Charts of the Day – October 30, 2020

Corn
Soybeans
Chicago Wheat

Afternoon Market Commentary – October 30, 2020

by: Chris Betz

Corn Soybean Wheat
Old Crop (futures month, change, settle price) CZ0 0’0 398’4 SX0 4’6 1056’4 WZ0 5’2 598’4
New Crop (futures month, change, settle price) CZ1 3’4 387’2 SX1 5’6 971’0 WN1 0’4 592’4

Mixed bag to end the week with corn closing unchanged on the December contract, soybeans up over a nickel on the Jan, and wheat down a tick over a nickel. A risk off week for commodities saw all three close lower on the week, which will give bulls pause. Fears of another round of economic shutdowns pressured markets this week, along with some repositioning ahead of next week’s election. An election which will of course have implications of how the United States will handle the recent resurgence in case counts around the world.

December corn retreated sharply from resistance at the 423’4 high and would make a bearish close below the 20 day which becomes resistance at 400’6. Next support is around 384 then 371’6.

January beans held some support at 1045’6, but would fail to close above the 20 day which is resistance at 1057’6. Next support is around 1016’4 then 990’2. Key resistance is the contract high at 1088’4.

December Chicago wheat stayed below its 20 day throughout, which is resistance at 609’6. Support is at 588. Topside key resistance is the high set at 638’2.

Technical Thoughts – October 29, 2020

By: Ken Lake

I was excited about last Friday’s close in the November soybean contract over 1080.  That close set us up for a leg higher measured from 1208.  Renewed threats of economic shutdowns as a result of COVID and yesterday’s 25 cent drop in spot soybean futures has tempered my excitement.  In the weekly soybean chart below, applying Elliott Wave theory, you can see that we have completed multiple waves higher.  Elliott Wave theory says that after 5 waves higher one might expect 3 waves lower.  My fear is that we may be at that point in the soybean contracts.  A downturn in soybean futures will spill over into corn and wheat.

Today, January soybean futures have broken 20 day moving average support at 1056.  Next support is 1012.  Momentum indicators point lower.  Considering that we have likely completed a major move higher and now have risk of moving lower, producers uncomfortable with their position should advance sales.

December corn futures have traded below its 20-day moving average, 399 and momentum indicators point lower.  Next support is 377.  If values find a bottom today or tomorrow upside targets are 410, 422.

December wheat futures have been down 4 days in a row and has broken 20 day moving average at 608.  Momentum indicators point lower.  Next support is 573.  Fundamentals for wheat is bearish but sales are not warranted until the oversold condition is resolved.

July 2021 wheat futures broke 20 day moving average support at 602.  Momentum indicators point lower.  Next support is 577.  No new sales are recommended here.

Fertilizer Update – October 6, 2020

By: John Ezinga

As harvest ramps up and prices are seeing some volatility, it’s good to freshen up some purchasing indicators.
We will review each basic commodity and a breakeven sheet for Corn/Soy/Wheat/Dry beans.
Locking in a favorable relationship between your outputs and inputs should be a successful strategy to long term growth.

28%
As you can easily see below, the decision to purchase 28% should be close to a no brainer. Two things to worry about going forward. 1) As soon as harvest starts to wind down most producers will shift gears and start locking in next spring’s needs. This typically spikes the price Nov 15 thru Dec 31. I would recommend you buy ahead of the crowd or after the year end rush. Target 220 or better for spring ship and 200 or better for Fall/winter ship. When the purchasing starts the price will jump pretty quickly. 2) If you buy your 28 and wait to sell corn and the price of corn drops you will be losing the favorability of the relationship….along with some of the profitability.

Urea
Similar story with Urea as 28%. The price per pound of Nitrogen as a percentage of a bushel of corn for both Urea and 28% is exactly the same at 10.2%. That has been a good buy over the past 15 years that I have tracked. US urea prices are cheap compared to the values in Europe, South America and India. If these values remain this way thru winter we will end up being short urea for the spring season which sets us up for a very volatile price and spot shortages. I believe we will see a price spike at year end that will (should) move cargoes are way. Getting some coverage now before a spike would be advised. Target 310 for fall ship and 330 for spring ship.

Phosphate
Prices of your starter grades are stronger than last spring and likely to remain strong thru fall and winter. The phosphate industry has asked for price protection from foreign imports and the determination of any support (protection) will be decided in late winter early spring. So as I understand it….if an import vessel comes to our shores and the price protection is granted the tariff will have to be paid retroactively to the date of the complaint (summer 2020). So…if you are an importer, how much of that price risk do you want weighing on your financials for 9 months in retro? Net result is phosphate prices have bounced hard off their bottom to the tune of about 30%($80bucks a ton!)

If we look at the chart it is telling you to buy hand to mouth. Don’t bank it to the soil and don’t book it forward (past this fall or next spring’s needs.) Target 450 or better for fall and 470 or better for spring. 10-34-00 will not need a reason to go lower with dry prices up….book accordingly.

Potash
Just buy it. Potash has slipped back into what I consider a good relationship with Corn and if you follow the bean/corn ratio below it is an even more favorable relationship vs. soybeans.

Potash is controlled by a few major players and the industry in general has tremendous capacity  to increase as needed. I do not see potash prices going far without some type of black swan event specific to the industry. But if they all decide to go golfing together you could see a spike back into the yellow zone fairly easy. Everyone wants a piece of your corn/soybean check…just make sure you lock in your cut! Market your outputs as you lock in your inputs is sound advice.

Breakevens
Now, everyone has a different cost structure but the point of this table is the obvious favorability to the soybean market. Demand is obviously strong for soys and if relationship remains we are going to plant a record crop of soybeans (2.65/1 bean corn ratio). One comment: “Show the American farmer a profit and he will show you a surplus”-said anyone who ever studied the ag markets.

Will you wait to see the surplus to sell or will you lock in profits in advance?

*For a better view of this spreadsheet image or a version that you can plug your own numbers into, e-mail jezinga@michag.com

The strategy is to lock in profits when they present; consistent use of this simple strategy is a continuation of your business.

From a macro perspective, I believe the farm community is still sitting in the cat birds seat. You have favorable government support, you produce inflationary protected (typically) commodities by borrowing (using) today’s dollars to produce tomorrows inflation adjusted staples and paying back the leverage with ever “cheaper” dollars. If you can thread the needle with the right mix of leverage and assets it’s a winning combination. However, someone once said, “Farming looks mighty easy when your plow is a pencil and you’re a thousand miles from the corn field”.