The Bull Run Rolls Into September

September started just like August ended with sharply higher prices based on another US attack on Iran, Putin ending any export corridor hope and no change to a brutally hot/dry US outlook into mid-September. While there seems to be new wrinkles each day, they are simply incrementally more bullish stories adding to long-standing series of supportive events. Until the wars end, the US growing season ends or the Chinese export purchases end, the outlook is supportive with an increasing level of volatility.

News and Notes:

• The hot/dry finish to the US crop is still intact as record daytime heat and heat indexes will not be giving away to the normal seasonably cool nights to help crop fill. The US weather pattern for the next few weeks is setting up to be the hottest/driest in years.
• The front month weekly bean chart is on Page 2 and shows the recent breakaway to new 30-month highs. The interesting thing about the chart compared to where we were the last time we were at these levels (Dec ’23) is that this market is in a dead bull spring while the prices were in a developing bear market in late 2023. With no major overhead moving average resistance and an air pocket underneath back to last week’s breakouts, it is hard to confidently project technical targets in a little bit of a vacuum. The momentum is certainly higher, but as the funds continue to pile into speculative grain and soy length, increased upside and potentially downside volatility should be expected. If you are happy when prices go up sharply, you need to take a more measured approach about freaking out when the inevitable large setbacks occur. The more speculative money that is involved in our markets, the more volatility will occur.
• Weekly crop conditions showed the bean crop is slipping fast losing 2% to 58% G/E while corn was unchanged at 57% from last week. The poor/very poor categories for both are gaining attention as is the accelerated maturity of the crops pushed by the heat and the very inconsistent August weather. Crop scouts will be out ahead of the Sep USDA report to put out news yield estimates, but they are certainly not getting better than the August USDA estimates. Beans over $13 are implying that a sub-52 BPA yield is in play. The corn yield remains a moving target, but we are staying with a 176-178 estimate for now.
• China was announced as a buyer of another few cargoes of beans this morning and the EPA’s small refinery exemption announcement was in line with estimates, but they are offering a path for more bean oil use in 26/27 where the larger refineries will get the SRE’s to help keep the expansion of both bio-fuel markets. The relief and wording from the EPA sent bean oil sharply higher and was a part of Nov beans sprinting through $13. Monday’s export shipments were very strong for corn (+13% from LW and +6.1% from LY) and shows that the buyers are taking delivery of their corn bushels.
• Turkey’s President did not get too far in his negotiations with President Putin as Russia intensified their bombing on Ukraine energy and transportation infrastructure overnight with Putin soundly dismissing any humanitarian Black Sea corridor or ending the war. In between that and the US bombing Iran twice in the last 3-days, there is not much optimism that either war will end anytime soon. A continuation of these wars means that high wheat prices and high diesel prices will be around until either or both are resolved.
• The USDA announced a Ranchers First Initiative to help US ranchers both grow the US herd but put out $500 million in support more processing capacity and to buy only US beef for American schools during the expansion. One of the provisions is to use only US beef for the public school lunch programs, which sounds great, but is not a piece of demand to move the needle too far.

Hello from the balmy 100-degree index Iowa Farm Progress show! As the summer of field days and farm shows winds down and harvest moves north, it is not a normal time to see the markets post new contract highs, much less new multi-year highs. The factors we thought would be supportive have become extremely supportive as the wars intensify and the shortages they will continue to create are helping build a bullish base with the US hot weather adding another layer. Al Sales Targets remain on hold and we continue to have a volatile bullish bias.