This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
Despite all the turmoil on the political front over the weekend, Monday’s trade felt like it was more about weather than politics. Honestly I think the market is just as confused about what will happen in the election as the rest of the general population and the world is. I do not think there is a clear understanding what will happen to the ag markets under a second Trump administration and clearly we do not know what another democratic administration will look like since we do not even know who the candidate is right now. Trump has promised to be tough on China which not many years ago would be bearish for commodities, but the Chinese have bought so little from us in the last couple years I do not think that will have much of a negative impact.
The funds have been building a record short position in the corn and a massive net short position in beans but not quite a record yet. They were pricing in a higher than trend yield crop in corn and beans and looking for the markets to go below 4 on corn and below 10 on beans. There are problem areas but by in large they expect the good areas to make up for the bad. Monday was a big reminder that there is still five weeks of growing season left to navigate. The crop is not made until its in the bin. Both the EU and GFS model are showing hotter and drier forecasts in the long term. This explains why beans led the charge higher as bean yield is made in August so there is more weather left that matters for beans. Market will continue to trade these weather forecasts and we are looking at the long term ones that can shift dramatically. However the biggest wet blanket on the market is going to be the amount of old crop that still needs to be sold. People with old bushels left to sell are going to be looking for an opportunity to get off what feels like a sinking ship so it is going to take a lot of fund buying to overcome that selling. In the Southeast the basis should continue to strengthen since we do not have much of a new crop to pressure. In parts of the Midwest, the basis will come under pressure from the old crop and new crop.
USDA released the weekly Crop Progress Report that reported 67% of the corn crop rated good or excellent. That is a 1 point drop from last week and also one point below expectations which were for conditions to be unchanged. That compares to 57% last year. Soybeans were unchanged from last week at 68% good/excellent which was the same as market expectations. That compares to 54% last year.