Why Markets Dived Downward on Tuesday

July 19, 2016 05:30 PM

Never doubt the power of a rising dollar and better than expected crop condition ratings.

Those two factors pushed corn down 15 cents and took more than 30 cents off soybeans on Tuesday in what Pro Farmer’s Chip Flory called a “tough day” for the ag markets.

Corn and soybeans weren’t the only commodities that suffered, though. Soy meal, live cattle and feeder cattle also all were “sharply lower” on Tuesday, according to comments by Davis Michaelsen of the Inputs Monitor on Market Rally.

The impact of a stronger dollar, which makes U.S. exports more expensive to buy, was certainly a key influence in those market drops. “The dollar pushed to its highest level since March 10 today, adding to recent momentum to the upside that creates headlines for the broader commodity sector,” said Arlan Suderman, chief commodities analyst at INTL FC Stone, in his daily commentary.

Also in play: Crop conditions for corn and soybeans.  

A rating of “76% good to excellent on corn is very much at the top end of crop conditions we’ve seen in the past 20 years,” said Ted Seifried of Zaner Ag Hedge, speaking on Market Rally. “You put that into the yield calculator, and that’s going to put you around a 172 (bua), 173 (bua) as far as an average national yield.”

Such numbers would represent an increase from last year’s national average yield of 168.4 bua, potentially growing the U.S. corn supply and putting pressure on corn prices.

 “The market is starting to come to the realization that we’ve got a really good crop out there,” said Joe Vaclavik of Standard Grain, speaking on Market Rally. “The change in ratings this year versus last year in the eastern Corn Belt is really remarkable. Illinois, Indiana, Ohio, Missouri—they are so much better than they were last year from a statistical standpoint. The market is starting to catch the drift that we may even build on those very good national yield numbers that we had last year.”

Seifried expressed a similar opinion. “Right now, with crop conditions being as good as they are, we almost have to start talking about yields at or above that 168 (bua) trendline,” Seifried said. “But the question really is, where will we be two weeks from now, because there will be an effect from the warmer, drier weather we are going to see.”

Could this upcoming weather pattern affect soybean prices? Seifried sounded doubtful.

“While it’s never good to get hot and dry for crops, it’s not going to be something that‘s going to kill a 71% good to excellent bean crop, so a lot of that concern has fallen away from the market,” he said. 

Listen to Tuesday's Market Rally show below or download the My Farm Radio app for Apple or Android devices.

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