Daily comment for Wednesday, August 26

Another round of Chinese soybean buying kept demand in the conversation too, with our own math now putting China's purchases past the halfway mark of their 25 million metric ton commitment for the year.

Outside markets were mixed, crude firming modestly while the Dow eased a touch.

Key Points/Developments

Technicals: Dec corn added 13 cents to 536 1/2, clearing the 528 to 530 resistance we flagged yesterday with room to spare. The next level up is the 545 area, while support falls back to 530, then 524, then 510 to 512.

Nov beans jumped 28 1/4 cents to 1266, closing within a couple cents of their highest level in more than three years, which now stands as the immediate hurdle overhead. Support stacks up at 1250, then 1238 to 1240, then 1222.

Spreads: The Sep/Dec corn spread narrowed half a cent to 22 1/2 cents, while the Dec/Mar corn spread we are now tracking narrowed three quarters of a cent to 14 1/4. The Sep/Nov bean spread widened to 11 3/4 cents, and the Nov/Jan bean spread widened slightly to 14 3/4, both new crop months still holding a premium.

Weather: TStorm left its ratings unchanged again today, corn, soybeans, and winter wheat all still neutral. Seasonable weather holds through Friday before temperatures soar into a heat wave this weekend that could last at least a week and make the next two weeks among the warmest in about 50 years.

A cool front looks probable to break the heat around the first week of September, though rain through that stretch looks thin, with better chances riding the northern edge of the heat than near its core.

Markets/Trading Implications

We came into today thinking a push to fresh highs might finally spark some selling, or at least the start of a real consolidation, after the run this market has already had. Instead, headlines that Russia is escalating the war sent corn, beans, and wheat right through those highs, with wheat settling limit up. Given how impulsive today's move was, we would be careful calling a top here in the short term, even with some real bearish divergence building on the charts and the fund buying still looking more like short covering than fresh money.

That is exactly why we would rather use this strength now than wait around trying to pick the exact top. We have been patient about pushing out new sale recommendations, and that patience has paid off given the run we have seen, so for anyone behind on our recommendations, or behind on what needs to move over the scale, we would use this move to catch up rather than hold out for a better price. We will, however, remain patient in advancing past 40%.

We have leaned bullish for months and still think this market has room for higher highs down the road, but we would expect that to show up more once a poor crop is actually confirmed, and even more so if this winter brings a real El Nino event to South America. It is worth remembering the soybean carryover is still projected near 300 million bushels, and unlike corn, private estimates have not yet called for much of a cut there.

Every situation is a little different, so give us a call and we can talk through where you stand.

Other Notes

• Fresh reporting today says Russia views its peace talks with Ukraine as a dead end and is weighing a real escalation, including intensified ballistic and cruise missile attacks on Kyiv and infrastructure in other Ukrainian cities, with Russian plants said to be producing as many as 300 missiles a month. Ukraine reportedly has only about a tenth of the air defense interceptors it needs, which raises the stakes heading into winter.
• USDA confirmed another 330,000 metric tons of soybeans sold to China this morning, taking their tally to somewhere around 11.3 to 11.5 million metric tons by our count, with a pace of about 750,000 metric tons a week needed from here to reach the 25 million ton goal by year end.
• Broker estimates suggest most of this week's fund buying has come from short covering rather than fresh money, something that would normally give a rally like this some pause.
• Energy markets have their own tight supply picture right now, with US crude stocks including the reserve running about 13 percent behind a year ago and gasoline supplies at their lowest level in a decade.

Static Notes

• Commitment of Traders report released Friday, August 21, covering positions through Tuesday, August 18, showed funds piling on even more length across the board. Corn's net long jumped to about 182,000 contracts, up roughly 56,000 on the week, funds buying about 9,000 new longs and covering another 47,000 of shorts. Soybeans saw a similar swing, net long growing to about 152,000, up 43,000, while wheat's net short narrowed to about 25,000, a shift of roughly 8,000.
• That buying came right into a week that was already rallying hard, not against it. In the six market days since Tuesday's cutoff, corn has added 48 1/2 cents, beans nearly 50, and wheat 66, so the buying has only intensified.

Have a nice evening!

Clayton and Taylor

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