Brooks Schaffer Market Report for Tuesday July 9

This is the Market Report with Brooks Schaffer of Palmetto Grain. Reach him at [email protected] or 843-540-4540.

We went home friday feeling pretty good about corn and beans. We managed to hold the support levels from report day and eked out a positive close heading into the weekend. Unfortunately it did not take long on Monday to have our optimism dashed. Corn, soybeans and wheat all sold off hard on monday. Getting the volume back after the holiday week did not help the bulls case. The selling broke through the support levels put in after the report and saw Sept corn close below $4 at $3.93. November beans tried to claw their way back above the 11 level but were unable to close there. Hurricane Beryl made landfall today and is forecast to move Northeast and bring rains into some of the areas that need it the most, Illinois, Indiana and parts of Ohio. Those areas have been drying out and facing the extreme heat from the ridge. The forecast models are also pointing to a drier trend in the parts of the western belt that have been hit by the historic flooding. 

Beans got a boost last week from oilseed production issues popping up in several different crops. There are new threats to canola production and palm oil. There are also growing tensions between China and Indonesia which is one of its largest suppliers of palm oil. If the trade spat grows, it could force China to look for alternatives to palm which could be bean oil. Beans gave up that risk premium Monday on the non threatening weather forecast. 

On Monday we got the commitment of traders report which was delayed from friday by the holiday last week. It showed the funds have continued to build a massive short. It is a record as a percentage of total open interest in corn now and the trade on Monday would indicate they were sellers again. We also got updated crop condition ratings on Monday. The corn crop was rated at 68% good/excellent which is a point higher than last week and compares to 55% last year. The market had expected the same 67% from last week. Similarly on soybeans, they were 68% good/excellent which is a point higher than last week and a point higher than what was expected. That compares to 50% last year. Cotton conditions dropped 5 points from last week to 45% good/excellent which compares to 48% a year ago. 

It is hard to imagine a scenario that would be more disheartening than the situation we find ourselves in watching crops struggle in the field as the price continues to fall. It is hard to find much positive to focus on but there is still a lot of northern hemisphere growing season left. The market is priced in a perfect crop and there is still a long way to go before it is in the bin. With the large short position the funds have built in corn and beans, if they get spooked and rush to cover their positions we would get a big help.