Market Update 1/19/2021

US $ 90.75 up .75 for the week. This is still trending down

CORN

Corn futures gained 35 cents last week due predominantly to the numbers released on Tuesday with the estimated corn yield reduced 3.8 bushels.  They say that is the largest reduction on yield ever.  So, even though USDA reduced usage from ethanol increasing supplies slightly the result was still a supply estimated reduced to 1.55 billion bushels, again below the low estimate with quarterly stocks following that trend.  Ok, that is all well and good but here are the reservations.  I am not trying to throw a wet blanket on this market but.  Because the funds are approaching extreme long positions in the futures market one needs to be prepared for profit taking.  Next, even though there has not been anything wrong with export sale reports it is the inspections that are lacking and a concern.  Inspections are those bushels leaving the US.  After that it needs to be pointed out that even though cash basis remains respectable it has weakened slightly.  Last and most certainly not least depending on who you talk with is that the old crop futures have lost a few cents to deferred contracts.  I believe the thing to take away from all this data is that odds are old crop futures could in fact begin to give back some gains especially in relation to new crop.  There are many ways to handle this, call us to see how.

SOYBEANS

March soybean futures gained 42 cents last week and again due mostly to the USDA numbers.  The result being a stock to use ratio at the lowest level ever for this time of year, 3.08, I believe.   There are a lot of opposites in comparison to the corn numbers, inspections have been stellar, the funds are not as long as they could conceivably be, and the inverse in the futures market is huge, telling the market “we want your soybeans now”.  Technically the numbers point to 1439 and then 1448.  There is nothing wrong with that so if you are going to own soybeans own them prior to August.  Also, other factors saying to begin 2021 crop sales are the huge acreage estimates and common sense.  Trickle those sales out there 10% moving up to 30% on continued strength, just a consideration.  Then you can own those bushels with call options in the old crop futures.  My opinion is: this is a much more explosive market than corn.

CATTLE

 The February live cattle contract lost 170 last week and the cash failed as well, with most sales reported working lower from 112 ending at 109.  I remain positive with the movement of boxed beef, indicating there is demand.  I also believe the reports that say slaughter ready numbers will decrease going forward.  Last, but not least is the old adage that high priced corn leads to high priced cattle. That takes time.  My opinion is: anytime we see futures approach 120 at anytime find a way to take advantage of the market. 

Any statements of fact herein contained are derived from sources believed to be reliable, but do not purport to be complete.  No responsibility is assumed with respect to any such statement, nor with respect to any expression of opinion herein contained.  Futures trading is speculative and a substantial risk of loss exists.  The prices above may reflect those of the relevant spot contract.  Movement in the spot contract does not necessarily correlate to the movement of individual option premiums.  Past performances not necessarily indicative of future results

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