Grains Find Their Footing Ahead of Friday’s USDA Report

Prices bounced to start the week with wheat leading the gainers while corn was mixed while beans had modest gains as end users were noted in the buying volume as the fund-related selling ended after the recent rout. Crop quality issues and delayed harvest from E NE to Ohio due to excessive rain with more on the way will be the news to trade heading into Friday’s USDA yield update with the bulls hoping for a 2–3-bushel loss to corn yield to quickly offset last week’s stocks surprise. There were no new developments in either war over the weekend with both looking to drag on for the near future, which will continue to cause problems for energy prices and world shipping logistics.

News and Notes:

• The window has opened for Midwest harvest to resume and should remain open into the weekend, but another storm system and a tropical system moving up the Mississippi River by late this weekend will add even more rain chances. The Corn Belt harvest is slowing with increasing reports of widespread crop quality deterioration with the off-quality bushels struggling to meet a high enough standard to avoid sizable price docks from the elevators. S Brazil’s flooding remains a problem with the pattern expected to last at least another week.
• The December corn daily chart is on Page 2 and shows the support at $4.92 (July 24th high) which has supported price since the breakout on August 19th. If $4.92 does not hold, the next level of support is the $4.84 area which is the daily 100-DMA (blue line) and the weekly 20-DMA. The funds have sold roughly 600 MBU from the long position over the last 2-weeks and it now a very manageable 1.55 BBU. The RSI is the most oversold since the contract low on June 30th, which could be a great setup if the USDA gives the corn market a bullish update on Friday.
• Please take a few minutes to listen to the latest podcast we did for Helena’s FieldLink where their Agri Intelligence program is discussed and a pre-USDA report market overview.
• Another wrinkle in the world political landscape is the Presidential run-off election that was set up by this week’s primary win by the son of former President Bolsonaro. The Brazilian Real was up 4% in today’s currency trade and will continue to strengthen if Bolsonaro wins, as is expected. Historically, a strengthening Real slows Brazilian farmer selling as they hold onto their bushels as an inflation hedge. Higher prices in Brazil will only help US exports.
• The average fall insurance revenue prices are $4.99083 for corn and $12.810 for beans.
• Although China is on a nationwide holiday this week, there was a bean sale announced to Unknown in today’s sales report. The decline since the trade meeting is perfect timing for China to move ahead with their year-end purchase promises. China will also be a more active futures buyer to hedge their purchase price before any official Chinese cash purchase is announced.

The news is expected to be fairly slow this week with everyone looking forward to Friday’s yield update for guidance on what the USDA has found in their early harvested results from their test plots and farmer responses. The bulls need a 2 BPA corn yield cut just to offset last week’s stocks increase which is at the lower end of private estimates with average yields estimated in the 175-176 area. A return to $5.25 will have to see that cut while a return to the $5.50 area will take a larger yield cut and China purchasing 100 MBU plus before the end of the year.