Grain Markets at a Crossroads as Demand Signals Build

Another depressing day of grain and soy trade saw additional harvest selling pressure and fund stop loss selling with corn, bean, and wheat prices moving to new 3-month lows. Although China was announced as a bean buyer in the daily sales report, the bearish charts are forcing technical liquidation as end users have been very patient stepping in to buy this break. Other news remains limited, but with EU corn prices making new all-time highs, domestic basis rising, and US corn below other world offers, it is not a cash driven break.

News and Notes:

• Dry US weather continues to benefit harvest progress and hinder prices as the combines are rolling quickly with a mostly open forecast for the next week. Current SA conditions and forecasts in month-end are non-threatening.
• The November bean daily chart is on Page 2 and shows the complete breakdown that started just before the Sep 30^th quarterly stocks report. While the stocks number did not rock the bean trade like it did on corn, the September yield increase and fear of potentially another 1 BPA increase by the January report has leaned heavily from the fundamental side. On the technical side, the 20-DMA (red line) has stopped all fall rallies, while test of the 100-DMA (blue) in early August was the launching point for the August rally. The funds are long 1 BBU but have not cut their long position in beans like they have in corn.
• Please take a few minutes to listen to the latest Helena FieldLink podcast where early season weed control and my thoughts on the post-USDA report trade and a look at other current conditions.
• Harvest progress was reported a little behind expectations with corn at 44% (49% expected) while beans were 64% (66%). The oddity in the report was the corn rating was unchanged at 56%, which in no way correlates to the higher yield estimate and a 181 BPA yield expectation. Please call the USDA and have them get rid of the crop ratings if they have no value.
• Beans continue to fall on US harvest pressure and fear of even higher upcoming yield updates, but China has been in the daily sales report both days this week with a confirmed purchase over 23 MBU today. The bean market was rallying on demand news in late August but are ignoring it now. Crush margins, weekly export inspections, and weekly exports are bullish. The bean market must get comfortable with final US yield before it can embrace just how great domestic and world demand is for the soy complex.
• With the election just 17-days away, President Trump and Ag Sec Rollins announced the $8 billion Harvest Fuel Relief Program to help offset record diesel prices. The breakdown per crop will be released in November, but it you took a percentage on planted acreage alone, corn and bean acres could potentially receive over half the budge. The FSA will administer the payments.
• The average fall insurance revenue prices are $4.87151 for corn and $12.78791 for beans. With more than half the month gone, the averages will continue to fall with Dec corn and Nov bean prices substantially below the monthly average.

The grain markets are trading like they are scared. It is understandable that everyone has post-traumatic stress after the USDA gut punches, but there are other factors. Harvest is flying along and bushels are flooding the cash pipeline that cannot or will not be stored. They are also trading like the hostage corn/wheat supply in the Black Sea will be back in world circulation after President Trump, President Putin and Chairman Xi meet at APEC in mid-November to pressure Russia to end the war. The heavy harvest pressure is the only absolute mentioned above, as yields from Nebraska are not confirming the USDA’s massive yield increase and there is little chance that Ukraine ends the war and gives the Ukrainian territory that Russia demands. After such massive declines, markets typically bottom on either shocking news or a nasty capitulation where every long left in the market sells and gives up. Today does not look like that day, but with the funds long about 1 BBU of corn (was once 2.5 BBU) and short 250 MBU of wheat (were slightly long 6-weeks ago) and the SA growing season just getting started, the funds do not have the justification to move toward being flat in corn.