Daily comment for Tuesday, September 8

A lack of flash sales, moderating weather conditions (which has less market effect every day), and profit taking from the record long funds were the main negatives, and prices ended mixed.

Traders are looking forward to Friday's USDA Supply Demand report which will be taken very seriously by the trade not only because the crops are nearing maturity, but the yields will be estimated using more intensive field testing than previous reports.

By the close, December corn saw its lowest settlement in almost two weeks, while November beans settled at their second highest price in over two years (bettered only by 1 1/2 cents one week ago).

Outside markets saw higher crude (new contract high) reacting to further war strife and lower stocks.

Key Points/Developments

Technicals: Dec corn closed lower for the fourth day and momentum indicators continued to sag. We see support at 527-530, 510, and 490-492. Amazingly, Dec corn remains 50 cents above its 50 day average, even after pulling back 16 cents from its contract high set last week. Resistance is at 540-542 and 550. Nov beans remain in a very tight range for the past week with support at the bottom of this range near 1300-1306, then 1270 and 1250. November beans are one dollar above their 50 day average. Resistance is seen at the top of the recent range from 1321-1324 and then 1340.

Spreads: The Dec/Mar corn spread was unchanged today at 15 1/2, only 1/2 cent from its widest trade. The Nov/Jan bean spread widened by one cent today, closing at 15 3/4, only 1/4 cent from its widest trade. Both of these spreads are offering very attractive rollover opportunities for those with hedges or HTA's in the front months.

Yield update: The USDA estimates from the August S&D were 180.7 and 52.7, and they are widely expected to lower both of these on Friday. The average trade guesses for yields are 178.1 for corn and 52.4 soybeans. We will provide estimates for the other data points in tomorrow's letter.

Weather: TStorm upgraded their global crop condition estimate for both corn and beans over the weekend to Neutral (from Slightly Unfavorable). Today's summary comments:

Heat generally continues for the southern third to half of U.S. corn and soybeans for 5 to 7 more days, while northern areas are cooler as cool fronts occasionally flow through heat. The central U.S. probably turns considerably cooler around one week out when a stronger cool front passes, especially with northward extent.

Some t-storms focus from KS-NE through the southeast two-thirds of the Corn Belt into Thursday as a cool front passes, followed by higher coverage of t-storms over a five-day period starting Sat.-Sun. as cooler air starts to become more dominant, which should start to improve soil moisture for upcoming HRW and SRW wheat planting.

Markets/Trading Implications

In spite of the strong night performance, today's corn and soybean trade was pretty uneventful as the trade waits for further yield reports, particularly from the USDA on Friday. Funds remain at or near record longs in total grains, and although this might make these markets more vulnerable to sharp correctional selloffs, it also strongly implies that they will likely continue to defend those long positions and continue buying until proven wrong.

Between the higher than normal yield uncertainty, the upcoming US visit from Chinese President Xi, continued strong demand, and the upcoming expected historically big El Nino in South America, these are big positives which for now are likely to continue to be supportive on any pullbacks.

Please give us a call and we can talk through where you stand.

Other Notes

• No new flash sales announced today. China soybean buys are estimated at 11.5 to 12.0 million metric tons of US beans secured, roughly halfway to the 25 million metric tons it pledged to take by the end of December.
• Today's Crop Condition report indicated that corn's good/excellent rating dropped 1% to 56%. The year ago rating was 68%. Corn harvest is 5% complete. Soybeans came in at 58%, unchanged from last week and compares to the year ago rating of 64%
• China confirmed it will bring a delegation of CEOs when President Xi visits the US on September 24, with agriculture and non tariff barriers expected to be on the table.

Static Notes

• Commitment of Traders report released today, covering positions through Tuesday, September 1, showed funds still adding aggressively. Corn's net long grew to about 431,000 contracts, up roughly 55,000 on the week, funds buying about 28,000 new longs and covering another 27,000 of shorts. Soybeans' net long grew to about 241,000, up roughly 43,000, while wheat flipped from a net short of about 14,000 to a net long of about 15,000, a swing of nearly 29,000 and its first net long position since late April.
• Over the reporting week itself Dec corn gained 22 1/2 cents and Nov beans gained 80, so that buying came into a market that was already climbing hard. In the three market days since Tuesday's cutoff, though, corn has given back 9 1/4 cents, beans 8, and Chicago wheat 48 1/2, which means all of that reported length is measured within a few cents of the highs of the move.

Have a nice evening!

Clayton and Taylor

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