While it was certainly not for lack of effort, but bears were unable to keep the grain and soy markets under pressure yesterday as prices worked back into the positive column for the close, which has led to additional strength in the overnight hours. Does this mean the correction is complete? We have not quite confirmed this as of yet, but I do believe the market is telling us that until we have a better handle on production, the bears will not be able to muscle prices much if any lower than we have this week. Do keep in mind, this is not to say that the bulls will have free reign either but looking at the grains in particular, not only have we pushed down into critical levels of support, we have weekly oscillators oversold to the point that a 3 to 5-week rebound would look within reason.
At least a portion of the strength in corn is being attributed to forecasts for warmer temperatures to return next week and beyond. With the exception of the Texas Panhandle and bordering states, I have not seen were anyone is called for excessive heat just yet. The reality for much of the crop in the upper Midwest and certainly that east of the Mississippi, we do need to experience a little more above normal temperatures if we hope to catch up on GDU’s before fall.
Beans were supposedly supported by a report that trade representative Robert Lighthizer will be headed for Beijing early next week for a resumption of trade talks. While not to say this is not a welcome development, it is interesting that it will coincide with a period where China would appear to have little interest in U.S. beans, to begin with, outside of some token goodwill business. Last week Chinese officials met with crushers in that nation and informed them that they could apply for exemptions from the 25% tariff on beans arriving by the end of this year. The problem is that even with the tariff wavier, U.S. beans were still not competitive with Brazilian beans at least through October. There was a sale of 100,000 MT of beans to unknown destinations reported this morning. I would suspect this was someone other than China, is if it were a goodwill gesture in front of the next meeting, one would have to suspect they would want their name on it.
There have been a few world production updates released overnight with the usual mix of positive and negative news. On the positive side, the Russian consultant group SovEcon trimmed its estimates for that nation’s crops. Total grain harvest was trimmed from 121.9 MMT to 117.2, with wheat lowered from 76.6 MMT to 73.7 MMT. In South Africa, while the official government number will not be released until Thursday, private analysts are looking for a slight reduction in the corn output, now estimating a crop of 10.913 MMT. On the other side of the coin, APK-Iform from Ukraine boosted its grain harvest estimate for crops in that country to a record 71.8 MMT, up from the previous estimate of 70.4.
While you have undoubtedly read this already but, last but not least, Ag Secretary Purdue announced yesterday that the details of the aid package from the Federal Government would be announced by the end of this week. The total is still expected to be around $16 billion, but exactly how the pie will be divided is the unknown. He did state that at a minimum, farmers hurt by the trade tariffs would receive $15 per acre but will be divvied out in three tranches. The first, which is where the minimum $15 would be issued, should account for around 50% of the payment and the second and third payments would be defendant on market conditions. I would interpret that as you may or may not see those.