AgResource Daily Farm Marketing Advice for Friday: 1/ No new advice.
The CBOT been stronger than producers or traders expected as funds have been covering shorts with November soybeans rising above key resistance at $9.80. The rally above the 200-day moving average (and above a prior high) in November soybeans confirms a price trend of higher highs and higher lows. That same positive trend is noted in wheat, but not corn. Corn is holding in a tight range just above contract lows and has not been able to forge higher highs or even higher lows. US corn export demand is struggling and yields are coming in at higher than expected levels.
However, the corn short trade is crowded and the rising feed wheat market has suggested that world feedgrain trade will be filled mostly with corn until Southern Hemisphere wheat is available. Corn lacks a demand story.
Pre-weekend harvest hedge pressure is expected with harvest activities in full swing across the southern half of the Midwest. With 80-85% of the US corn and soybean harvest ahead, it’s doubtful that bullish CBOT trends can be sustained without new confidence of reduced US corn and soybean yields. The extreme variability in existing yield data makes that determination difficult.
CBOT brokers report that funds have bought 9,000 contracts of soybeans, 7,600 contracts of corn, while selling 1,500 contracts of wheat.
The rally in the USD has not been able to be sustained! The USD’s close for the week is disappointing in the background of this week’s US Central Bank hawkish action. The US dollar will have to hold its recent lows or uncover another round of selling. ARC research maintains that it’s the rising GDP rates of emerging markets which is helping to pressure the greenback amid the US political disarray. The weaker US dollar helps pressure farm producer profits overseas.
The USDA announced the sale of 190,000 MTs of US soybeans to Mexico for the 2017/18 crop year.
Moisture levels of corn and soybean crops throughout the Midwest are dropping quickly (some agronomists argue .5-1.0% per day), and E and C Midwest harvest next week will be active next week. By September 30th, some 30-35% of the Midwest corn and soybean crop could be under cover.
Midwest farmers are not selling much new crop grain across the scales as they hope for higher prices. Farmers are filling existing contracts, and then storing as much grain on farm as possible. Most elevator managers argue that it’s the last 15-25% of the harvest that could produce the most cash selling.
The South American weather forecast remains arid across Brazilian crop areas north of RGDS for the next 10 days. The GFS keeps trying to argue for better rains in the 10-15 day period, which needs to be confirmed.
Midday GFS Weather Model Forecast Update: The forecast is little changed from the overnight run with moderate to heavy rains slated to drop across the NW Midwest and the W Plains from a stuck Ridge/Trough pattern. Rainfall totals are estimated in a range of 1-3.50”.The dry E Midwest will continue to see limited rainfall with active harvest expected. Rain potential for the E Midwest looks to range from .1-.6” into the end of the month. Hurricane Maria looks to hold off shore and not impact the US. Temps average much above normal with highs in the 80s to mid 90s for the E Midwest. Some record highs are likely this weekend with cooling starting late next week. 1-5 day (top) and 6-10 day (bottom) precip are below, which make clear the coming pattern shift to complete dryness across the Midwest.
AgResource Market Comment: The soy market is most sensitive to even modest yield changes, and so until harvest begins in earnest, we expect both the bulls and bears to struggle for leverage. Our work suggests lows are in, but that choppy/sideways trading is mostly likely through early fall.
