Corn follows soybeans higher, while wheat tests support

Grain & Oilseeds Report

Corn: Overnight, corn followed the bean market higher, as it has done recently but when beans gave up a little ground, the corn gave up much more.

This market has been able to follow beans on the thought that there was still a risk for early frost this year. Coming in Tuesday morning, there were still no forecasts for an early frost and some claimed that threat was off the table. Without frost risk, trade is still assuming that dryness will not affect the corn crop anymore as the crop is too far advanced. If the dryness causes plants to die before black layering, then there is a case that test weight can be lost, which is something trade will not likely focus on for some time yet. A scenario where test weight is lost but not bushels would be one where we need to look back at 2009 to predict future trade. In that crop year, the sizable bounce was not seen until the start of October.

On the technical side, the December corn filled the chart gap left at 474 ½, which leaves next support at 463 1/2 and resistance at 508 1/4. When corn closed the December settled almost right in the middle of the trading range during the month of August. Trade was looking for a 3% drop in the GTE rating, which is exactly what was seen.

Going forward, we should still look at bean bounces to offer the best short-term support but with frost risk now off the table, that support is likely to be even less than it was last month…Ryan Ettner

Soybeans: Bean market bulls came out of the long holiday weekend on a tear as the market gapped sharply higher on the open. A bullish spin of the weather was given credit for the strength.

This strong move higher was capped when the market bulls were not able to take out the contract high that was scored last week. The market tried twice in the morning to take out the contract highs, but both attempts failed. That led to some profit taking as the market closed 21 ¾ off the session highs. This close was still 29 ¼ higher for the day so, as a whole, soybean bulls had a pretty good day.

With the heat and lack of rain that the crop has experienced over the past week the general view of the trade is that the crop is getting smaller not bigger. Roughly 40% of the soybean crop could be considered under drought stress after this weekend’s rain events. With this week’s forecast calling for a generally warm, dry trend we would anticipate the crop will continue to shrink back this week.

The trade was anticipating crop ratings would drop 3% to 5% due to the weather. The report released after the close showed that the good to excellent ratings fell in line with expectations coming in with a drop of 4%. The USDA now estimates that 54% of the current crop is rated good to excellent. The five-year average for the good to excellent ratings is 55%. The five-year average, not including last year’s poor crop ratings, is 61% good to excellent. With a hot, dry forecast in the works this week we would look for ratings to drop again next week.

Many in the trade are now talking that the national bean yield will fall below 40 bpa on next week’s WASDE report. Allendale will be releasing the results of our 24th annual yield survey Wednesday morning at 7:30, Chicago time. If the crop would drop below the 40 b/a threshold this year’s production would only be a shade above last year’s 3.015 billion crop, using the USDA current acreage estimate. If you lower acres due to prevented plant this year, crop will be smaller than last year. We are looking for planted acres to drop 1 million when the USDA is done revising its data.

We don’t anticipate the market to fall out of bed until the driest areas of the country get rain and stabilize the crop. The crop definitely is getting small not bigger after this week’s heat and lack of rain. We would not recommend fighting the market’s upside momentum until the current weather pattern changes. If the pattern stays put and the national yield drops below 40 bpa, a price move above the $15.00 level is not out of the question as the market would have to rally to ration what beans we have left to sell…Jim McCormick.

Wheat:  

  • Weekly wheat grain inspections came in at 36.41M bu, which is much better than expectations ranging from 24-28M bu.  Last week’s inspections totaled 31.27M bu.
  • Japan is seeking 116,350 tonnes of wheat in a tender ending September 5th with 67,923 tonnes being of US origin.
  • Turkey overtook Egypt as Russia’s leading importer of wheat in July as Egypt is now looking to Romania and Ukraine for cheaper wheat supplies.
  • Egypt’s GASC announced they purchased 355,000 tonnes of Black Sea wheat over the weekend for mid-October delivery.
  • Analysts estimate Brazil HRW and spring wheat imports could reach 3-4 mmt due to a poor Argentinian wheat crop.
  • December Minneapolis wheat tested and held support at 723’4 today, but the next move lower will result in a new contract low… Alex Bassett
About the Author

Ryan Ettner is a registered commodities broker and grains analyst at Allendale, Inc. Steve Georgy is a Sr. Broker/Manager at Allendale, Inc. Jim McCormick is Senior Broker/Manager at Allendale, Inc. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com

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