GRAINS BOUNCE BACK AFTER BEARISH REPORT

Written By Sebastian Frost

MARKET UPDATE

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Overview

The bearish tone surrounding yesterday’s report didn’t last for long. In Tuesday's audio we said that if the report is negative, the effects likely wouldn’t last for long.

As grains rally following yesterday's USDA report where we saw a sell off across the grains. Today corn and beans essentially erased all of yesterday's losses with the bearish report.

There were a few things supporting our markets here today. Firstly, we had the US dollar drop to fresh 14 months lows, breaking some key support. Most of this was due to the inflation numbers yesterday coming in not as hot.

Secondly, we had the newest drought monitor updates. They showed some slight improvements, but not as much as the trade was likely expecting. The midwest actually saw hardly any improvement. More on this later in today's update.

If you missed yesterday's report recap you can listen to it here.


Today's Main Takeaways

Corn

Corn follows the bean market higher, as we erased all of yesterday's losses. Bouncing back and closing above $5 after trading at it's lowest levels since 2021.

As mentioned, the newest drought monitors came out. We had some slight improvement nationally for corn areas experiencing drought. As the areas improved by 3% to a still pretty large 64%.

Here is a state by state breakdown. 8 of our top producing states still sit over 50%. The top 3 are all 86% or higher.

We have made many 2012 comparisons in the past. Yes, this year isn’t anything like 2012. But it’s not like 2013 either. It is a year of it's own.

We simply don’t have the heat we had in 2012. But in 2013, there was zero drought.

Actually, the Midwest is only 4% behind 2012 in terms of drought. Take a look at the 3 years.

Yesterday the USDA came out and they did decrease yield, but not as much as nearly everyone thinks they should have. We shouldn’t expect anything else from the USDA..

They estimated yield at 177.5 which is still 4 bushels an acre higher than last year..

Which doesn’t make much sense given just how much worse are conditions are than last year. Here is a drought comparison to last year.

As mentioned in this morning's audio, it would take some extremely timely and near perfect weather to top last year's yield. Could it happen? Of course it's possible, but not likely. I fully expect to see some more significant drops in the months ahead. Does this year's weather really look like a record yield to you?

So we know yesterday's report was a disappointing outcome for yield but…...

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INCLUDED IN TODAY’S UPDATE

  • Things bulls would like to see in corn

  • Upside target in corn

  • Bean outlook. Is there a bigger demand story ahead?

  • Time to reward the bean rally?

  • Wheat outlook

  • US & Global drought updates

Sebastian Frost
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DROUGHT & DOLLAR ERASE YESTERDAY’S LOSSES