After the Bell: Corn, Soybeans End 2020 at New Highs on Weather, Demand and Chart Buying

Posted on Thu, 12/31/2020 - 14:28

Corn: March corn futures closed the day up 9 1/2 cents at $4.84 and set a contract high and also scored a 6.5-year high. For the week March corn gained an impressive 33 cents. Thursday marked the 14th consecutive day of price gains for corn futures.  Prices also closed at a technically bullish weekly, monthly, quarterly and yearly high close. The futures market has now gone “parabolic” in trading parlance, which can be the final stage of a major bull market run. The recent nearly vertical price rise also suggests a major market top could come sooner rather than later. However, market fundamentals in corn remain rock-solid. Futures were supported on news of the export suspension announcement by Argentina.  

Soybeans: Soybean futures ended the day, month, quarter and year on a strong note, with futures climbing 7 to 11 1/2 cents today and the March contract pushing $3.38 1/2 (34.8%) higher for the year. Front-month soybeans are at their highest level since 2014.  The recent acceleration of the uptrend signals a near-term top and pullback could be coming. But for now, momentum favors market bulls and the market should remain well supported thanks to both tightening supplies and strong demand. USDA on Monday is expected to remind of the latter, with the department expected to report a record-breaking crush for the month of November. With South American crops heading into their key reproductive phases in the weeks ahead, Southern Hemisphere weather will be key. Dryness is expected to return to southern Brazil after showers next week, and erratic rains are expected to continue for Argentina, heightening crop stress.  

Wheat: Wheat futures traded lower for much of the day but finished narrowly mixed with a slight upside bias in SRW contracts, around 2 cents higher in HRW contracts and 2 to 3 cents higher in HRS contracts. For the week, March SRW wheat firmed 13 1/2 cents, the March HRW contract rose 14 1/2 cents and March HRS futures strengthened 16 1/2 cents. When traders return after the extended weekend, the calendar will read 2021. The start of a new year may not have any significance to price action. But given the impact fund activity had on price action to close out 2020, whether money managers add to their length in the wheat market or decide to lighten up on their net long positions will be important.  

Cotton: March cotton closed up 13 points to 78.12 cents on Thursday. The contract ended up 5.97 cents for the month and up 7.32 cents for 2020. Cotton futures ended with small advances Thursday but posted the strongest annual percentage gain since 2010 as strong demand was further boosted by a weaker dollar. The world economy is starting to recover and much of the textile chain needs to restock for better apparel purchases in the second half of 2021. But there appears to be a little bit of price resistance at 78 cents. Weekly export sales showed a net 287,900 bales in the week ended Dec. 24, down 30% from the previous week and 24% from the prior four-week average.  

Hogs: February lean hog futures closed the day up $2.675 at $70.275 and hit a nine-week high. For the week, February hogs gained a solid $3.325.  Thursday’s technically bullish weekly and monthly high close in lean hog futures sets the table for good follow-through buying to start the new year next week. USDA Thursday morning reported good weekly U.S. pork sales for 2021 delivery of 46,300 MT, including 22,700 sold to China. It also reported 7,700 MT in sales for 2020. Shipments last week remained active at 39,400 MT, down about 1% from the prior four-week average, with Mexico and China each taking more than 13,000 MT.  

Cattle:  February cattle rose 57.5 cents to $115.025. The contract rose $2.15 in December but was down $7.25 for the year. March feeders rose 47.5 cents to $140.225 on Thursday and ended December up 25 cents.  Cash cattle prices reached 10-year lows below $95 in June and have slowly recovered but remain depressed relative to most other commodities. Cash trade occurred at $111 to $112 this week, up $1 to $2 but still down from $122 a year ago. It will be important for cash to continue to firm given the current premiums February and April are trading to the cash markets. But it is clear the futures are comfortable with the current premiums on spot markets despite the heavy market weights that are starting to retreat.  There is a perception that there is a backlog of cattle, but that is not the case. Weights are falling and will continue to decline until May.