Charts of the Day – January 11, 2021

Chicago Wheat

Afternoon Market Commentary – January 15, 2021

by: Chris Betz

Corn Soybean Wheat
Old Crop (futures month, change, settle price) CH1 2’6 531’4 SH1 13’6 1416’6 WH1 5’4 675’4
New Crop (futures month, change, settle price) CZ1 2’2 460’0 SX1 1’2 1197’6 WN1 2’6 657’6

Corn and beans close the week on both sides of unchanged for the session Friday as calendar spreads relaxed a bit from the recent run up. Wheat was firm early on a Bloomberg article that Russian export taxes would be doubled in February. A less than anticipated NOPA monthly crush number will have weighed on beans. More largely, a firmly dollar on Friday will have lent pressure on commodities, but the dollar figures to remain weak to weaker in the near term as additional U.S. stimulus is likely to be introduced before long.

March corn closed well above the recently formed gap, which is support at 519 then the 20 day at 479’4. Resistance on the continuous chart is the chart gap at 550 having made a supportive weekly close at 531’4.

March soybeans are holding gains well despite a double digit loss on Friday. Resistance is the contract high at 1436’4 with resistance on the continuous chart at 1536’6, the 2014 high. Support on the March is back at 1348’6 then the 20 day at 1320’4.

March Chicago wheat jumped to a fresh contract high in the overnight, which becomes resistance at 693. Support is the 20 day at 637’2 then around 615. Resistance on the continuous chart is the 2014 high at 735. 

Technical Thoughts – January 14, 2020

By: Ken Lake

I sometimes find that I focus too much on one commodity or the other and ignore one way too long.  In this case, wheat has been ignored by me much too long.  That said, it has been somewhat difficult to extract information from mainstream sources which is why one must continue to monitor many sources.  In the case of wheat, Arlan Suderman’s WASDE update this week offered epiphanies for me in wheat.  If you haven’t reviewed the piece, I sent an email yesterday with links to it.  It’s worth your time to review it.

The story in wheat is 4-fold.  First, Russia is talking about doubling its export tax on wheat in order to slow food inflation.  Second, European supplies are tightening.  Third, weather in the Black Sea region and the US plains is yet to play out.  Currently the four-corners region of the US is under extreme drought. Fourth, wheat, corn and soybeans will now compete for acres in the US.

The weekly wheat chart below shows Fibonacci values from the high we put in back in December 2014 of 677 and the low established in September 2016 of 359.  Notice that we briefly traded above 677 this week.  A weekly close above 677 will signal a move to 735, the high set in May of 2014.

Fertilizer Update – December 15, 2020

By: John Ezinga

Last update was 8-21-20 and we were starting to see grain prices move higher. My recommendations were to buy most of your needs forward except MAP. I have now updated those recommendations to buy all commodities forward and lock in a favorable corn sale against it. So what is going on in the world to have all these commodities moving higher? Our government has decided that deficit spending and quantitative easing is the correct course to bridge us through the pandemic. By increasing the M1 money supply at rates we have never seen before we are witnessing the side effect of this inflationary practice. See chart below to see the value of the dollar has dropped 10% since March. This devaluation has been directly reflected in commodities as they are very inflation sensitive by nature.  The cheap dollar has also encouraged demand from abroad.

As most of you know potash has two primary suppliers to the world, Russia and Canada. The North American market has been flush with the mineral for the past 5 years. As you can see the chart below the relationship with corn has been neutral to farmer friendly since 2015. Well, that just changed in a big way. After the past two years of a wet fall seasons and/or challenging spring application seasons 2020 proved to be a year where the farmer really caught up on his potash applications in a BIG way! The large application window this fall lead to depleted inventories at all levels of the system. Prices have moved against the farmer to the tune of about $50-$75/ton. I think we will see a push by the big three (Mosaic, Nutrien,  and K+S) to move my charts into the red zone! I have been recommending to forward buy your potash for past 4 years and that recommendation has not changed.

Phosphate prices continue to rise as supply availability is in question. The domestic producer(Mosaic: Ticker- MOS) persuaded the government to raise tariffs on foreign imports from Morocco and Russia to help stabilize the local production in Florida. When the duties were announced prices jumped 20-30 dollars on the news….which was on top of a 50-60 dollar appreciation summer through fall. I believe there is still upside momentum to this market as we need to attract import tons to meet our needs. Although my charts are showing MAP as a neutral buy I am recommending at this time to get your spring needs booked because I think we are heading higher.

Urea prices moved higher from the mid-summer lows and are offering you neutral pricing opportunity vs. corn. Although Urea pricing has moved up 50-60 dollars per ton the corn price has moved higher and as you can see in chart below, has moved the urea purchasing decision more towards the favorability direction of the farmer.

I still recommend buying here and booking some forward corn sales to lock in the spread relationship with corn. With the government trying to get inflation going you will see it show up in commodities first. Don’t wait to get your coverage in season….you could be paying a lot more.

As harvest winds down the gears are shifting towards inputs for next year. The decision to purchase 28% nitrogen is still offering you very favorable relationship with Corn. I strongly recommend you purchase your 2021 needs. It will not be long and CF Industries, Koch Industries, and Nutrien will all be looking for reasons to move 28% higher. The game, as I have talked about before is for the domestic producers to hold prices down long enough through the winter as to not allow imports in for spring planting. As we move through the winter I sense they will likely be very aggressive with the upward movement of prices.