What Traders are Talking About:
* End-users are the key. Soybean futures closed sharply lower to mostly limit down Monday while corn futures posted steep losses. There were a number of reasons for the extremely sharp price pressure, but the reasons don't really matter. The key to how far prices slide lies with end-users. With supplies expected to very tight through the 2012-13 marketing year, end-users will tell the market whether prices are cheap enough to represent a value buy or if prices are high enough to curb usage. Other factors such as speculative money flow are also key in the price discovery process, but the end-user is the key from the demand perspective.
The long and short of it: With end-user demand so critical to prices, keep a close watch on basis for signs of when seasonal price pressure has run its course.
* Corn harvest remains record quick. As of Sunday, USDA says 26% of the corn crop was harvested, which was slightly higher than traders expected and a record pace for the date. Barring any unforeseen delays, producers will continue to aggressively harvest corn amid concerns of yield loss. In many areas, producers are harvesting their best fields first, opting to leave the worst fields standing longer as there's less potential yield loss in those fields. Meanwhile, USDA reports soybean harvest was 10% complete as of Sunday, which was also just slightly more than expected. Soybean harvest is most aggressive in areas where corn harvest is quickly wrapping up. Most producers will likely favor harvesting corn over soybeans because of the yield-loss potential with corn.
The long and short of it: Producers are clearly working to secure as much of the corn crop as possible before more yield is lost. The record harvest pace will keep seasonal pressure on the market, especially since much of the harvested corn is moving to market.
* Better-than-expected soybean yields pressuring futures. There was lots of talk during Monday's limit-down price plunge in the soybean market about better-than-expected yields on early harvested soybeans. While some producers may be getting better yields than feared, it's too early with only 10% of the crop harvested to say for sure yields are broadly better than expected. Still, as long as that talk continues, soybean futures are at risk of additional near-term price pressure.
The long and short of it: Markets are largely built on perception. If traders perceive yields are better than expected and USDA will raise its production forecast, it will weigh on futures.
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