We have begun this new week on a pretty dour note as we have pressure across all the grain and soy markets. Understandably, wheat is experiencing the least of the selling and we have continued to hold above the lows set two weeks ago but that is small consolation at this point. Realistically the wheat market should be the first of the grains/soy to bottom as we have already absorbed a harvest "hit" and the market has acknowledged a solid world crop and very tough competition in the export market. Historically, we will often see wheat bottom before corn, which of course does not say much positive for the corn outlook at this time.
Chinese import data was released over the weekend and during June, wheat imports were down 48% versus last year. Although the Russian harvest got off to a slow start they have been making progress, which has continued to pressure their markets. The Black Sea rules the export trade right now.
The heat early this week will evidently be brief with showers and cooler temperatures quickly on its heels, which should keep the overall psychology of the markets negative. As I commented initially, wheat has not pushed into lower lows but moving forward will need to at least begin trading flat at current levels to begin thinking about a bottom in the making.
There was a song that I learned in my childhood that many of you probably remember named Home on the Range. I could not help but think of it this morning as in the song it talks about the skies not being cloudy and that we seldom hear a discouraging word. Well this year has been anything but a real life example of the song as we have had more than our share of clouds and it is pretty difficult to find anything but a discouraging word, and that certainly applies to this morning. The corn market has posted another weekly gap lower and into new contract lows once again. I am not going to view this as anything more than a possible minor measuring gap but if left unchecked through Wednesday, it will have open the door for a push down to at least the 3.59/3.55 level.
Weather is really the only topic that traders are focusing on at this point and realistically it could not be much better for the vast majority of the growing crop. After a brief warm up today and tomorrow, showers and cooler temperature are set to return and it would appear that a large swath of the corn will have pollinated under ideal conditions. Outside of the wet spots and those areas hit by hail, corn plants have experienced precious little stress this year, which usually translates to excellent yields. The focus should soon shift to finishing this crop out with enough growing degree-days.
Managed funds have continued to liquidate their long position but still hold around 93,000 contracts. This fact along will hang over the market like a weight; a 93k pound weight.
There is very little else to look at currently. The trade expects the weekly ratings to be flat and of course keep in perspective; these numbers will normally begin moving backwards after pollination. There is little sense in trying to pick a bottom at this time, particularly in light my opinion that we should set what I believe will be the base level for the corn market for the next 20 year or so this fall.
The bean market also gapped lower again this morning but unlike the corn market, did not gap into new lows for the year. That said, if we have not filled this hole before Wednesday close, it provides projections in November futures to at least 10.45 and of course we still have the previous gap objective down between 10.20/10.10.
New beans were supported last week by large Chinese buying and while that could return again, it would appear to be one of the few positive factors that we have. As expected, managed funds are now short over 6,000 contracts, which is a first since late 2011. The extended weather forecasts would appear to be favorable as we look out into August and if correct, it is difficult to think prices could hold in face of. Look for conditions to be unchanged to possibly a touch better this afternoon.
As I commented initially today, we have begun this week on a pretty dour note with the only words to be heard are discouraging ones. Instead of singing a light-hearted cowboy tune, the trade has nothing to listen to but the down and dirty blues.