The financial and commodity world risk-off on a low liquidity day.
Grain futures are called sharply lower today, with the financial world taking a significant risk-off day in a low liquidity holiday atmosphere. Interesting how the news story is delayed until now when it obviously was apparent already on Wednesday, but concerns over the uncertainty associated with a new Covid variant that has been identified in South Africa has sparked massive selling in financials and commodities. Options on the December contracts today only add to the emotionally charged market.
The current concerns come from the unknowns of the African Covid variant, which has mutated at least 30 times and is more virulent than the Delta version. It’s found mostly in southern African regions, with travelers having brought it back to Israel and Hong Kong. How well existing vaccines work will take weeks to fully understand their efficacy.
This has sparked massive selling around the world. French milling wheat is down 7-$8/MT (20-30 cents lower for US wheat values), canola is down 17-$18/MT (20-30 lower soybeans) with corn likely over $0.10 lower due to crude oil being down $4-5 lower overnight on the concerns that lockdowns may potentially spike in Europe. The markets are emotionally thinking worst-case scenarios with a lack of liquidity. The Dow Jones is down 800 points as of 7:30 a.m. this morning after trading as much of a 1,000 lower overnight. Likewise, the S&P 500 is currently down 78 points, having been down 110 overnight.
The anticipated heavy rains did fall in Australia and are anticipated to continue through the weekend. This is become well known, with rains moving out towards the middle of next week. In South America, a front to produce needed rain across the northern 3rd of Argentina of .5-2.00” on Thursday with lesser amounts for S Argentina and S Brazil of .1-.8”. 10-day forecast shows the above-normal rainfall continued across N and C Brazil with totals of 2.00-4.50” while light chances continued for Argentina and S Brazil. Lack of extreme heat limits any crop stress.
With cattle prices having closed at the highest prices since September on Wednesday, a sharply lower outlook is anticipated on the plunge in financial markets related to the African Covid variant. Cash cattle traded on Wednesday at $136 and some places as high as $139. Western Midwest dressed trade occurred at $214, which was $4-6 higher on the week. This week, the cash trade is likely completed with packers now unwilling to bid in the uncertainty of the Covid strain of how the markets are responding in the financial sector.