Weekly Grain Update – September 25, 2017

9/25/17

Harvest is starting to ramp up in many areas of the Corn Belt as the unseasonably warm temperatures push the crop into maturing several weeks earlier than originally anticipated.  Local yields on beans seem to be decent, but many farmers are complaining that although the beans are dry, the stems are still alive and hard to cut.  On Saturday at Readfield, we dumped approximately 20 loads of new beans and almost all of them were under 13.5% moisture.  Most of these beans are coming from the southern areas.  It is truly shocking how the beans dried down so quickly when just 2 weeks ago we thought nothing would ever dry down.  Heat will do this.  In fact yesterday was the hottest day of the entire summer in this area, and it is the last week of September!  Who would have ever guessed.

We witnessed an unusually strong grain market on Friday.  Corn closed up 3 and beans closed up 14 cents.  This type of market activity normally does not happen during harvest.  After consolidating around $3.50, Dec corn futures broke up through its upper channel line of resistance that it had been respecting for weeks.  This bullishness caused some of the funds to start to cover their short positions, and the market ran higher after many protective buy stops were triggered.  This is the first sign of corn bullishness that we have seen in months.  This strength is from a technical perspective and not from a fundamental perspective.  The corn fundamentals are still quite weak.  Argentina still has the cheapest corn in the world by far, and we have no outside country buying corn at any significant volume.  We did start to see some slight farmer selling of corn on storage, but most farmers continue to sell their beans for cash flow and store their corn.  Time will tell if this is the start of a reversal process in corn.  However, please keep in mind that we have just barely started corn harvest in the corn belt.  When this happens in about 2 weeks, there will be some selling pressure which will likely put pressure on futures and basis.

The bean market took the lead from corn and continued its upward move as well.  It is interesting to note that if one looks at the Nov bean futures chart, it made a high on July 11th at $10.47 and made a new low on Aug 16th at $9.21.  Now, please keep in mind that it is quite normal for the markets to retrace 50% to 61.8% of a move before resuming the previous trend.  The market move lower during this period by the total of $1.26.  The normal retracement window is 50 to 61.8% of this move or 63 to 78 cents above the low of $9.21 before it turns around and again moves lower.  This represents the Nov futures window of $9.84 to $9.99.  On Friday, Nov beans closed at $9.85 ¼ or exactly a 50% retracement.  Isn’t it interesting how a normal barrier of resistance like $10.00 almost exactly matches the 61.8% retracement level of $9.99?  This is not by coincidence.  There are many traders at Chicago who are looking at the very same thing.  If you still have beans left to sell for harvest delivery, my best quest is that Nov beans will make a high between $985 and $10.00 before turning around and moving lower, and possibly significantly lower through harvest.  Please take advantage of this opportunity before it slips away.

As you deliver your grain into our CHS Larsen Co-op elevators this fall, please communicate with your drivers on what you wish to do with your grain when delivering.  At the elevator, the scale operator will need to know if you want to sell your grain, place it on an existing contract, place it in Delayed Price or Open Storage, or into Grain Bank if you are using it for feed.  It is critical that we know what to do with your grain BEFORE the truck leaves the elevator.  This will help to make sure there are no delays in processing your grain deliveries.  Unfortunately, if your truck leaves without telling us what to do with your grain, we will be forced to place your grain into Delayed Price and title will be lost.  Please avoid this mistake by communicating with your drivers or simply calling our office so we do not make a mistake on processing your grain shipments.  We greatly appreciate your help in this matter.

As always, if I can help you with anything, please call me in Readfield.

Marcus

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