Corn and soybeans continue to work lower, challenging recent support levels. Since the weather scare a few weeks ago, the weather has turned close to ideal for much of the Midwest. The funds still have a very large short position but have bought back some positions. The fund buying was offset by farmer selling as the Midwest farmers have been major sellers of corn in the last few weeks as many now see a big crop in the field and need to make room. Corn and soybeans saw a decent bounce Friday and Monday despite turmoil in the outside markets with stock indices falling into correction territory. An explanation for that is that the funds needed to take profits in their commodity positions to make margin calls on stock positions that had lost value. The commitment of traders report Friday after the close will show us how much of their positions they have bought back. The question we are all trying to get a handle on is whether the good areas are good enough to offset the trouble areas.
The fundamental news this week other than the weather has been mostly supportive. Corn exports were well above expectations for old crop but on the lower end for new crop. Soybean sales though were well above expectations for both old and new crop. Brazilian bean values have risen to the point that the US has the cheapest beans in the world and we are seeing the results in the export numbers. Ethanol production was off from last weeks record but was still very strong and well above the pace needed to reach USDA’s estimate. The market had expected another increase in ethanol stocks but they declined indicating very strong demand. Low prices stimulate demand.
The August monthly WASDE report is a big report normally and this year it will be even bigger. On the August report USDA will give us their first actual yield estimate. The yield we have been using so far is just a statistical trend yield. The yield they give us Monday will be estimated using farmer surveys and satellite data. Previously we have had to wait until September or later before USDA updated planted acres using FSA and RMA data and prevent plant. This year they announced they received the data early enough to process it for this report. Acres have been a big market mover this year starting with the bullish prospective planting report which started the spring rally. The June acreage report showed 1.5 million more acres of corn than expected which accelerated the selloff. Everyone expects USDA to raise yield on Monday but the effect of that on the balance sheet will be reduced if acres are also reduced.
The report comes out Monday August 12th at 12 noon Eastern. It will probably set the direction of the market for the next few weeks so stay tuned.