And if you thought the first week of 2021 was great for the grain/soy bulls, wait until you get a look at this one! The combination of corn, wheat, and beans extended into higher highs again, stimulated, of course, via the “word of gov” on Tuesday, and we have now reached the highest cumulative price level since the spring of 2014. Actually, in each of the past five weeks, we have registered higher highs and higher lows, have closed higher for six weeks in a row, and since the August bottom, the group has advanced over 60%. Take the S&P 500 as you have only rallied 20% during that time frame (although it has advanced 75% since the spring low). As we have noted previously, the grain/soy markets are on a quest to ration demand and encourage production, and just where that point lays, is a moving target. The only things we can say for sure at this point is we are extremely overbought (the most so since 2012), and during a big move, markets will always overshoot the mark and then eventually need to correct. While there is no sign we have reached that moment yet, now is not the time to become complacent or assume it will carry on indefinitely.
We obviously had not scared demand away just yet as the USDA announced a couple more solid sales in the daily system. Mexico stepped in to purchase 110,000 MT of corn for this crop year and unknown destinations bought 318,000 MT of beans for the 2021/22 crop year.
While I would not go so far as to say this stimulated the recent buying, but the U.S. Dollar is on track to close at the highest point in the past five weeks and should close above the previous weeks’ high for the first time since the end of October. No, that does not provide a confirmation that we have a bottom established but as I have noted previously, there are several factors that are hinting that we may be very close to doing so. A higher dollar right when South America is moving quite close to harvest, does not seem like a good combination for sustaining demand for our beans.
Looking at the rest of the macros as we finish out the week; Brent crude oil is lower for the day and for the week, gold is on track to close lower for the week, and this after a big reversal down last week, 10-year notes look to close higher after stabbing down to the lowest point since March and the S&P 500 is poised to close lower for the week.