Weekly Grain Update – Aug 28, 2017

 

8/28/17

It’s been said that bull markets end quickly and bear markets usually last a long time.  Something tells me that we are witnessing the second choice with our current grain markets this week.  This is a long, slow grind, if there ever was one.  All grains continue to struggle with outstanding yield reports coming out of the Delta areas in the south as well as southern Minnesota.  We did see the bean market attempt to rally this week, moving about a dime higher during the session on Thursday.  Nov bean futures were able to rally to the $947 level, but then hit its head on resistance right around $950.  I hate to be the bearer of bad news, but we are definitely in a bear market, and I am not sure what could change to create a bullish pop.  We did see the Chinese buy a huge amount of new beans this week, and this also added to the support for beans.  In the coming weeks, it will be important that we keep selling beans to them as they are the single largest buyer of US beans, hands down.  The fact that beans out of the Gulf are the cheapest in the world should allow more export sales to be made.  This will be critical in the weeks ahead.

Corn Export

Unfortunately, Brazil has corn for sale that is cheaper than our corn at the Gulf.  The result is that corn is starting to stack up with no real export program.  Some farmers are starting to “throw in the towel” on old corn and just dumping it or just selling new corn across the scale.  This selling is causing the corn export values to soften and the basis at the Gulf has crashed this week, down by more than a dime.  This gives us a sense that we don’t have a strong corn export program this year, and we desperately need one.

Traders continue to feel that the bottom is close and we are due for a bounce.  While we are most definitely over sold, what will change to create more demand?  The managed money funds are now short all grains, and they have become shorter and shorter each week.  If this continues, there might be a chance for a short covering rally, but this probably will take several weeks for this to materialize.  We had the Pro Farmer tour this week, and they pegged the corn yield at 167.1 bpa and beans at 48.5 bpa. The USDA pegged the corn at 169.5 bpa and the beans at 49.4 bpa on its August crop report.  Yes, the Pro farmer yields are less than the USDA, but the tour has had a long history of pegging a yield that is at least 1 bu less on beans and 2 less on corn.  Thus, these numbers from the tour are not bullish, and in fact could be viewed as bearish.  Why?  Because the market was expecting lower yields from the tour, and this did not happen.  In fact, many are surprised by the tour’s corn yield.  Many did not expect their corn yield to be this high, and many are surprised that the crop is better than expected.  However, the tour was a little disappointed in the bean pod counts, but again, the bean yield was higher than most expected.  All of this is not bullish.

Harvest Coming

If you are in the position where you do not have enough corn or beans sold for the coming harvest, you have a challenge on your hands.  I believe you need to closely monitor the markets, and be a seller on any kind of strength the market gives you.  This is especially true for bushels that must be moved this harvest because you don’t have enough space at home.  If we see a pop, this will be a short-lived selling opportunity, not a chance to get bullish.  Frankly, our next bullish opportunity will come with a South American planting issue in January, and then our planting issues during the first part of May.  If you will be storing your crop in anticipation of a rally, it will likely take this long in order for something significant in the market to develop.

Looking at the charts today, I see major resistance on Dec ’17 corn futures around the $368 level.  We closed at $356 on Friday.  On Nov bean futures, the chart is starting to wedge.  This means we will likely break up through the resistance level, or fall down to support.  Frankly, if you need to move beans this fall, I would start here, and take advantage of this week’s bounce.  If this rally fails, Nov bean futures will likely fall back to the $935 level.  Nov ’17 beans closed at $946 ½ on Friday.

If I can help you or your team in any way, please call me.  I will help in any way I can.

Thanks,

Marcus

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