The big news this week is the monthly USDA grain report to be released on Tuesday at 11 a.m. There are definitely areas of the corn belt where the crop is less than stellar, but the over-all size and quality of this crop is pretty good. I am hearing reports today of damaged beans coming out of the southern delta region due to the massive rains from the hurricane over a week ago in Texas and western Louisiana. This rain is causing problems with quality on a ripe crop. Still, yield reports from these southern areas seem to be quite good. The market is expecting a 166-168 bpa yield on corn and a 48-49 bpa yield on beans. Any significant variance from this and the market could react explosively. I have seen enough of these report days and anything is possible. I encourage all of you to have your targets already in place resting at Chicago in case we do see something bullish hit the floor today. If this happens, you all can take advantage of a pop.
We did witness a nice bean rally last week. The cool weather has the market concerned about the lack of maturity in many areas. The dry areas in Ohio and Indiana are also raising concerns. The funds were short beans early last week, but these uncertainties caused them to cover the majority of their short positions in beans. So most of us had the opportunity to sell $9.00 fall beans again if you needed to make some “catch up” sales. We witnessed strength Monday through Thursday in beans, and then the managed money crowd decided to take their profits to the bank and sold it back again before the close on Friday, sending beans solidly lower on Friday at the close.
Corn and wheat are acting like “sticks in the mud” while beans moved higher last week. Beans would rally, but corn and wheat could not do a thing. Folks, we have a solid export program in beans at the Gulf this year. Our beans continue to be the cheapest beans in the world. China is expected to continue to buy more and more beans as harvest progresses. However, our corn export program is woefully inadequate, and the corn will start to stack up soon. South American corn is the world’s cheapest bushels, and world buyers of corn are bypassing the US. Corn basis levels at the Gulf remain weak, and this is weighing on the entire corn market. What is concerning is that we are not to gut slot harvest yet, and there are already concerns about the back log of corn barges. This corn market could get really interesting in about 30 days. Time will tell.
As I look at the charts last night, I still see clear resistance on the Dec ’17 corn futures chart at $370. Any rally attempt to this level needs to be sold. On beans, it is interesting to see that Nov ’17 bean futures rallied to the exact 50% retracement level of the entire $1.26 slide from July 11th through Aug 16th. The high point during this move is $977 ½ and that is now our resistance point. Any rally attempt to get us back to this level should be sold.
If I can help you in any way, please call me at the Readfield office.