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Much of the food and energy based commodity sector found support from positive money flow today. Escalating weather and geopolitical risks combined with rising global central bank stimulus suggest that demand will rise, while supply could be at risk. Reinflation concerns are also being bought up again, which would make commodities a safe haven/hedge against inflation as central banks around the world cut rates to stimulate economic activity.
Check out the charts below to see how well the commodities have been fairing against their moving-averages. Corn and wheat are above the 100-day moving average (Red), with wheat looking to challenge the 200-day moving average (Green). This is wheat's first $6+ close since June.
Russia is doubling-down on their concern for the 2025 wheat crop. Another one of Russia's winter wheat regions declared a state of emergency today due to dry weather. Oryol is northwest of Voronezh. Also today, Russia's weather agency said that conditions for winter crops, were "worse than usual" because of recent dryness.
Headlines also showed today that Egypt's state grains buyer struck a deal to receive monthly wheat supplies between November-April, about 510,000 tonnes per month. This totals 3.12 mmt, and is one of the largest ever direct deals. Source will be Black Sea.
Today's EIA Report showed that ethanol production rose to 1,015K barrels per day last week, up from 994K bpd the previous week, and up from 1,009K bpd in the same week last year. The production of ethanol utilized an estimated 100.8 million bushels of corn last week, up from 98.8 million bushels the previous week, and up from 100.4 million bushels in the same week last year. Estimated corn use for ethanol through the first 27 days of the new corn marketing year total 396 million bushels, which exceeds the early seasonal pace needed to hit USDA's target by roughly 17 million bushels.
What does this mean for grain marketing? Should you hold on because the market is going higher? Should you sell to take advantage of the rally we have had? I had a grower today tell me, "I hope this sale [of wheat], is the worst one I make". I think that is a great reminder to everyone that we don't have to sell all-or-nothing. Scale up selling gives you the opportunity to sell some of your grain in smaller quantities to help manage your price risk over a period of time. If we sell at a profitable level and the price goes up, SUPER! You have more grain to sell and can capitalize on that. If the price goes down, SUPER! Good thing you put a sale on so at least you have some coverage that you would not have otherwise. Soybean and corn harvest is breathing down our neck, and wheat planting too. We are over $1 off our lows on soybeans, almost $0.50 off our lows on corn, and almost $1 off our lows on wheat.
Funds were thought to have been all buyers.
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