Soybeans sell-off after "frost" fails to materialize 8/31/09

Published on: 16:34PM Aug 31, 2009
Sep 09 Corn
326 ¼    
+ 5 ¼
Dec 09 Corn
329 ¾
+ ¾
Nov 09 Beans
979 ½ 
- 31 ½
Sep 09 Wheat
+ 4
Sep 09 KC Wheat
+ 5
Sep 09 Min Wheat
521 ¼ 
- ¼
Dec 09 Meal
- 11
Dec 09 Oil
- 1.09

            December corn closed slightly higher on the day and 20-cents lower on the month. Good August weather and good yield outlooks weighed on prices this month. High feed wheat supplies, the potential for record corn yields and lower animal numbers should keep prices on the defensive heading into harvest. The crop is still lagging in maturity and this has kept prices stable as the market is waiting to see when the first frost/freeze hits the Midwest. There were some areas of the northern Midwest that saw temps reach the mid to upper 30’s over the weekend, but not cold enough for a frost to occur. Temperatures now look to warm back into the 70’s and 80’s with no frost threats seen for the next 14 days. There are a lot of people waiting to sell their crops once we “get by” without an early frost. This could cause another large sell-off as we head into the end of the month. Corn yields look to be very large as long as an early freeze does not hit before the end of September. The market will still be sensitive to “early” frost forecasts, but there are a lot of bushels that need to be sold/ moved in the next 45 days. On the positive, the demand front looks to be improving for corn. Ethanol margins are at the highest levels in over a year. As long as energy prices remain strong, this should continue. 28-year highs in sugar prices could also add support to the global ethanol market as less sugar is used for ethanol production in South America. Corn also looks to lose acres to soybeans in South America this fall. So, although I still think corn prices could break another 40 or 50-cents from here, there are some positive signs ahead. 
            November soybeans closed 32-cents lower on the day and 2 ½- cents lower on the month. November soybeans have been trading in a very wide trading range for the past 3 months. Large Chinese purchases, tight old crop supplies and the fear of having an early frost have been keeping the market supported. Good weather and weak domestic demand have been keeping prices capped. Tight old crop supplies have kept the soybean market very sensitive to any adverse production news. The possibility of an early frost is keeping the market supported for now. However, I still believe that without an early frost soybean prices could head much lower this fall/winter. Traditionally, cool and wet conditions during August result in very large yields. I know that a lot of people will disagree with me on this one. I know that there are some disease problems (white mold, SDS, ect.), there always are. I do believe that heavy rains throughout August will more than offset these problems. An early frost would change my opinion, but even with a normal frost I think we could see a record national yield. That’s just my opinion and only time will tell. If I am right, there are very few people even talking about the possibility of a record national yield. Right now, most people are trying to figure out if the USDA’s current yield estimates are too high or if their demand numbers are too low, or both. The entire marketplace from the hedge fund to the farmer is convinced that the soybean market is going higher. Again, maybe everyone is right. Either way, as a producer I would still have downside protection from here just in case we do have a very large sell-off. 
            Wheat closed 4-cents higher on the day and 57-cents lower on the month. I hate to sound like a broken record, but large global stocks and weak demand continue to weigh on prices. High crop ratings for the spring wheat and large supplies of winter wheat are helping the carryout continue to grow. Global stocks continue to grow, and domestic wheat prices are trying to find additional demand. Cheap wheat out of the FSU and cheap corn and DDG prices in the U.S. are making that a difficult task.  Wheat made fresh 2 1/2 –year lows today before closing higher. End of the month buying helped wheat prices rebound sharply late in the day. The funds are holding very large “short” positions, so at any time we could see a 30 or 50-cent rally off of the lows (like we had from 8/24 to 8/25). However, at this time a producer needs to be in the position to sell those rallies.
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