Like the corn yields observed in Iowa on this week’s Pro Farmer Crop Tour, price action was a mixed bag across the grain complex this week. Soybeans were the overwhelming winner, closing the week substantially higher after temporarily trading down to its 200 day moving average early in the week. Monday’s trade in December corn was extremely disappointing. After a significant flash sale, and gapping 7 cents higher in Sunday night’s session, the contract managed to not only fill the gap, but close 10-4 cents lower that day. Fortunately, the contract was able to claw back about half of its losses through the balance of the week. The spread between corn and soybeans continues to expand, but it’s largely been supported by the respective market fundamentals. This Monday’s crop progress report will be important as it will provide our first glimpse of the impact this week’s heat wave had on corn and soybeans. If we see materially significant declines in G/E ratings for soybeans, it could lay the groundwork for the November contract to test, if not push through, 1400 level. Moreover, a continuation of the rally in soybeans may afford the December corn contract a modest boost to retest the 500 handle, which we’ve tested and failed to close above 7 times this month.
Recapping the Pro FarmerCrop Tour:
Blue Line’s very own, Oliver Sloup, had boots on the ground for the Pro Farmer Crop Tour this week. He partook on the Eastern leg of the tour, and published his analysis on each stop of the way. If you’d like to see the results from each stop, don’t hesitate to reach out to us! Corn yields were a bit of a mixed bag with a high degree of variance in yields in relatively close proximity to each other. Iowa’s yields probably serve as the best example of this, as yield checks ranged from 80 all the way to 222 bushels per acre (BPA). For the most part, the corn crop looks solid. Unfortunately, the soybean crop left something to be desired. Pod counts in Illinois were largely disappointing, and yield estimates were largely reflective of this. Overall, Pro Farmer pegged national corn yields at 172.0, while the latest USDA estimate is 175.5. Pro Farmer’s soybean yield estimates were also lower than USDA’s previous estimates, coming in at 49.7 BPA, while USDA was at 50.9 BPA. Having both corn and soybean yields come in below USDA’s estimates was a bit of a surprise. Fortunately for producers, it brings the potential for higher prices if USDA makes adjustments in the coming September WASDE report mirroring Pro Farmer’s findings.
Frustrating would be a generous understatement for corn bulls when describing Monday’s price action on the December corn contract. We gapped higher by 7 cents opening trade at 500-4. In spite of a 112,000 MT flash sale of corn for ‘23/’24 delivery to Mexico before Monday’s open, the contract proceeded to not only fill the gap, but move an additional 3 cents lower, closing the session 10-4 cents lower, settling at 482-2 on Monday. This was the 7th time that we’ve tested 500 on the December corn contract in the month of August, and we’ve yet to be able to close above it. Fortunately, corn prices turned higher along with temperatures across the corn belt later in the week. December corn was ultimately able to claw back roughly half of Monday’s losses, settling just 5 cents lower for the week at 488-0. Now, managed funds are holding a considerable net-short position. Per today’s Commitments of Traders report, managed funds hold a net-short position 121,612 contracts (262,748 short positions compared to 161,136 long positions). If we manage to test the 500 level again next week, short-covering could push prices toward our 3-star resistance pocket between 502 and 506-4. Moreover, if we surpass that, we should expect more rigid, 4-star resistance between 518 and 525-6.
The November soybean contract was the biggest winner in the grain complex this week. Like corn, November soybeans gapped higher on Monday before showing a bit of weakness. Unlike corn, soybeans were able to maintain the majority of their gains. The contract showed the most weakness on Tuesday, trading down 15-6 cents to settle at 1346-0 that day. But, the contract charged higher each of the remaining 3 days of the week. Not only did we manage to trade through our psychologically significant 1350-1355 resistance level, we managed to fill the gap between 1375 and 1382-4 from July 31st on Friday, ultimately settling at 1387-6. For the week, November soybeans gained 34-4 cents. Weather certainly played a role in the strength of the contract later in the week, and yield estimates coming out of the Crop Tour were also a contributing factor. If we get notable declines in crop ratings after Monday’s close from the Crop Progress report, it could lay the foundation for November soybeans to test 1400 next week. Fund positioning shouldn’t be a major factor heading into next week, as funds hold a net-long position of 54,283 contracts. Broken down, that is 97,524 long positions and 43,241 short positions.