Bulls Stay in Control as Corn Climbs to New Contract Highs

The grains provided today’s biggest rallies with Dec corn closing at the highest price for the life of the contract despite not making a new contract high while wheat clawed back some of yesterday’s gains as the Black Sea remains closed for business. Beans tried early to take out yesterday’s weekly high but settled little changed despite another decent flash sale to Unknown this morning. Momentum remains on the bulls sides as prices have roared higher since last week’s USDA report with both small and large private crop tours reporting conditions and potential yields that are even smaller than the USDA told us last week. The week will end with September option expiration at levels that very little trading has occurred over the summer, so it will be interesting if some of the more heavily held strikes at lower prices become part of tomorrow’s trade to end the week. The bulls (and farmers) are enjoying being in charge this week as end users are concerned over being forced to cover their needs at even higher prices.

News and Notes:

• August will end with cooler to much cooler than normal temperatures for most of the central and ECB while the heat will remain in place for the southern tier of states. The heart of the Corn Belt will be drier than normal for the next 10-14-days which will help fields dry out, but the crops need heat to finish and a long warm fall like we have seen in recent years to keep from losing more yield.
• The daily December corn chart is on Page 2 and shows today’s impressive attempt to take out the contract highs. The strong close (highest for the contract) more than offsets the fact that new contract highs were not made. All three markets are moving into overbought position, but the previous run to new highs in May saw the markets get to even more overbought before pulling back.
• The ProFarmer Crop Tour will report their final findings tomorrow after the markets close but a majority of their social media and posts from their participants have indicated a good but not great crop with both good and poor pockets across each leg of the tour. Inconsistent is a word I have used all year and heard from my agronomist contacts, which is being validated by the PFT and the USDA.
• Another 2-cargo flash bean sale to Unknown was announced this morning while the weekly export report was good but not great. The industrial demand numbers are the most impressive part of the corn demand column and will not allow the USDA to lower total exports/use in upcoming reports.
• Monday’s crop ratings each fell.
• President Trump indicated that more bombing of Iran will be on hold as a return to extreme economic sanctions are underway. Economic sanctions always sound like a good idea, but they did not work against Russia in the 4+ years they have been at war with Ukraine and are unlikely to hurt Iran as Russia will figure out a way to buy their oil in exchange for wheat. More of the same.
• Crude oil jumped to over $85 and new 1-month highs while diesel jumped to new daily, weekly, monthly and all-time highs as the world’s refining capacity is greatly diminished with no refineries being built and 50%+ of Russia’s refining capacity damaged in the war. Even if crude oil drops back to a $75-$80 range, do not expect a similar % break for diesel as the world simply cannot make enough of it.

Much like when Michael Jordan played basketball in Chicago, the bulls are in charge and winning big. Energy inflation, raw material inflation, higher prices in metals are leading to significant inflation fear which is both driving interest rates higher and enticing the speculative funds into additional long positions across the entire commodity and raw material sector. With far more strategists now bullish and the trade becoming overbought, it is a great time for any producer who needs to clean out his bins to make room for harvest or make catch up new crop sales. It has been a while since the opportunity to sell the contract high came right when the farmer typically is fearing harvest pressure and harvest lows. Play catch up on cash sales, put in option floors if you are not sure about your production or combine some cash sales and option strategies into your plan. TAKE ADVANTAGE OF THE RALLIES!!!