• jcrist18

Market Thoughts 08.14.22

September corn gained 29’4 to finish the week at 639’6. Futures finished strong, closing within a penny of the daily high and posting the best weekly close since June 21st. September beans gained 71’6 to close at 1535’0, the best for that contract since June 13th. September spring wheat added 33’0 to close at 919’4; the best close wheat has managed since July 5th and somewhat impressive considering it happened at the start of harvest with strong early yield reports.

The USDA’s August WASDE report was released on Friday included the first attempt at objective yield analysis for 2022 corn and soybeans:

  • CORN HIGHLIGHTS: Yield reduced 1.6 bu/acre and harvested acres down 140k after the NW Corn Belt resurvey. The result of those changes was 146 million bushel decrease in production with 22/23 ending stocks now estimated to be just 1.388 bln bu with Stocks to Use of just 9.8%. Despite landing near the middle of trade expectations, this was decidedly bullish for corn, more on that below.

  • SOYBEAN HIGHLIGHTS: Beans leaned bearish with yield increasing by .4bu/acre to 51.9 and ending stocks increasing 15mln to 245 million bu despite a decrease in harvested acres.

Initial trade response to this report focused on bean numbers and was quite bearish in the immediate aftermath. Beans at one point were 38 cents lower, dragging corn and wheat down too, before reversing course 45 minutes or so after report. Futures losses for most of the first hour post-report had us confused and a little uneasy. First because our Price Signals mere hours before the report gave very low odds of a bearish report and our Price Signals have only been directionally wrong once on a USDA report (This year’s June 30th Stocks/Acres report!?!!) since they became public almost two years ago.

But also because the news for corn is decidedly bullish. Consider that the USDA has now lowered yields twice before even getting to the September report that includes plot evaluations. There is a strong precedent for further yield reductions when this is the case. And even the latest modest reduction required 75 mln bu of arbitrary demand cuts just to solve for minimally acceptable 10% stocks/use on paper. The satellite crowd continues to suggest much lower yields and there is just enough lingering weather uncertainty/problem areas to have traders geared up for that to be the case in September’s WASDE. Add to it improving economic news and very low probability of a 2008-style market collapse and owning grains starts to make sense again for the managed money crowd. We suggested a week ago there was little probability of lower prices (than the lows from last week) ahead of harvest – almost certainly correct and not particularly gutsy – but we were also skeptical of a major move higher. The news this week however and market response to it has significantly increased the probability of a continued move higher.

SEPTEMBER CORN DAILY CHART – nearly perfect bullish Head and Shoulders pattern

Chart Courtesy of Matt Campbell/StoneX - The August resurvey actually showed decreases in North and South Dakota bean acres. This fits observations from our client base across the Dakotas but was certainly supportive as many were expecting big increases; with the final acres number coming in below the low end of trade estimates.

18 views0 comments

Recent Posts

See All