Today is technically the first day of autumn, but it would seem evident that someone forgot to remind traders that harvest is upon us and that the USDA is forecasting record bean production and just slightly off record corn. While we are still a few hours away from the weekly close, if we were to finish right now, November beans would be up for the 5th week in a row with a gain for the current week of nearly 10-cents, December corn would be up a relatively minor 1-cent but higher nevertheless and towards the highs of the week and while not in the midst of harvest, December wheat would be up 5-cents and set to post the highest close, both daily and weekly since mid-August. Granted, these are the early days of harvest, and at current price levels and amount of carry in the market, the first choice undoubtedly will be the bin, but these are futures markets that are always trying to anticipate the next step.
Of course, in the case of soybeans, we can look directly at the solid demand that has been buoying prices. Over 2MMT of sales on the weekly report released yesterday, the second largest single sale ever recorded earlier in the week, and this morning another sale of another 190,000 MT to Mexico reported, which have all combined to remind the trade that supply is only half of the equation, and we have been factoring it into the price for months. Unfortunately, corn could use a little stimulus on the export demand front but here again, the supply side story is growing old and I continue to believe is exaggerated, which would suggest that downside risk would be limited.
It is interesting to point out that evidently with the new marketing system in China, farmers in that nation are electing to hold onto corn inventory themselves, looking for better prices. Just as here, storage capacity could be a limiting factor, but now that the government has adopted a market price based approach, the Chinese farmers’ appetite for risk appears to be growing a bit as well. One must suspect that part of this could be stimulated by the well-publicized fact that the nation intends to increase ethanol production and as early as 2020, could be importing as much as 20 MMT of corn, nearly 6-times the current.
Capping off a week of additional natural disasters we appear to have manmade disasters brewing with an escalating war of words and insults between President Trump and Kim Jong-un of North Korea. The latter now threatens to test a hydrogen bomb, launched over Japan no less. This has left the equity markets and the U.S. Dollar a little unsettled but not panicked. Let’s hope that over the weekend, it results in nothing more than threats.
For those headed into the fields, we wish you a safe harvest weekend.