MARKET UPDATE

Futures Prices Close

Overview

Corn & wheat hang on and end the day green while soybeans continue to sell off following yesterday’s blood bath. Today new crop Nov beans fell to new 3 year lows. Yesterday both corn & beans posted their worst single day losses in over a year.

The culprit for the recent heavy sell off?

First is the hurricane.

It is pushing timely rains up into the eastern corn belt. Illinois, Indiana, Ohio, and Michigan are all going to get good rains. These were the areas that were suffering from dryness.

These are the EXACT areas that needed rain.

I circled the exact same area in the forecast & drought monitor.

It is cool for a few days, then we have some heavy heat coming but the market doesn’t care. All they care about is the rain.

Crop Conditions

The trade was expecting no changes from last week, but both corn and beans improved +1%.

We saw improvements across the board.

These are the best crop ratings since 2020.

Right now, these numbers suggest a trendline crop. HOWEVER, in a wet year like this one, crop conditions aren’t always perfect. Again, these are essentially an eye test. An eye test can’t determine the effects from wet planting, nitrogen loss, root structure issues. These issues pop up later.

But for now, this is what the market trades and it is not bullish today.

Chart Credit: Darrin Fessler

Just for comparison, since everyone is nervous this is a 2014 repeat. Here are comparisons of crop conditions from 2014 and 2010 vs today.

Yes we have great conditions today, but they were far better in both of those years.

Chart Credit: JP Gieseke

The Funds

Next is the funds.

They continue to hammer their selling.

COT data came out yesterday. The funds are short -350k contracts of corn. Which is an all-time record. This number is even bigger today.

Now no they do not historically stay this long for very long, but they are just riding the wave. We will need a shift in supply or demand to change their minds.

When they do cover, it is a massive amount. But there is no telling at what price levels they will decide to do so.

Chart Credit: Standard Grain

Something else to point out, in 2014 the funds were long the entire year. The funds are record short in 2024 and haven’t came close to being long.

We have also never seen the funds not get long at some point during a year. 2024 would be the first if they do not.

Chart Credit: Karen Braun

Farmer Holding

Along with the funds we have the US farmer holding a massive amount of grain.

This is one of the biggest problems we have.

Yes we have rain and the USDA says we have a big crop, but the 3 billion in stocks is the biggest long term issue.

In all reality if you compare the numbers, the farmer holding too much grain is a heavier negative effect than that of the funds.

The funds are short 350k contracts (1.7 billion corn bushels)

The farmer is holding 600k contracts (3 billion corn bushels)

Nearly double what the funds are short.

Another way to look at this is:

Does it really matter if there is all this grain out there if it is not for sale? At a certain point, buyers will have to pay up if farmers refuse to sell. Not many want to sell grain for a loss. But currently the market thinks all of this will have to be sold.

Today's Main Takeaways

Corn

Right now, a weather scare rally is probably off the table for this summer. Typically that window closes about a week or so from now.

The biggest concern long term is still demand.

Supply will be there. Even if we get some supply taken off the balance sheet, we will need demand if we want higher prices.

But that is the silver lining of low prices. They create demand.

Yesterday we sold some new crop corn to China, not a lot, but a start.

Short term, we probably either see chop or a grind lower unless something changes.

Weather is bearish. We are nearing the end of the weather market.

The funds are record short. They will need a reason to cover.

That reason could be a multude of things. First is later this year we see some supply issues pop up. The effects from the wet spring, the flooding, the hail etc.

Second would be demand. New crop export sales are a problem right now. With low prices, we could see this demand pick up fast.

Combine both of those scenarios and we could see a lot higher prices months from now. The question is how low do we go before hand?

Bottom line, it is hard to pick a bottom. We are oversold, but the outlook is bearish short term.

So what do you do?

The farmer and commercials are both holding a lot of grain. The difference is the commercials hedge. So they are able to hold longer than the farmer.

The farmer will have to pull the plug sometime, but nobody knows if it will be here at $4.00 or all the way down to $3.25. Yes if weather is perfect we could easily see another -50 cents of downside or more, especially if demand remains lackluster. I hate making sales at multi years lows in an environment where we haven’t even had the chance to sell above breakeven.

I know some of you hate spending money on protection. But rather than panicking and wondering how low we can go, keep a floor under your corn until you sell it. Especially those that do not have storage.

Look at what happened to anyone who didn’t add protection or make wheat sales on the rally. They gave up the entire $2.00 rally in 30 days.

You never want protection until after we drop.

Short term, we could struggle. Longer term I do believe this will create more demand and pricing opportunities. I just hope that demand led rally doesn’t take another -50 cents of downside to achieve. But that is the risk. So be comfortable.

Charts

We broke into that 2014-2020 bear market territory. So historically this $4 area should offer some support.

If it does not, there was many years where we found support all the way down at $3.18

2024 vs Prior Years

We are still following 2014 thus far.

In 2014 we didn’t find a bottom until $3.18. I do not think that is likely, but anything can happen.

However, as I mentioned above. The funds were long the entire year in 2014. In 2014 we also had far better crop conditions.

For a refresher:

2010: Wettest summer on record. Market didn’t realize the issues until later.

2014: We continued lower the entire year after a bull run from 2010-2012 (which is the possible similarity 2020-2022).

2020: We saw a demand led rally later in the year that lasted a few years.

Funds + Open Interest

Funds all time short. Open interest at a record high. Prices at levels that are losses for operations.

When this turns around, it could happen fast. The question is when?

Bottom line, be comfortable with every scenario.

Give us a call if you have questions (605)295-3100.

Dec Corn

Soybeans

Soybeans drop -50 cents in 48 hours.

Soybean oil went from bear market to yearly highs in 4 days. This was mainly due to short covering, as the funds were holding a historical short.

Today it collapsed, adding more pressure to beans.

Some are wondering why didn’t the recent rally in bean oil help pull soybeans higher?

The simple answer is meal is what matters to crush, not oil.

Bean meal has taken a beating. 3 year lows.

If you are an end user, this is an early Christmas present.

Just like corn, demand is a problem right now.

Our new crop sales are the worst in 20 years.

The USDA says that exports are going to account for over 40% of all demand for beans. Right now exports are awful. So this needs to change.

The market is trying to find levels that create demand.

Just like corn, these lower prices will help create demand.

Soybeans are in essentially the same situation as corn, although we do have a less bearish US balance sheet in soybeans. Which means if we shave some yield off and find demand, we could run out of beans at some point.

But the question is still how low do we go before we find this demand?

Nobody knows. As a farmer, your risk is to the downside. So keep puts for protection under unpriced grain especially if you are undersold.

In the past, we have seen the $10.75 range act as big resistance multiple times throughout the years. (Old resistance turned to new support?)

We are quickly approaching that level.

Bottom line, I think we are at price levels that will ultimately create more demand and lead us higher LONG term.

Short term, it is a waiting game seeing where the bottom is. I am just hoping it doesn’t take another 50 cents to $1.00 of downside to see some demand. Either way there is still downside risk.

Do what you can to get comfortable.

If you are someone who is nervous or is going to have to sell something off the combine, either lock in a floor with puts or give us a call to go through some other strategies. (605)295-3100.

Nov Beans

Wheat

Poor action in wheat, closing well off the highs.

Unlike corn & beans, Chicago wheat has held it's recent lows (KC wheat made a new low yesterday.

Spring wheat ratings came out +3% yesterday better than expected. So that was a negative.

Winter wheat harvest is 2/3 of the way complete, so we should see less harvest pressure.

Weather over to the west in Kansas and Nebraska is forecasted to get little rain for the next week with temps above 100 degrees, so this could add support.

It is very hot and dry in Ukraine and Russia production areas, but not a major issue considering the initial story was overblown from the analysts when that scare happened.

Overall not much else today for wheat.

I think we are near the bottom. However, if you are someone who did not make sales on our May 22nd sell signal on the rally, or are undersold, keep puts under your unpriced grain until you make the sale.

If you are someone who did make sales and think we have some upside, now is a good spot to look to re-own. (Of course nothing wrong with walking away).

There is nothing saying wheat has to go higher next week, but there is also not a reason for us to continue falling here. I'd like to think we are fairly priced here for now sitting just +20 cents off our lows for the year.

Sep Chicago

Sep KC

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Check Out Past Updates

7/8/24

RAINS, RECORD FUND SELLING & 2014 COMPS

MARKET UPDATE

Today's Main Takeaways

Corn

Soybeans

Wheat

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Check Out Past Updates

GRAINS CONTINUE TO GET HAMMERED

PUKE SELLING, RAIN MAKES GRAIN & FUNDS RECORD SHORT

HARVEST SALE

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