mostly because of acres.

These declines in crop size did not make it into the USDA report, as some of the information was not available in time for inclusion.

In addition, the trade is suspecting that much of the world’s supply of wheat, which is in China, is not really there. The Chinese do not publish this data, which they consider confidential. This is similar to the Chinese corn situation. They report large supplies, but continue to buy more than they normally do.

Corn and soybeans

Meanwhile, corn and soybean prices have been soft on the Chicago Board of Trade. March corn futures made a high of $4.391⁄2, and then corrected lower and traded several days in the low $4.20s.

Since the correction, we have been mostly sideways, with the March at $4.211⁄4 Dec. 15, down two and a quarter cents for the day, and 18-1⁄4 cents off the high. We actually gained three cents last week after the correction.

The soybeans made that notable January futures high of $12 Nov. 23, and came within a fraction of a cent two more times. We quickly corrected, however, and Dec. 15 we were trading at $11.69, down 31 cents. This is not a big deal for soybeans, however, where we can see that much change in one day.

Lower carryout

The talk in markets is that the carryout for the end of the marketing year was reduced by 15 million bushels, as USDA expects the current record pace of crushing to continue. That brings the carryout to 175 million bushels, getting into the area where we are tight and may need to ration supply.

This comes even as we are still talking about dry South American weather hurting their growing crop. There have been scattered rains, but lower yields are anticipated, even if not actually predicted yet.

The result of the lowered carryout and competitor’s weather problems is talk that we need to increase acres. At current prices, that seems easy to do. Of course, that means fewer acres for corn, so that would help corn prices, also.

The wheat chart is showing a different pattern than the corn and soybeans. The March futures high was Nov. 25, at $6.223⁄4. Not that long ago we were struggling to trade up to $5. We corrected to $5.651⁄2 Dec. 7, but on Dec. 14, we got back to $6.22, helped by the forecasts of reduced growing crops.

We continue to stay in an odd, contra-seasonal market, where we are making high prices when we normally make the year’s lows. Continued export demand in corn and beans and continued crop problems in worldwide wheat crops may mean this is a new market for us, and a time for optimism after this ugly 2020 that we will long remember for low process and COVID-related problems.

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