This week has been more of the same in the grain markets. No bullish surprises to turn the market so good weather and talk of big crops continues to put pressure on the market. Additionally the lack of Chinese purchases of new crop soybeans is giving increasing concern to the bean market. China has been a big buyer of soybeans and has been actively importing despite big domestic inventories and negative crush margins within China. One interpretation of their actions is that they are hoarding supplies in anticipation of a long trade war with the US. Normally they are buying from the US right now for new crop shipment as our new crop beans are cheaper than the old crop in Brazil. Preparing for a long trade war does not necessarily mean there will be one but the bean market finds itself at a significant crossroads. With less acres than last year, if we have normal demand the bean balance sheet is going to be tight. But if we find ourselves in a long trade war with China and they do not buy any beans from us, we are going to have too many. Even more than weather, the long term direction of the bean market is going to be determined by progress with China on trade. 

We came into the growing season with increased odds of a Midwest drought, but that has not happened. Instead we have had very good weather in a vast majority of the growing regions. NDVI values are at all time highs across much of the corn belt. This is not a surprise to the market, we have been pricing in a monster crop for months now. That has kept prices low and kept demand high. We saw huge new crop exports this week for corn. On new crop we have already sold 464 million bushels compared to 230 million last year this time. This is the second highest total for early August on record. Stone X came out with their widely followed crop estimate this week and pegged corn at 188.1 which is 7 bushels above trend and at the higher end of major analysts. Despite this massive yield, carryout is just over 2 billion bushels which is big but not overwhelming. 

We get USDA’s updated yield estimates on the August Supply and Demand report that comes out next Tuesday Aug 12th at noon. On their previous yield estimates, USDA was just using a trend yield. The estimate we get on Tuesday will be based primarily on farmer surveys but with satellite data playing a supporting role. USDA has a history of overestimating yield in the August report in years with a big crop. If we can absorb and price in a big yield now, then we can put the seasonal low in early and get a bounce in the market. The calendar will be our friend again as the seasonal trend turns higher as we move into the fall. We may not be at the lows yet, but I hope we are at least close now.