Grain Markets Pause While Bullish Fundamentals Remain Intact

Turnaround Tuesday did not provide much excitement as Monday’s better than expected crop ratings and no morning Chinese purchase announcements allowed the bulls to take a break after Monday’s sharp rallies. Other news was limited with consistent US forecast that expect a cooler week with more chances of scattered rain, but no mention of the widespread soaking event most of the western and central Corn Belt would like. Crude oil rallied again and remains solidly over $82 while diesel continues to make new highs on no progress in reopening the Straits or an end to the war with Iran. Russia and Ukraine continue to attack ships and port structure in their war, so despite today’s flat to lower trade, none of the major bullish legs of support weakened with today’s news. Chinese demand, US weather and war remain the markets most important drivers.

News and Notes:

• Slightly cooler with additional rain chances continued through the overnight and noon US forecasts, but the S Plains through western Nebraska and the Dakotas remain parched with little rain chances into early August. Europe and the Black Sea continue to see yield deterioration their hot/dry summer will not end.
• The daily December corn chart had a potentially major breakthrough today despite only modest gains. Today’s close over the psychologically important $4.75 level, which is also the .100-DMA (blue line) for a bullish outlook. Closing over all 4 major moving averages sets up a potential run back to the $4.90 range and with any weather issues, a test of the $5.05 contract highs. Friday’s August option expiration and the large number of open positions at the $4.75 strikes may calm the market until next week, but a weekly close over $4.75 is a green light.
• There were no announced flash sales this morning to anyone, much less China. With Chinese trade officials coming to the US in less than 2-months for trade talks, it would be a surprise if China does not maintain a consistent purchase program until the meeting.

Consistent news and slower markets would be a welcome change after a wild summer of volatility and surprises. Each new weather forecast for the next 2-months will be closely watched to see if yields can maintain the 180 and 52 levels. Be prepared to sell additional rallies but please call us to talk about option strategies for re-ownership and if opening an account works for your operation.