This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at [email protected] or 843-540-4540.

Friday’s selloff was not enjoyable but a pullback is a healthy part of any price rally. Without pullbacks the market can get overbought and get ahead of the technical indicators (moving averages and strength indices) that are so widely followed by many traders. What we did not want to see was follow through selling after the pullback on Friday. Monday’s trade did not set any records but we managed to get a modest bounce in corn, beans and wheat.

Friday’s trade seemed to be sparked by a selloff across almost all asset classes. The jobs report was disappointing leading to more concerns about economic growth and sparked a broad selloff in stocks and energies. The last few big down days in stocks has resulted in buying in the ag commodities but that was not the case on Friday. The commitment of traders report that came out Friday after the close showed the funds have been big buyers of corn, wheat and soybeans. That shrinks their short positions down from near record but they still hold sizable short positions. There is additional buying coming to the market as end users see value at these levels and if the seasonal low is indeed behind us, they want more coverage on at these levels. Farm selling has slowed now that we are past the Sept contract and the calendar selling has subsided.

We will get a big test on Thursday whether the seasonal lows are behind us. USDA will release their latest production estimates Thursday Sept 12th at noon eastern. They will use satellite and survey data similarly to the August report but will also add objective yield data collected from fields on this report. The bulls hope the trend will continue that the highest yields are now behind us and the crop will not continue to get bigger. USDA can also tweak harvested acreage that will affect production as well as yield. ProFarmer found issues with stands and plant population in corn even in the areas that were thought to be the best. They found record pod counts but there has been a lot of hot and dry weather since then for much of the Midwest. Several private estimates have come out since ProFarmer that also estimated corn yield lower than USDA’s last projection of 183.1 and soybean yield below USDA’s last at 53.2.

Some of the trade this week will be positioning for this report. We already have market expectations released and the market is looking for USDA to trim corn yield by a few tenths of a bushel but possibly raise bean yield by a tenth. However, the market is looking for bean production to be almost unchanged even with a higher yield with a small downward revision of harvested acres. Market looking for domestic carryout to be pretty close to USDA’s last estimate on beans and just a little bit below on corn. Beans still look to have a very comfortable carryout with a lot of cushion but corn is just above the important psychological level of 2 billion bushels. Thursday will be a key day.