Weekly Update – August 17, 2018

Corn has spent most of the last week trying to get back what we lost on report day despite headwinds from the other commodities and beneficial showers falling over big portions of the Midwest. The crop is maturing at a near record pace and we will see crop tours starting over the next couple weeks. The report itself was not that bearish or unexpected for corn but for that day, it just could not overcome the washout in the grains and oilseeds. USDA gave us a big yield, but the market has priced in a big yield. We have a record yield but are still projected to have a 500 million bushel drop in ending stocks and the world balance sheet is projected to be the tightest since the 70’s. Demand is our savior! The market has been able to absorb these huge crops. Exports have stayed very strong and progress is being made on a trade deal with Mexico. The market is going to see some pressure when harvest starts but the world cannot afford to lose any acres in South America who will be planting soon so we feel the downside will be limited. Historically it is very rare to make new highs in Aug/Sept with a big crop looming, but we feel downside will be very limited.

Harvest has been a hit and miss with the rains that have been across the state within the past week. Basis has started to weaken as the bushels come out of the field and make their way to the end users. Please call us and lets talk over fair numbers before deciding to pull the trigger on anything, that is what we are here for.

Soybeans have had a very volatile week following USDA’s surprise yield. The market was expecting an increase but thought that USDA would wait further into August before raising it that much. This begs the question of whether the soybean crop can now get even larger if Aug weather remains non-threatening. Soybeans have two major forces pulling them down: number one is the trade spat with China and number two is the size of the US crop. August weather makes bean yield and there is 1 to 2 inches or rain forecast for much of the Midwest next week. The rains from the last several days have left big dry spots in many large producing areas, but if the forecast for next week is realized it will alleviate many of the areas that were missed. The market rallied 25 cents overnight on rumors of low level talks resuming between the US and China. Any progress on trade will be very supportive to the market as we saw several weeks ago with a 40 cent rally on talks. A resolution on trade will be very supportive and likely propel beans back over $9, but even if China resumes normal trade activity the US will still have a very large building of stocks this year if the projected yields are realized.

Wheat has had as rocky of a road as soybeans since the report. USDA did not drop the foreign crop estimates as much as the market had anticipated and the funds had built a significant long position and delivery approaching in the Sept contract has been weighing on the market. Fundamentally the picture looks better in wheat than it has in quite some time. We have significant production issues in the Black Sea region, Europe and Australia. Egypt has made some large purchases this week signaling a concern about their production. However, as the US dollar has rallied it makes the US wheat less competitive. However, exports this week were well above expectations. The building currency crisis in Turkey is also very concerning to this market. World production estimates continue to drop and should provide underlying support. Get orders in for new crop wheat if you are thinking about planting!! Even if you want to work it at $6.50 or $7.00, have something working! Two weeks ago the market rallied 40 cents due to a facebook posting by an Eastern European minister but by the close had given back most of the gains once his comments were clarified. Anyone that had an order working in that range got filled!

Cotton market was very surprised by USDAs US production estimate which was well above expectations. With a very large speculative long position in cotton, the market was ripe for a major round of fund selling. Adding fuel to the fire was late season rains in Texas, which will be of debatable help to dry-land cotton this late in the season. Additionally weighing on cotton this week has been strength in the US dollar and the building currency crisis in Turkey. Turkey has been one of the top five importers of US cotton in recent years. Exports had remained strong through the summer which is counter seasonal, but fell off this week. The forecast for much of the cotton belt calls for below normal temps and above normal precip which does not help late season cotton with a lot of bolls open. Market seems to have found support on that and rumors of US and China coming back to the table to talk. Patience on cotton.


Precip estimates for the next 7 days