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

It is very hard to find something positive to talk about with this market. The selling has been relentless and every time we think we see something positive, the market quickly undoes it a session or two later. Last week, we rallied on a high pressure ridge bringing heat and dry weather to much of the Midwest. Then the market sold off as the high pressure ridge shifted west and ridge riding storms brought rain to big parts of Illinois and Indiana and other parts of the Midwest. There was also selling pressure from farmers making sales. There is still a tremendous amount of old crop bushels left to price which has served to stifle any rallies before they could build much steam. Other than the short weather scare, the funds have not seen any reason to abandon their record short positions in corn and beans. 

Weekly ethanol output was expected to be lower than last weeks record level but it was actually higher, setting a new record. Low prices are stimulating demand. Ethanol stocks were also higher but not at a burdensome level yet. Exports were a mixed bag with old crop soybean sales much higher than expectations but new crop sales were right in the middle of the range of expectations. Wheat was disappointing and corn was disappointing on old crop but right within the middle of the range on new crop. 

We are quickly approaching the big August USDA report which comes out Friday, August 12th, at noon Eastern. This will be USDA’s first crack at an actual yield estimate. This differs from the yield we have had on previous balance sheet releases which was just a trend estimate. The yield estimate on the August report will come from famer surveys and satellite data. So a change in yield from the July to the August report will not signify that the crop has gotten bigger or smaller from the previous report. It will represent the shift in methodology used to estimate it. Also on the August report, USDA will incorporate FSA acreage data so there may be an adjustment to the acreage on the report as well. Historically they have not been able to use FSA data this early in the year so it was incorporated on later reports. This ups the stakes for the August report. The market is already pricing in higher yield for both corn and beans. The big question is whether the good areas can make up for the trouble spots. The market thinks this question is answered with a resounding “yes.” Only time will tell.