Grains markets closed higher on Tuesday with livestock lower.
Soybeans Hit Contract and Multi Year Highs
Soybeans gapped higher on Monday night with massive fund buying during the day session.
Allison Thompson with The Money Farm says USDA’s crop ratings on soybeans dropped 2% to 58% good to excellent which fueled the fire. “You’re also seeing maturity pushed and that is kind of telling us that we’re kind of running out of steam here.”
Combine that with weather forecasts that look hot and dry for the first part of September and the market is starting to get concerned about a smaller crop.
“So I think that we’re going to be dealing with a smaller yield all in all and with better demand it puts more pressure on yield,” she says.
China/Export Demand
China was back in for another 5.0 million bu. of new crop soybeans on Tuesday morning after a 5.9 million bu. flash sale to unknown on Monday.
Thompson thinks China will continue buy up to the September 24 meeting between President Trump and President Xi.
“I believe that they will. And I think that’s just another thing that’s pushing this market along is we’re creating new highs, but we’re still getting export business coming in. So it’s really hard to sell a market that is finding demand at these prices,” she adds.
Bean Oil Surges on SRE Decision
Soybean oil also surged higher with EPA offsetting the Small Refinery Exemptions totaling 1.76 billion RINs with 770 million RINs that would be reallocated to the RVOs for 2026 and 2027.
Thompson says that helped rally the RIN market and the bean oil market.
“There was some reallocation of the RINs and those values have gone higher. So, we’re seeing some incentive here on the demand side of the market and obviously it’s just another spark of demand here in the soybean complex.”
Beans in the Teens
With November soybeans pushing and closing above the $13 mark where do values project to now?
Soybeans put on over $1 in August alone, which is rare to see this time of year according to Thompson as it is counter seasonal.
“It’s only been a few times in the history of keeping track of markets here that we’ve seen highs for the year being printed after the month of August. So entering September here and we’re already making new highs for the year we’re definitely dealing with the counter seasonal move and counter seasonal moves can be very strong,” she explains.
Thompson says after crossing $13 she was watching $13.20, which the market traded through on Tuesday but did not close above.
“So getting above that on a closing basis, I think opens the door for another leg higher. I’d be looking at $13.50 as the next target at this point,” she says.
Corn Hits Contract and Three Year Highs
Corn was also higher hitting new contract highs as it continues to price in a smaller crop. The weather is not providing the best finish for the crop in areas of the Western Corn Belt and that may further cut yield.
Thompson says, “It’s the same case that we’re seeing in the beans. You know, a lot of maturity is getting pushed along. And then, of course, we’re starting to get some weather now which doesn’t really do much for the crop. So I think that the market’s well aware that we’re going to
have a production shortfall. It’s just kind of a question now over the next couple of weeks of what the USDA is going to do in their next report.”
September WASDE
So how much will USDA lower corn yield in the September report?
Thompson thinks USDA will lower yield but the market is already pricing a yield cut in so they could be disappointed. “I think that we’re going to have to see a lower yield. Typically, they’re a little bit more conservative this early in the season,” she says.
By the October report there will be more yield reports coming in to support a lower yield she says, “Lower test weights are going to come in. We’re probably going to see some of that yield drag just from that alone.”
However, with strong corn demand the quarterly stocks report at the end of September may be just as important.
Inflationary Buying?
With crude oil also up sharply on the escalation of the war in Iran the corn market and the grains in general may have been seeing some inflationary buying.
She says, “I think inflationary pressures just come more into the scope of things when we’re pushing $90 crude again, as high as we’ve been here in a month. So it just kind of reopens that door. We’ve definitely kind of separated ourselves from the Middle East conflict and things like that, but inflation keeps us locked in. So when you are getting big moves or escalations, you know, tensions escalating, it’s hard for grains to ignore it.”
Super El Nino
That is bringing in massive spec money from the hedge standpoint, plus concerns about Super El Nino.
“And that’s going to be the next thing we’re going to be talking more and more about here in the months to come, especially with South America getting their planting underway”
Higher Monthly Close in Corn
December corn up about 75 cents on the month but it feels like the market wants to go higher. What is the next area of resistance on the charts?
She says, “We actually are near to my next level of resistancethan I thought we would be at this time. But obviously, $5.50 is just a big, fat,
round, psychological level of resistance that the market’s going to have to get across. So that’s going to be the first line. And really, above here where we’re at in the market, there’s a lot of air. So once we get past that $5.50 mark, I wouldn’t be surprised to get to $6 rather quickly.”
Thompson looked at some retracements going back to the old highs at over $8 and then using the lows from a couple years ago. She says the 38% retracement is right there near the $5.50 mark. “So, I think that could be a level that the trade may struggle with initially and maybe that’ll finally give us you know a little bit of relief here in the market maybe we’ll see you know some consolidation around that area until the market gets something new.”
Black Sea Export Issues Continue
The corn and especially the wheat market have been putting in some risk premium with the Black Sea export disruptions. Plus, Russian President Putin has rejected any grain corridor deal.
Thompson says that should not be a surprise. “We were dealing with this just a couple of weeks ago as well. So no new corridor movement. And it sounds like their grains are going to be backpiling or at least not having very good flow here over the next couple of months,” she adds.
How high will wheat prices go to factor the loss of exports in? Thompson says it depends on how much exports continue to be choked off.
“We’ve started seeing their exports really slow here over the last month, but it needs to be prolonged. I mean, we’re in the world of wheat and there’s always new wheat coming on the market. So it’ll be very interesting to see how the market reacts to that. But it also needs to incentivize, too. We’re still dealing with dry conditions here in the U.S. the EU. And now we’re dealing with issues in Russia and Ukraine, all of which should be looking at planting their winter wheat crops here shortly,” she says.
To incentivize planting of winter wheat will take much higher prices in her opinion she speculates.
Less Wheat Acres
Ukraine farmers are already talking about planting less wheat and Southern Plains farmers may do the same without some rain soon.
“Especially after the last year, we were dealing with lower production as well. And it just doesn’t sit good. I know prices are there, but guys really like to have a crop. It’s just a farmer mentality. So I’d like to see some conditions, you know, improve here in the near term. We still got a couple weeks before we really see planting really kick off. So if we can get some better conditions here in the next couple of weeks, that’ll be key,” she says.
How High is Too High?
How high do prices need to go before the U.S. is priced out of the export market?
Thompson says while weekly exports are not on fire for wheat or corn, they are well ahead of last year for soybeans. So she says prices aren’t high enough yet to ration demand.
“We’re seeing China continue to buy, but world weeds is obviously a little bit different too. We’re going to be starting to watch the Southern hemisphere and obviously with trade flows and things and the EU not having a crop, it could be a very interesting end to the year here.”
Cattle Struggle
Cattle futures were again struggling on Tuesday and the market can’t seem to find a definitive bottom. Higher corn prices did not help but there have been plenty of other outside factors.
Thompson says while supplies are tight the headlines have continued to be negative for beef prices and the cash market has also continued to fall.
“Obviously it just comes down to cash. We need to see cash come up and I think futures can finally hopefully hold a bottom,” she concludes.
