Market continues higher based upon disappointing early harvest corn yields and expectation of continued export buying. The corn market is now becoming the leader of the current bull move. Early yield reports are suggesting that it will be very difficult to meet the current USDA estimates. Expectation is growing that USDA will be forced to reduce crop size in the upcoming September report.
End users and producers who have previously sold inventory are starting to become concerned that limited fall weakness will develop. We have been waiting for a correction to buy next year’s feed needs but it’s looking increasingly like the seasonal price action will not work this year.
We would recommend feed buyers start buying based upon the calendar rather than flat price. We however would suggest buying via an in-the-money call rather than futures just in case the bulls get surprised by yield once the harvest gets into full swing.
As for the soybean market, it’s rallying but nowhere near as strong as corn. Harvest has already started in central Indiana. The yields are overall average but nothing exceptional. The trade attitude is still concerned that the current high USDA estimates will be revised down significantly because of the hot and dry August weather. Remember a 1.5-bu. drop in the U.S. yield will take us from a adequate supply back to reasonably tight stock levels. The trade currently is trying to put weather premium into the market. At this time we will be recommending moving slow on selling 2011 inventory.
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