Weather and Global Tensions Extend Grain Market Rally

With more escalation on both war fronts and another oil shipping problem in the Middle East, crude oil and wheat were sharply higher through the day which helped pull corn and beans higher following rising ethanol and bean oil prices. Adding to the bullish landscape is the return of heat with little moisture expanding in the US Corn Belt and continuing through most of Europe and the Black Sea. The growing stack of bullish factors is forcing may end users and commodity bulls to enter any or all of the affected markets as speculative buying volume continues to easily overpower farmer selling or profit taking. Although there were no additional sales to China announced, the growing list of bullish factors has been able to lead even without China’s help. It is hard to see a quick resolution to either war, northern hemisphere weather problems and increasing world shipping and logistics problems, so breaks will be supported by the many players who did not buy the break in June.

News and Notes:

• Northern Hemisphere weather forecasts took an ugly turn today as the most stressed regions of the US, Black Sea and Europe will be offered no reprieve in the weeks ahead. The US forecast is particularly troubling as the heat in the WCB is forecast to move east into E Iowa and potentially across the Mississippi River into the ECB in the weeks to come. With the formation of a Super El Nino accelerating, the current northern hemisphere problems could evolve into southern hemisphere problems this winter.
• All three new crop charts look very similar with each suffering a collapse in June with a V bottom starting on June 30th reversing to start the sharp rallies of the last three weeks. I stayed with the Dec corn chart today to highlight the continued and accelerating breakout after Monday’s close above $4.75. The market is very overbought, RSI is at 66.7 (lower box) which does not mean the market is about to top, but the fast advance and acceleration of speculative buying does tend to slow at these levels without a strong fundamental catalyst or shock.
• There have been two Sales Targets hit this week, one in Dec corn (today) and one in Nov beans (Monday) to reward the rally after the massive reversal of the last 3-weeks. As bearish as June was, July has been as bullish to recoup all of June’s losses plus another 10-20 cents. That is a good way to get an ulcer or five.
• After Monday’s sharp rally in both cattle markets, it looked like the worst was behind them. Not so fast. Tuesday and Wednesday both saw sharp collapses in both markets with feeder cattle now almost $35 below the late June high. Rising feed costs and packers low balling their cattle offers makes taking advantage of this break more of a leap of faith than a sure thing.
• China has been a welcome addition to the weekly sales reports this month and Thursday’s report should be no different. Huge sales totals would be a surprise as other business has been routine, but if China comes in as a strong buyer worrying they missed their chance at the lower June prices, the long list of bullish factors would get a heavyweight addition to end the summer.

As mentioned above, there have been two sales targets hit this week as the plan to layer in sales on rallies with call option bushel re-ownership on breaks remains unchanged. It is hard mentally and emotionally to see all the bullish leaning factors and not get a little apprehensive about selling too early. Human nature is the hardest part of marketing as your fear or missing out is rarely correctly diagnosed as greed. After the substantial rallies in July, reward the rallies with cash and reinvest a small portion of your sales into a plan that extends your ability to continue to participate in the rallies, without taking too much risk. Please call us about how to set up that plan, if an account is correct for your operation and any other questions.