This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
Markets opened Sunday night with a bang after the Independence Day holiday, but it was not the direction we wanted. Corn and soybeans traded with some decent strength ahead of the holiday weekend. There were rumors that we were going to see trade deals with specific agricultural purchases and also some Chinese purchases which helped support buying going into the weekend. The funds have also been sellers for so long there was some profit taking as well ahead of the holiday. When nothing materialized by Monday, the market got tired of waiting and funds turned back to sellers. The weather remains non threatening and we are starting to get pollination within the 14 day forecast. There is some heat in the Midwest but forecast shows rain to go with it.
Market was also anticipating an increase in condition ratings which we saw on Monday. USDA’s latest crop condition report released Monday at 4pm estimated corn conditions at 74% good/excellent vs 73% expected. That compares to 73% last week and 68% last year. This is the highest rated crop in the last 7 years. Soybean crop conditions were estimated at 66% good/excellent vs 66% expected. That compares to 66% last week and 68% last year.
Commitment of traders report was delayed on Friday due to the holiday and was released Monday July 7th. No surprise that it showed the funds were huge sellers once again. Their short position in corn is now over 200k. The record short is 353,000. They were also big sellers of soybeans where they still had a long position that has now been almost completely sold off. With the lack of weather threats and a highly rated crop, the market is taking all the risk premiums out. There is still the possibility of a trade deal or purchases from China that can spark some covering.
Market is also looking ahead to the USDA July Supply and Demand report that comes out this Friday July 11th at noon. They will use the lower acres from the planted acreage and lower stocks from the stocks report. Market will be looking closely to see how much they trim old crop carry in. We will need to price in the yield USDA pencils for the new crop. There is a lot to price into the market with this report and the funds are already loaded up on the short side. We need some help from the weather or USDA or the administration to spook the funds to cover some of their shorts.