Soybeans seek success

Weekly Grains Outlook

Corn (CBOT:CU14)

Corn conditions came in unchanged at 73% Good-to-Excellent. But, today’s report will be the most important factor to be watching and the expectations are as follows:

Old crop traders:

  • Trade is looking for old crop carryout to go from 1.246 in July to 1.240 today

New crop traders:

  • Trade is looking for new crop carryout to go from 1.801 in July to 2.005 today
  • Trade is looking for yield to go from 165.3 in July to 170.1 today
  • Forecasts continue to offer light/moderate rains days 6 – 10 and light rains 11 – 15 day
  • Temps look to turn 2 – 4 degrees above average for most areas days 6 – 15

Bulls:

  • A short term bounce can be found if yield is increased but stays short of the 170.1 expectations today
  • Even if yield trade keeps the 173 mindset at the end of the year it is still possible to see a 1 day bounce if below 170
  • Aggressive buying should still hold off until moving into the low 360′s
  • With the Pro Farmer tour being next week, bulls can buy even more aggressively right now looking for an entire week of support next week
  • Pro Farmer does not need to find horrible fields to be slightly bullish next week, just fields that suggest a sub 173 potential

Bears:

  • Bears have to continue feeling that on the long term they are in charge and can still sell any bounces
  • It could be best to hold off for even better bounces during the Pro Farmer tour
  • Any move into the 370′s for almost any reason still has to be considered a sale while adding to those shorts any level higher


Soybeans (CBOT:ZSU14)

Another volatile day was had in the soybean pit as trader’s positioned themselves for today USDA report. The August bean contract continued to find strength from the tight cash market in the Eastern Corn Belt. Open interest in the August contract was down to 2,500 contracts coming into today so it does not take much to push this contract one direction or another. We look for the volatility in this contract to be high until the contract goes off the board on Thursday.

The new crop bean contract came under pressure as better rain that expected was seen in the Eastern Corn Belt over the weekend and there is more on the way for next weekend. With trade looking for the USDA to raise the size of this year’s crop today some in the trade were no doubt selling before the report. Adding to the downward pressure was expectations that today’s crop rating would show no declining after decent rains fell last week. A 71% good to excellent rating would put the crop at 3 highest rating wise for this time of year (actual number was down 1% to 70% good-to-excellent, still the third highest for this week).

The average trade guess for today's report is for the USDA to put the bean crop 3.823 billion bushels with a nation yield of 45.583 bu/acre. In July, the USDA put the national bean yield at 45.2 bu/acre and put total soybean production at 3.800 billion bushels. The average guess for old crop ending stocks is 136 million bushels and the new crop is guessed at 414 million bushels.

Allendale is looking for the national bean yield to be 46.1 bpa with total production to come in at 3.860 billion bushels. We are estimating old crop ending stocks to come in at 134 million bushels and the new crop ending stocks to come in at 434 million bushels. Historically, in the past 21 years, the USDA has raised the soybean yield in August only 5 times.

If we average the percent increase we saw those years and apply it to this year it would suggest we could see the USDA bump the yield to 46.4. With the bulk of the Midwest seeing decent August rains, we continue to view price rallies as opportunity’s to sell. We would recommend have resting orders above the market for today’s report for traders/hedgers that want to sell if by chance the “algo” traders take todays numbers to be “bullish”…

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