MARKET UPDATE

Futures Prices Close

Overview

Wild day across the world with one of the biggest equity sell-offs in history. Equities got smoked. Stock market fell hard. Cattle sold off. Japan's stock market collapsed. Yet, grains showed resilience.

Grains panicked early with the rest of the markets, but rallied off the early pressure with corn +11 cents off it's lows, beans +25, wheat +20.

Here is a look. Grains were the strongest market today while the world was panicking.

S&P 500 Heat Map Today

So what happened in the outside markets?

It was basically a Black Swan event. The first since COVID in 2020. Friday the jobs report sparked fear of recession. As July non farmpayroll showed less jobs and the unemployment rate jumped from 4.1% to 4.3%.

Japan raised their interest rates by 1/4 a point. This caused their stock market to crash -13% last night. The greatest drop since 1987.

It took Japans stock market 35 years to reach all time highs. It has dropped nearly -30% the past month.

Japan Stock Market

To add on to this, there was news of Iran vowing to missle Israel.

All of this caused the VIX (A stock market fear index) to soar to it's 3rd highest level ever. Only behind the 2008 crash and 2020 COVID crash.

Why didn’t this hurt grains?

A recession would 100% hurt grain prices. Soley because recessions kill demand. Less spending, less consuming of grain.

However, we are not in a recession. This was simply a Black Swan event. Grain prices are also heavily depressed compared to other markets. The real risk is in markets such as the stock market and cattle. Markets that have outperformed the grains.

This was a risk off day where hedge funds were liquidating their long positions.

Hedge funds are RECORD SHORT grains. So this equity sell off was somewhat friendly for grains. Long term a real recession would not be friendly. If funds would have been long grains, this probably would’ve pressured them to. But the funds don’t have any risk to the downside in grains being short.

I do not believe we are headed to a recession. Goldman Sachs said they believe there will be a 25% of a recession the next 12 months. Back in 2022 they also said there was a 96% chance for one.. we didn’t get one.

This correction across outside markets was not that crazy. The S&P 500 is still up +10% YTD.

Feds WILL cut interest rates. Likely 2 to 4 times this year. The data says there is a 90% chance they cut rates 50 bps by September. This would be friendly for grains. As it will pressure the US dollar which will help US exports and create more demand.

Bloomberg also says that there is a 60% chance we see an emergency rate cut from the Feds this week.

Overall, today was a phenomenal day for the grains, as we rallied off this morning's panic collapse. During this collapse, neither corn or beans took out last week's contract lows either and all grains rallied off their lows.

Let's dive into the rest of today's update...

Today's Main Takeaways

Corn

Corn gets follow strength we needed after closing above that key $4.03 level on Friday. We actually closed above Friday's high of $4.05 (Closing at $4.07) so very positive and optimistic price action. As we have found great support everytime they try to push corn under $4.00.

The funds are currently holding their 4th largest short in corn. However, they were buyers last week.

Corn crop conditions decreased by -1% from last week to 67% G/E, but this was the trade expectations.

Weather from here isn’t a major market mover for corn. So I will go over weather in the soybean section.

Overall not much news for corn today.

I wanted to include this takeaway from analyst John Scheve. He said:

"Everyone is asking if the lows are in yet. With what we know, it is unlikely because:

The low for the year rarely happens in early August
Too many farmers have unpriced old crop corn still in storage
Every rally seems to be met by farmer selling"

Do I agree with John? Hard to say. The low could definitely be in. On the other hand, I wouldn’t be shocked to see another -30 cents of downside.

All you can do is play the cards dealt and get comfortable with early scenario. If you are sold, look at calls. If you are undersold please grab puts for protection.

Looking at the chart, super friendly looking chart. We took out Friday's highs. The first time taking out the previous days high in 2 weeks. Sitting above key support. The chart looks like we are going higher, but we still have work to do. Longer term I see demand leading us higher, but we could definitely go lower first.

I still need to see us close above $4.23 to $4.26 to say for certain that I believe the bottom is in. Until then, if your risk is lower, protect it. If $4.03 breaks, we could still see $3.80.

I mentioned this Friday:

“Going into this report, I am sure everyone is going to be bearish. So I could see grains seeing little bounce going into early next week, then seeing pressure as we head into the report. Just a guess.”

I could still see us pressured going into the report, because everyone will be talking about record yields etc. even though record yields are already priced in.

Dec Corn

Soybeans

Soybeans rally double digits back to back days.

Soybean ratings came in +1% from last week, at 68% rated G/E. However the trade was expecting a -1% cut to 66%. So this could definitely cause some pressure short term. It shows that this recent heat did not do the damage some thought it would.

There are plenty of reasons why soybeans could………

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IN TODAYS UPDATE

Biggest concern with soybeans
How to know the bottom is in for beans
Rumors of China buying?
Is weather a concern?
Wheat carving out a bottom finally?
Targets for wheat
Brutal sell off in cattle

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Check Out Past Updates

8/2/24

GRAINS STRONG WHILE WORLD PANICS