Prices eased back this week on corn, soybeans, and wheat as harvest selling put pressure on the market and the speculative buying slowed. Chinese purchases for export may have reached their quota as today marks the second day in a row that there has not been a new export sale announced. Prior to this, there had been a new export sale announced every day since September 8th. Harvest weather looks to be almost ideal for the next 3 weeks with very little rain forecasted and moderate temps. On Monday corn was 8% harvested vs 10% on the 5-year average and that should advance to 15-18% by this coming Monday. Soybeans were 6% harvested vs 6% average and they likely advance to 17-18% by Monday. It’s still too early to determine a trend, but so far what we’ve heard it sounds like corn yields are very good and soybeans are average to slightly better than average in most areas. The USDA will be out next Wednesday at 11 am with the Grain Stocks report which will tell us final ending stocks and carryover for the 19/20 crop year. This could give the market some excitement as it compares recent export sales to ending stocks numbers and tries to estimate any changes to 2020 production. South America has started planting their next crop with about 15% of the first corn crop planted so far and beans will follow in 2-3 weeks. Traders will be watching for US yield reports and South America weather in the coming weeks.
December corn was down 13 cents this week to $3.65 after not being able to make it through resistance at $3.80 last week. Surprisingly December corn didn’t actually reach $3.80, stopping just shy at $3.7925 on Friday and then falling below the 20 day moving average yesterday and finding support at $3.63. With the seasonal trend lower for the next 3-4 weeks and the bulk of harvest dead ahead it would not surprise if the market drifted back towards $3.45-$3.50. There is an open chart gap at $3.45 from August 24 when the market started to rally and most of the time the market will try to fill that gap before it moves on to whichever direction it wants to go. It doesn’t have to do this and additional bullish news could push us on higher, but the combination of harvest, slowing export sales, and large ending stocks would certainly make it look possible for it to drift back lower. The cash market is actively looking for corn and basis levels have been improving the last 2 weeks. Corn harvest is slow so far as corn has been slow to dry down and many are cutting beans that are ready. This is making for some very good quick ship premiums and 5-10 cent better basis levels even for October at this point so if you have corn that will be ready or at least at 18-19% or under that you want to take to town we should look at locking in these basis levels and negotiating moisture discounts.
Soybeans fell 41 cents this week to close at $10.02 in November after peaking last Friday at $10.46. The soybean market has fallen back to support around the $10.00 mark and traders will be gauging whether this is a correction ahead of a stabilizing or possibly higher market or if this is the start of a bigger correction. The funds were long 211,143 contracts as of Tuesday and they have likely sold a little of their length this week, but there remains a lot to go depending on what they decide to do. New export sales have slowed the last 2 days and everyone will be watching to see if that resumes next week or if China is done for the time being. We could see more of a correction if buying is done, but the market probably won’t completely sell-off until more is known about how South America’s growing season goes. The basis levels should remain strong either way as there is a lot of demand to fill now after all of the sales. Soybean meal and oil are both seeing good demand and prices are up which will create more demand at the processors. We’ll see the export markets, rail, and river, competing with processors through January which is when the bulk of the export sales are for currently which will make for very strong basis levels to sell into. We have seen basis for harvest improve about 5 cents this week and basis for Nov-Dec is up 5-10 cents and should improve more after harvest which will pay us to store beans. There is no carry in the futures market so once we get the basis improvement into Dec/Jan we need to have beans sold as it will not pay you to store any longer.
Today’s cattle on feed report is attached and appears to be bearish. The On Feed and Marketings came in slightly higher than expected and the Placement rate was much higher than expected at 109.2% of last year. Monday’s open is likely to be down sharply especially on Feeder cattle and Live cattle will follow as the marketing rate should be higher on Live cattle in 4-6 months as these cattle finish. Once the market finds support the big driving factor for prices will be cash trade and demand. Cash trade had finally started to work higher after several weeks of lower sales with trade yesterday up $1-2. Boxed beef prices were up $1.61 to $217.48 on choice and select was up $0.14 to $207.74 which was a 2 week high. Packer margins remain strong and they will look to use this break to buy cattle cheaper and with production back to normal levels a sell-off should find demand to help stabilize prices. The seasonal trend on cattle is for them to slowly work higher into the end of the year starting in early to mid-October to fill holiday demand. We’ll see what the market does early next week but this should be a good opportunity to sell puts below the market to add premium to cattle we are waiting to market and then hopefully keep that premium and sell the cattle when the market rebounds.
Have a good weekend.
John Lenhart