Weekly Market Update – September 19, 2019

Markets find decent follow through higher in spite of unsupportive USDA report last week. Soybeans have taken the lead as China bought 10 cargos of beans last week. It is impossible to interpret all the contradictory rhetoric about whether or not we are getting closer to a trade deal so China’s action means more than all the talk. I am doubtful they would have come crawling to us for beans when they were trying to get the upper hand so we can assume they are out of all other options for beans now. Luckily due to our spring planting issues, we do not need them to buy a lot of beans to tighten up the balance sheet. We are no longer sitting on several years worth of soybeans. USDA on Monday reported that only 15% of US soybeans are dropping leaves compared to 38% on average. Only 95% of soybeans are setting pods! Some of those acres are in the south where they may have time to salvage some yield, but there is also acres in the Dakotas and Minnesota that are going to be a zero. There are going to be some adjustments to either yield or acres, it is just a matter of when those adjustments are made. 

Soybeans for once finally have some hope on the horizon on both the supply side (yield and acre adjustments) and the demand side (China buying cargos). It is too early to matter yet but the market is definitely watching dry weather in South America. If it continues in the next month or so that could be the spark that triggers short covering. Very few beans are sold for 2019 crop, so if you are behind on sales you need to start scaling in at the $9.10-$9.20 range.

Corn has been relatively boring compared to beans as it works to march higher slow and steady. USDA reported only 18% of the US crop is mature compared to the 5 year average of 39%. There is no frost threat on the horizon so far right now and the late season heat may be helping yield in areas that have plenty of moisture. Despite Trump’s promises to fix the ethanol demand reduction he caused, the only announcement is that Trump is backing a plan to boost biofuel quotas by 10% in 2020 (https://www.reuters.com/article/us-usa-biofuels/trump-backs-plan-that-would-boost-biofuel-quotas-10-in-2020-idUSKBN1W11KG). Many analysts are skeptical this will offset the loss of demand caused by the Small Refinery Exemptions (SREs) and are also skeptical if the administration will stop issuing new SREs. There was an announcement of another ethanol plant shutdown, this one in Iowa. Old crop corn is hard to source and trains are not running well. Basis is getting firmer in most of our markets. As poorly as the trains have run, I believe we would have seen some premium quick ship bushels in the last couple weeks if everyone had not been cutting and shipping as hard as they could with the hurricane heading our way.

We are still several weeks away from harvest starting in the Midwest. The early yields should be the best since that was the corn planted on time. Any surprise there will be bullish. South America weather does not matter yet but will soon and it is dry right now.

I will say this every week: Do not sell any posted bids on corn right now. There is push at just about every mill.

Wheat has shown strength due in part to a lot of short covering. There have been significant quality issues in the spring wheat due to wet harvest. Strength in the Russian currency has increased the value of their offers and dryness in South America have also helped support. We have some time before the Dec contract goes into delivery. The market has fallen apart the last few delivery periods. Basis remains firm and lines have died down at the flour mills.

Cotton has made it back into the mid 60’s for the first time in several months. Crop condition ratings are drifting lower with USDA reporting only 41% of the country in Good/Excellent. This looks similar to last year’s 39%. However, last year much more was rated poor/very poor (32%), while this year only has 17% in those categories and the rest rated as Fair. Cotton got some short covering strength as the funds are near record short cotton. This rally could get us to the mid 60’s but to have any hope of much higher, we need more progress on trade.