Daily comment for Friday, August 28

Fresh reports of possible disease showing up in Midwest soybean fields, on top of a very hot forecast for finishing the crop, added to the strength, and beans went out at a fresh multiyear high.

Corn followed along a bit reluctantly, the same pattern we have seen the last couple of days, tagging a fresh three year high near 541 early before fading back for the rest of the session.

Chicago wheat kept leading the complex too, technical buying building on the latest Russian threats and more blockage of trade.

Key Points/Developments

Technicals: Dec corn added 3 cents to 536 1/2, tagging a fresh three year high near 541 early before fading back for the rest of the session, the same reluctant follow we have seen from corn the last couple of days. Support falls back to 530, then 524, then 510 to 512, while 545 remains the target above.

Nov beans jumped 20 cents to 1288, closing right on the day's and the week's high tick for a fresh multiyear high. There is little in the way of chart resistance from here until levels not traded in years, while support now stacks up at 1268 to 1270, then 1250, then 1238 to 1240.

Spreads: The Sep/Dec corn spread widened a cent to 24 1/2 cents, and the Dec/Mar corn spread widened further to 14 3/4. The Sep/Nov bean spread narrowed slightly to 11 3/4 cents, while the Nov/Jan bean spread held steady at 14 3/4.

Weather: TStorm left corn and soybeans at Slightly Unfavorable again today, no change, while winter wheat held at neutral. The next two weeks are now shaping up as potentially the hottest such stretch for both crops in more than 48 years, with a real chance of topping the 1990 record.

Scattered thunderstorm chances remain, mostly confined to the northern third of the belt, while the southern third of the soybean crop looks likely to miss out on any real finishing rain as the heat settles in.

Markets/Trading Implications

Until the EPA actually rules on exemptions, we would expect soybean oil, and beans by extension, to keep whipping around on nothing more than rumors, though we should get some real clarity on it by Tuesday at the latest.

It is still too early to size up the yield impact from the disease reports out of the wetter parts of the belt, but as we have been saying, any threat to production should be, and has been, taken seriously given where ending stocks already sit. That uncertainty alone is one more reason we would not want to bet against this rally continuing, whether that's Monday, or into the end of the year.

The trend remains squarely higher, and more importantly, funds have been adding length at a pace we can hardly recall, with this week's report showing one of their biggest single week builds in both corn and beans. We have stayed patient about jumping in front of a move like that and trying to pick a top, and if these crops are as tight as the last several weeks of news suggest, that patience should keep paying off.

That said, a correction at some point would not be surprising, and when it comes it could be a sharp one, so anyone with harvest bushels still needing to move, or sitting behind on what needs to get done over the scale, should use this strength to catch up now rather than wait for a better price.

Call anytime and enjoy the ride!

Other Notes

• Russian wheat exports are set to drop below 2 million metric tons in August, with September shaping up no better, well behind last year's pace of more than 4.5 million metric tons in each of those months. The EU can only absorb around 1 million metric tons of that shift, leaving the US and Canada as suppliers of last resort regardless of price.
• New Federal Reserve Chair Kevin Warsh gave a hawkish speech at Jackson Hole this week, vowing to bring inflation back to target and roughly doubling the market's odds of a September rate hike, which helped the dollar find some footing.
• For the week, Dec corn gained 28 cents, Nov beans gained 48 1/2 cents, Chicago wheat gained 85 1/2 cents, and cotton gained 3.18, one of the stronger weeks for grains in years.

Static Notes

• Commitment of Traders report released today, covering positions through Tuesday, August 25, showed an extraordinary week of fund buying. Corn's net long exploded to about 317,000 contracts, up roughly 136,000 on the week, funds buying about 90,000 new longs and covering another 45,000 of shorts. Soybeans saw a similar surge, net long growing to about 201,000, up 49,000, while wheat's net short shrank to about 14,000, a swing of roughly 12,000.
• That is one of the largest single week fund buying sprees we can recall. Over the reporting week itself Dec corn gained 35 1/2 cents, Nov beans gained 21 1/2, and Chicago wheat gained 21. In the three market days since Tuesday's cutoff, corn has added another 13 cents, beans another 50 1/4, and wheat another 81 1/2, so the buying has kept right on going.

Have a great weekend!

Clayton and Taylor

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