Soybeans, Corn Continue Slump As Weather Stays Friendly 9/4

Published on: 18:08PM Sep 04, 2009
Dec 09 Corn
306 ¼
-9 ½
Nov 09 Beans
-19 ½
Dec 09 Wheat
471 ¾
Dec 09 KC Wheat
-9 ¼
Dec 09 Min Wheat
498 ½
-7 ¼
Dec 09 Meal
Dec 09 Oil

Soybeans, Corn Continue Slump As Weather Stays Friendly
  • Nov Soybeans End Week 89c Lower, Dec Corn 22 ¾ c Lower
  • Weather Outlook Friendly For Next 7 Days
  • Dec Corn Hits Fresh 3-Year Lows, Eying Break Below $3
  • Nov Beans Set To Slip Below $9 If Weather Stays Benign

November soybeans continued to bleed lower on long liquidation and short selling, and closed out the week at their lowest level in more than a month. The absence of threatening weather combined with the prospect of a record amount of planted acres coming within weeks of harvest has wiped nearly $1.50 a bushel off November futures in just 16 trading sessions.
Weather forecasts remain a major driver of this market, and any fresh forecasts for crop-threatening frost will certainly give prices a boost. The problem is, conditions for the next week look set to remain very friendly so in the interim prices may continue to grind lower. The next key downside target is $9.00, followed by the $8.80 area in Nov futures.
Nov soybeans at $8.80 sounds cheap, but it must be remembered that that’s still nearly $1 above this year’s low of $7.84 seen in early March, so producers need to be mindful that there’s still ample downside room if the weather stays perfect for the next several days and aggressive buyers stay away. Of course, it will just take one forecast of a frost in a key area to change this market’s tune, but until then we’re likely to struggle holding on to any gains in this market. And even if we do get the odd scare, we may not get a lasting or large rally given the impressive scale of this year’s crop and the fact that the tightness in the old crop has now nearly dissipated as we get closer and closer to having new crop supplies to fill the pipeline.
This all means that producers who are behind on sales need to look for opportunities to catch up. Give us a call early next week to discuss your options if you are indeed undersold, or want to chat about your positions over the coming weeks.
December corn futures took a significant step lower Friday and settled below $3.10 a bushel for the first time since 2006. The $3.06 ¼ settlement is 35% off the June highs of above $4.70, and compares drastically to the $6.00 settlement this contract recorded a year ago today.
It’s easy to think that we’re having a 50% sale tight now, but in reality we are just responding to last year’s price excesses with a more subdued demand landscape. There are some bright spots emerging on the consumption side of the equation that suggest the current price of corn is starting to evoke a positive response, but we need more than good demand from the ethanol industry to turn this ship around. Until we see real consumption pick up from the feeding industry and on the export market, corn will struggle to avoid further losses and will have only short-lived bouts of strength. Cheap DDG’s peddled by ethanol producers and millions of tons of feed wheat continue to compete for feed business both domestically and abroad, so we need to either chew through those substitutes or get much cheaper than them before we can expect a meaningful increase in corn demand that will send this market notably higher. 
That may take some time, and in the meantime this market may dip deep into the $2’s as the remains of the 2008 crop gets sold to make way for what is potentially 13+ billion bushels of fresh supplies here in the US. There’s no doubt that those producers who have private storage will store their crop, but there are still several billion bushels that will be sold off the combine, so watch out for another wash out in the corn price as harvest gets cranked up.
As in soybeans, those producers who have not yet actively marketed or protected a majority of their crop need to think about their options. If you have insurance, you have a floor above here on your guaranteed bushels and so should opt to keep your corn off the market right now and look for rallies to offload additional bushels. If you do not have insurance, please give us a call to discuss your options with regard to your breakeven price levels and cash flow requirements.

Chicago Dec wheat resumed its downward trend and closed out the 23 1/2 cents lower - a contract low close.  Global supplies of wheat keep climbing, so what's needed here to improve this market's health is cheap enough prices that stimulate real, lasting demand.  Are we there yet?  Not quite, and that has a lot to do with corn, but look for our exports to pick up if we down to $4.50, which could help us start to bottom out.

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