Corn: September Corn settled down 7 ¾ cents at $3.63 ½. Corn posted its high in the overnight trade, opened lower and then grinded lower through the rest of the day. For the week, September Corn lost ¾ of one cent while December Corn gained 1 ¼ cent and settled at $3.63 ½. Corn gave back all of the rally we saw Monday and Tuesday as traders took profits and focused on next Tuesday’s USDA crop production and supply/demand report. Funds sold 8,000 contracts today. The 10-14 day weather-outlook remains non-threatening. The average guess for Tuesday’s yield estimate is 170, with the range between 168 and 175. The USDA was at 165.3 in July. Stories floated today on the drought in China hurting their yield with analysts predicting a total production drop from 203 mmt from last year to 200 mmt this year. This may be what has underpinned the recent sales to “unknown”. US corn prices at about 65% the cost of Chinese corn at current levels. Time will tell, but it certainly looks like the US farmer will be more than able to meet that increased Chinese demand. The corn bean ratio for new 2014 crop moved to a new record high, out to 2.98. The funds remain long an estimated 59,000 contracts. Technically, all eyes are focused on $3.61 which has been the low for the move so far for new crop CZ. Upside, bulls cling to the hope of seeing $4.00 corn once again. Hedgers: Make sure you are balanced going into the USDA on Tuesday. Maintain puts for unpriced grain. Re-own ½ of cash sales if you followed our cash sale schedule earlier in this year.
Wheat: September Chicago wheat settled down 12 ¼ cents at $5.49 ¼. Wheat followed corn today, posting its high overnight and then leaking lower all day. For the week, September gained 15 cents for the week, while WZ gained 12 ¾ cents and settled at $5.66. The past 2 weeks have been interesting for the wheat. On July 29th it posted a new contract and 4 year low at $5.18 ½, then rallied 53 ½ cents in 6 days to post a 1-month high on Wednesday. However, in the past 2 days, wheat gave back approximately ½ of that rally. This puts us squarely in the center of the move as we look to Tuesday’s USDA report. The funds remain short an estimated 52,000 contracts and they sold an estimated 4,000 contracts today. US wheat still is pricey compared to other options out there for the end user. Both Russia and Australia prices for wheat are about even. The crop looks good in Australia, overall as well, with average guess there is for a crop of 25-26 MMT, vs the official ABRES estimate at 24.5 MMT. Tuesday’s WASDE should give a clearer picture of world-wide supply/demand for wheat. Hedgers: Maintain put protection for un priced bushels and anything you are looking at storing post-harvest. If you are selling off the combine, make sure you adjust your protection and re-own at least ½ of your bushels. Balanced hedging is the key heading into USDA reports.
Soybeans: September beans gained 14 ½ cents and settled at $11.13 ¾. For the week, September gained 40 ¼ cents, while new crop gained 26 ½ cents and settled at $10.84 ¾. Beans were pulled up all day as August, the delivery month gained 34 ¾ cents but saw a 36 cent trading range. The story for the spot month remains tightness, high basis and zero deliveries. This looks like a definite short squeeze, the type that produces cautionary tales for speculators down the line. The funds came in today short and estimated 12,500 contracts and sold approximately 1,000 contracts today. As for the new crop, the weather remains non-threatening and we saw decent Chinese purchases, as bottom-pickers bought against Monday’s contract low at $10.54. All eyes are focused on prepping for Tuesday’s USDA. The average guess for the yield Tuesday is 45.48, with a range between 44.5 and 47.0 The USDA in July was at 45.2. Hedgers: Make sure you have puts on for your un priced grain. If you made cash sales earlier in the year according to our recommendations, look at call options to replace at least ½ of those sales.
This week we saw some gyrations not only in the grains but in the outside markets as well. The Dow Jones futures contract took 5% off its recent all-time high overnight, dipping down to 16,208, only to rally back almost 300 points from that low as of this writing. The cattle, after climbing like Icarus, apparently came too close to the sun, and have seen 2 consecutive LIMIT DOWN days. Any cattle bears who are still financially solvent after the 8-month $53.00 rally are finally breathing a little easier.
The weather continues to be a non-issue. Usually by now we would have had planting delays, a drought issue, a re-plant story or something to feed a weather-fueled bull market. By and large, 2014 has lacked any of those stories The last arrow it seems the weather bulls have left is the possibility of an early hard frost.
The funds, who started the summer long 250K contracts of corn and long 160K contracts of beans have now had their wings clipped. Currently they are estimated to be long just 60k contracts of corn, short 59,000 contracts of wheat and short 12,500 contracts of beans. The new crop corn/bean ratio moved out to 2.98. We started the year at 2.40. This leads to the question, “How much wider can this ratio move?” Tuesday’s USDA should give us some more information to answer that question.
Have a great and safe weekend.
CER