We all witnessed a nice rally on Thursday due to fund short covering on the last day of the month. Managed money had accumulated a short position in corn, beans, and wheat, and in order for these firms to realize their gains during the month, many decided to cover some of their short positions, and take their profits to the bank. Many had their fiscal year end closing Thursday night, and this rally was due to managed money buying back their short positions so profits could be realized during the month of August. I hope that everyone who needed to liquidate corn, either on storage or selling for new crop, took advantage of this short lived opportunity. Again, these opportunities will be few and far between in the coming weeks and months ahead. These are opportunities to get caught up with needed sales, and not to get overly bullish.
Hurricane Harvey did a big number in South Texas with massive flooding and huge amounts of water everywhere. Fortunately, the devastation is mostly in South Texas and Western Louisiana. These flooded areas will affect the energy market in the coming days and weeks. However, the grain industry can breathe a sigh of relief that our main grain shipping channel, the Mississippi River and the Gulf ports in Southern Louisiana, were not harmed in a big way. That scenario could have been very serious for our industry. Harvey is all but gone now, and some areas did receive some much needed rain. However, parts of Indiana and Ohio are now quite dry and Harvey did not bring much moisture to the area at all. Crop ratings will be out Tuesday at 4 p.m. and will likely show some deterioration in crop quality in the Eastern Corn Belt. However true, some of this is already factored into the market at this time. It is quite normal for condition ratings to fall during the end of the growing season, so this is not a huge surprise.
It will be interesting to see what the funds do on Tuesday. Will they continue to short this market like they have been? Most likely they will. If this is the case, the bigger the short they put on, the bigger the potential rally we will have when they decide to cover. All it takes is for one or two firms to get spooked, or decide to head for the exit, and the herd will follow. If this does not develop, we could very likely see another rally at the end of September for the very same reasons as listed above. We also have another monthly grain report on September 12, at 11 a.m. If the USDA decides to throw us a curve ball, we could see some fireworks on that day as well.
How can you take advantage of these short bursts of market activity? By using target orders. Give us a firm order to sell a specified amount of grain at a price above the market, and we will watch it for you and place orders at Chicago to price your grain if the market suddenly pops up. These work extremely well, and it allows you to take advantage of opportunities that sometimes are very short lived.
As I look at the charts tonight, I see clear resistance on Dec ’17 corn futures at $367. On Friday, we closed at $355 ¼. If we can get back to the $367 area, and if you need to move corn for this fall, I would seriously consider selling what you need to move. On beans, I see a clear resistance level on the Nov ’17 bean futures chart at $955 followed by $963. On Friday, we closed at $949 ½. Again, if we can continue to see strength in beans and get to these levels, I would seriously consider selling what needs to be moved at harvest. I hear many farmers saying they will sell their beans for cash flow this harvest, but store their corn. I have heard this many times already this year. The point is that if we do have a rally, we are likely to see many farmers take advantage of it, and their selling could smother the fire. Something to keep in mind.
If I can help you in any way, please call the Readfield office.