Commodities: Grains And Oilseed Futures Move Into The Harvest

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  • Soybeans post WASDE and going into the harvest
  • Corn has corrected
  • CBOT wheat remains over $7 - Wheat is highly political
  • Cotton is still on a bullish path
  • Meats move into the offseason for demand

Each month, the US Department of Agriculture releases its World Agricultural Supply and Demand Estimates report. Many producers and consumers consider the WASDE report the gold standard for fundamental data.

The WASDE provides a snapshot of crop production, inventories, exports, and other data that is stale as soon as the USDA releases it each month. However, the futures markets tend to move higher or lower when the report deviates from the market’s consensus forecasts for the data. The futures prices are the actual real-time indicators of the path of least resistance for the agricultural commodities.

On Friday, Sept. 10 at noon EST, the USDA released its September WASDE report. The 2021 harvest season is now underway across the US and the northern hemisphere. Agricultural commodity prices remain a lot higher in September 2021 than last year at this time. The full text of the latest WASDE report is available via this link.

I reached out to Sal Gilberte, the founder of the Teucrium family of agricultural ETF products, including the CORN , SOYB , WEAT , and CANE product, for his take on the latest WASDE report. Sal told me:

Not much to today’s September 2021 WASDE release, the biggest things to me are the still too-tight-for-comfort US soybean balance sheet, the lowest level of US wheat ending stocks in 8 growing seasons, and the reliance of the USDA on big corn numbers out of China for both production and imports. Chinese corn prices remain very high relative to the US, which means either Chinese production is overestimated, or the Chinese corn import number needs some further adjustment. In any event, US domestic grain inventories are substantially below historic stocks-to-use ratios, especially in soybeans. It is clear the world will need at least another full growing season before grain inventories as measured by stocks-to-use ratios get back into line with historic averages.

Soybeans post WASDE and going into the harvest

Sal highlighted that the US soybean balance sheet remains “too-tight-for-comfort.” The soybean futures market appeared to agree.Soybeans Daily

Source: CQG

The daily chart of new-crop November soybean futures illustrates the oilseed put in a bullish key reversal trading pattern on Sept. 10, the day of the USDA’s report. The September WASDE said that beginning and ending stocks in the US and worldwide rose from August, while yield, production, and the US and global carryout were all within the market’s expected ranges. The soybean futures limped into the monthly report. The price bounced higher from the lowest level since late June. November soybeans were below the teens at but nearby at just over the $12.95 per bushel level on Wednesday, Sept. 15.

Corn has corrected

The Teucrium founder questions China’s domestic corn price given its production and import data. Fundamental corn data also came in within the expected ranges in the latest WASDE report. US and worldwide inventory levels rose from the August report, but new-crop December corn futures had been under pressure going into the USDA’s latest report.

Source: CQG

As the daily chart of December corn futures highlights, the price probed below the $5 level on Sept. 10 but put in a bullish key reversal pattern on WASDE day. After trading down to the lowest price since mid-April, corn stabilized near the $5.35 level on Sept. 15 in post-WASDE trading as the market moves into the 2021 harvest season.

CBOT wheat remains over $7 - Wheat is highly political

The US and global wheat carryout were within the expected range in the latest WASDE report. After trading at over $7 per bushel, wheat had been correcting when the USDA said the US ending stocks fell while global inventories rose. Meanwhile, global stockpiles remained below the 2020 level during the harvest.

Wheat Daily

Source: CQG

The chart shows CBOT wheat futures fell to the lowest level since late July at $6.77 per bushel on Sept. 10. Wheat recovered and was back at the $7 per bushel level on Sept. 15. Russia is the world’s leading wheat exporter, making the grain a tool on the geopolitical landscape.

Cotton is still on a bullish path

The USDA told the cotton market that the US beginning inventories fell since August but ending stocks should be higher based on increased production. Global inventories fell. Even though production rose, consumption outpaced the output.Cotton Daily

Source: CQG

The ICE December cotton futures chart illustrates the bullish trend that took cotton to a multi-year high at 96.71 cents in August. At over the 93 cents level on Sept. 15, cotton futures were within striking distance of the most recent peak and were edging higher in post-WASDE trading.

Meats move into the offseason for demand

The USDA lowered its forecast for beef production in 2021 and left pork output unchanged. The WASDE increased its forecast for beef prices in 2021 and 2022 and also increased its projected pork price for 2021. While the WASDE was mostly bullish for the animal proteins, the markets have experienced seasonal selling as the grilling season ended on the Labor Day holiday. The 2021 peak demand season finishes each year in early September.Cattle Daily

Source: CQG

The December live cattle futures chart highlights the decline from $1.38225 in late August, the highest price since 2017, to a low of $1.25675 on Sept. 13 in post-WASDE trading. December live cattle bounced towards the $1.30 level as of Sept. 15.

Source: CQG

Nearby October feeder cattle futures fell from $1.7255 in late August to a low of $1.54775 per pound on Sept. 13 before bouncing to the $1.56500 level on Sept.15.

Lean Hog Daily

Source: CQG

Meanwhile, October lean hog futures dropped from 91.425 cents per pound in late August to a low of 79.775 cents on Sept. 14 and were just over the 82 cents per pound level on Sept. 15. The declines in the meats were more a function of seasonal factors than the latest WASDE report.

Agricultural prices have dropped from highs earlier in 2021, but they remain much higher than at the same time in 2020. The bottom line is that agricultural products reflect rising inflationary pressures and demographics. As the world’s population grows, annual production must keep pace to satisfy the increasing requirements.

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