Tuesday corn and soybeans were slightly higher with wheat leading the way sharply higher. Coming into the day session the overnight trade was weaker and the US dollar was sharply higher. The market opened on its day lows and traded sharply higher by noon. At settlement December corn was 2 ¼ higher, November beans were 1 ¼ cents higher, and December wheat was 18 cents higher.
Wheat’s strength can be mostly attributed to yesterday’s crop rating of winter wheat which was only 47% good to excellent compared to 62% this time last year. The funds are net short Chicago wheat against net long corn and soybean positions. So with a bullish Winter Wheat crop rating, it is a strong catalyst to take profits on these spreads they are in. Over the past week wheat has been at its cheapest levels compared to corn and beans for a long time so it didn’t take much for those spreads to reverse today.
Crop progress shows harvest at 83 percent complete for corn which is well above the 5 year average of 49 percent at this time of year. Soybean harvest is at 91 percent complete and is ahead of its 5 year average of 72 percent at this time of year.
Grains continue to be highly affected by changes in the US dollar. Corn remains bullish from lower than expected production, but corn demand hasn’t been much of a story lately. For beans the opposite: world production has been strong but so has expected demand. This goes right along with what we have been hearing from the fields: on average variable corn yields and strong bean yields throughout the belt. We could easily see a further reduction in the national corn yield and an increase in the bean yield in the next WASDE report (November 9th). Between now and then staying well protected is important especially since the first set of moving averages are well below current levels and volatility remains high. For upside potential please call your broker if you still need to get spring call spreads on.
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