Posted on September, 4, 2024 at 09:53 am
Market analysts have been struggling with the idea that we could still see a lower low in corn and soybean markets. That has been the tenor of many articles published in the last few weeks.
The surprise in this short week (early deadline because of the Labor Day holiday) is that futures traders have found reasons to support prices after lows the week before last.
Good days Aug. 26 and 27 helped December corn futures bounce to 11 cents below the $3.85 low we saw on Aug. 26. We saw a bounce of 5 1/4 cents on Aug. 26, a decline of 2 cents on Aug. 27 and another bounce of 6 1/4 cents on Aug. 28. We added 5 1/4 cents again Aug. 29.
November soybeans, meanwhile, were up three of the first four days this week. We gained 7 1/4 cents Aug. 26, 5 3/4 cents Aug. 27, lost 9 1/2 cents Aug. 28 and gained 15 1/4 cents on Aug. 29. The net action was a gain of 43 cents since the recent low of $9.55 on Aug. 26.
December Chicago cookie wheat futures also gained three days of the four so far this week. Today, Aug. 29, we gained 7 1/4 cents, Aug. 28 we gained 6 cents, Aug. 27 we gained 10 1/2 cents, but we lost 3 cents Aug. 26. We have bounced 26 3/4 cents since the recent contract low of $5.20 3/4 on Aug. 27. There is talk that we may have seen the low in wheat. I certainly hope so. We are now almost $2.20 off the high we set in late May.
In all cases the market seems to be reacting to weather forecasts and good exports. Corn futures were off two cents on the December new crop futures Aug. 28 as forecast of some rain for dry areas of the Midwest and Kansas, a particularly dry area of the hard wheat crop, was a leading market influence. A few days ago the forecasts were for .75 inches of rain in the western Corn Belt, but that was raised to .75 to 1.25 inches.
Good corn exports that were reported at the close of the day Aug. 28 helped the market Aug. 29. The exports were for new crop corn, but the new marketing year starts on Sept. 1, so all our exports contracts from now on will be from the new crop category. On Sept. 1, we will stop talking about new crop.
There is some interesting news in the world that will affect our prices. For example, Brazil sources say that the corn crop there will export 210.2 MMT of corn this year, a little less than that exported last year. We are also told that Brazil, Argentina and the U.S. will export 110 MMT of soybeans this year, well over the 102 MMT of last year. Interestingly, China will import 111.5 MMT this year, up from 104.5 MMT last year. In other words, China demand is equal to all the exports of those three countries.
This is a huge change in the last few years. It was not that long ago that China’s imports of soybeans were very limited. The talk at national grain meetings for a decade was that with the growth of the Chinese middle class, there would be demand for meat to be consumed instead of veggies. That would require soybeans and corn imports to feed the livestock. We have now seen that market come to fruition. Now we just need one more China! One more piece of news is more closely related to our price projections. South Africa is one of the largest exports of corn in the world. Drought there has reduced the crop by 20%, to 514.1 MMT.
None of the current news is likely to change our overall bearish market picture. Yes, we have a little uptrend going here this week, but it will likely end up just being the uptick that marks a cycle’s pause, with lower prices again ahead of us. We are to September now, and we are not seeing the kind of weather patterns that can give us any kind of bullish markets.
There are a couple of other items of interest that have little direct impact on the grain balance sheets, but that do involve national security.
It is a real temptation in this time of low prices to have no real marketing plan, but to intend to “store and ignore” the grain. This is a phrase I read last night in a published article.
In fact, this is the time to make a plan. It is hard to make a decision to start with the first increment, when it will be sold before the cost of production is reached.
One plan would be to sell for the time periods that you normally use for delivery, and then, at the same time, buy out-of-the-money calls for protection if the market rallies.
Selling grain is actually a function of several factors: when do I want to deliver, how much do I want to deliver and how do I choose to set the final price.
Source: Farm and Dairy