Grain markets were mostly higher early Tuesday except portions of the wheat complex. Livestock were mostly lower.
Corn Resumes Rally as Funds Buy
Corn futures saw some light profit taking in the overnight session but were trading higher early on Tuesday.
December corn made new contract highs Sunday night getting up to $5.24 1/4 before encountering farmer selling pressure during the day Monday to end only 7 cents higher on the day. That triggered some profit taking overnight Monday.
Randy Martinson with Martinson Ag says the corn market saw new contract highs on Monday. Tuesday morning it looked like funds were back in buying the break.
“I thought we’d see a little bit more profit taking than we did. So I was kind of expecting the market to kind of take a breath here right now, kind of digest everything and then see a little bit more pressure. But it definitely shows that everybody wants to buy on a break right now. And that’s
exactly what’s been happening.”
How High Could Corn Prices Go?
He thinks the corn market has the potential to get to the $5.65 area.
“And I think at some point here, by the time we get into mid-September, we’ll be seeing those levels, especially if we get confirmation in USDA’s September crop production report of what we saw from the Pro Farmer Tour.”
Will USDA Confirm the Lower Corn Crop?
That is the big question. When USDA takes its objective field surveys in September, will they find as big a cut in yield as Pro Farmer?
Pro Farmer’s corn yield was down 10 bu. from trend and down 7.5 bu. from the August estimate at 180.3 bu.
Martinson says, “I don’t think we’ll see one that big. I expect that we’ll see maybe a couple bushel decrease or, three to four bushel. That would be about it, what USDA will want to do in one big setting. Everybody was really surprised that USDA made as big of a cut they did in the August report. So I think, you know, something like that will come into play. It’ll be a little more moot.”
However, after that he thinks USDA will slowly work into a smaller yield estimate by the time they’re done in December.
While the crop looks good on satellite and from the road there are problems.
“It’s kind of like 2012 when we had those really hot temperatures and we didn’t see a very good pollination. And so it’s kind of reminiscent of
that, where the NDVI’s and the pictures look good. I mean, the crop looks nice. I mean, it’s green, it’s lush, but there’s just been some damage as far as pollination is concerned, you know, a little less, you know, just because of the hot nights.”
Crop Ratings Drop
USDA’s crop conditions did back up the deteriorating crop with a 3% drop in national crop ratings down to 57% good to excellent.
The North Dakota corn crop rating dropped another 7% to 26% good to excellent and Minnesota was also down 2%. The crop tour did not get into North Dakota or the areas of Western Minnesota and the middle third of the state are in poor condition due to drought.
Martinson says North Dakota is a train wreck. “You look at our state, we got a couple of spots that have picked up some rain that will have maybe average or a little less than average yields. But everybody else is going to see some pretty dismal yield projections, especially after what we’ve been seeing over the last couple of years. So overall, yeah, I mean, we’re a train wreck. Western Minnesota is a train wreck. Northern Minnesota has got a decent crop coming. But for the most part, you know, we are going to see yields continue to decrease for these two states.”
Record Soybean Crop?
The crop rating nationally for soybeans also dropped 1% to 60% good to excellent and again North Dakota dropped 7% to only 27% good to excellent. South Dakota was down 3% to 46% and Minnesota fell 2%.
So, Martinson doesn’t think the U.S. will have a record soybean yield or crop because of the problems in the Western Corn Belt.
“The crop just isn’t there. And so I don’t think we have a record soybean crop.”
Funds Adding to Corn and Soybean Length
The volume on Monday in the corn market was over 500,000 contracts and the funds as of last Tuesday’s Commitment of Traders Report were long about 250,000 contracts in corn and 152,000 contracts long in soybeans.
However, Martinson says they are far from record long and could continue to add to their length.
“At this point, it seems like the funds want to go big or go home. And I think the way that we’ve been trading. So I wouldn’t be surprised for them to push to a record long position before this is said and done, especially if we continue to see these decreases in yield potential. And if we don’t get rain up here, and I would say in the Western Corn Belt, Northern Plains, if we don’t see rain by the end of this week, you know, our soybean crop, I mean, all our crops are really going to be suffering at that point.”
Counter Seasonal Rally
From the June 30th low in Dec corn at $4.25 3/4 to the high Sunday night the corn market had a dollar rally.
The rally is counter seasonal which makes it even more bullish according to Martinson.
“That is extremely bullish to see that happen. And the crop is starting to deteriorate rapidly, and that’s kind of the same scenario we saw in
2012. And the other part of it is we have good demand. I mean, our exports continue to be good. The feed demand continues to be good. Ethanol continues to be strong. So that’s adding to it that shows that we need to get these bushels and that there isn’t much wiggle room if we start seeing the yield drop too much.”
Soybeans Recover
Soybeans were down 15 cents Monday working in the record 53.3 bu. per acre yield from Pro Farmer but there were also concerns about China trade tensions.
The U.S. is putting economic sanctions on countries that do business with Iran, which could be a problem for the upcoming meeting between Trump and Xi, so that set the market back on Monday.
The U.S. is also putting an additional 7.5% tariff on China raising their overall tariff to 20%. While China was rebuking the tariff increase Martinson says it is a bargaining chip being used by President Trump to make sure China comes to the table during the Sept. 24 meeting in Washington.
Still, China has been buying U.S. soybeans on a regular basis and may have bought over an estimated 10.5 MMT of U.S. new crop soybeans so far. Another 4.85 million bu. flash sale of new crop soybeans was reported Tuesday morning to unknown destinations adding to last week’s 63 million bu. of export business to China and unknown.
“So I think they’re getting a lot closer to that 25 million metric ton. I would say they’re at least two thirds of the way there.”
That means soybeans will be well supported around the $12 mark as China will buy on the pull backs.
Corn and Soybean Demand Strong
Martinson says while yields are in question on corn but corn and soybeans are seeing very strong demand to help drive buying at these price levels.
“I think both markets, with the potential for where yields could be, where production could be, there isn’t a lot of room to move down right now because there gets to be too much demand. So until we get a better handle on where production’s at, I think this market’s going to be well supported.”
Wheat Mixed Eyeing Black Sea Headlines
While the wheat market got help last week from the rally in corn and soybeans the market stalled out Monday and is mixed early Tuesday.
He says the futures are consolidating while trying to determine the extent of the Black Sea export disruptions.
“I think we’re just chasing the headlines of what’s going on with the Ukraine and Russian war. They’ve been severely hurt. The big talk,
of course, 70% of Ukraine’s export potential has been impacted, 50% or 40% of Russia’s wehat has been impacted. So that, I think, hit the market pretty hard and helped support our wheat as well.”
However, he says until this translates into additional demand for the U.S. and increased exports it won’t get the trade’s attention.
Spring Wheat Harvest
The spring wheat harvest is 62% competed nationally.
In North Dakota, Martinson says the crop is coming in average to a little above average.
“I mean, everybody’s been a little bit surprised, but, most of the crop was made before the heat set in. So a lot of it is coming in, you know, good quality, you know, average yields. I do think USDA is still high on our yield. They’re at, I think, 55 bushels. I think it’ll be closer to like a 50 to a 53. So I think we’ll see some adjustments down. The western crop is pretty poor, but the central. and eastern crop is coming in average.”
Cattle Make New Lows for the Move
Cattle futures made new lows for the move on Tuesday again.
The market continues to see fund liquidation on concerns about Trump’s beef plan, and the border reopening.
USDA announced the second port in New Mexico will open in 30 days and the third port in New Mexico 30 days after that.
Monday, the Douglas, Ariz. port reopened with around 700 head inspected and allowed to cross into the U.S. there were another 750 head waiting to be inspected on Tuesday. That port saw nearly 1,500 head a day cross before the border was shut down to Mexican imports last year.
“So then that will start bringing a few more head in,” he says, “It’s a good test of the system to see if all the protocols are in place and if they’re going to work. So it was the right decision. You know, we’ve got the screwworm. So, I mean, there isn’t really any reason to keep the borders closed other than, you know, to protect our markets a little bit. But at this point, you know, it’s inevitable that it was going to happen and they picked the right spot to start having the cattle cross.”
Plan to Lower Beef Prices
The market on Monday disregarded the bullish Cattle on Feed Report placement number at 11% below last year as it was overwhelmed by the border news plus Trump’s plan to lower beef prices by 25%.
Martinson says the market is concerned about the additional 300,000 MT of ground beef or trim imports being brought into the U.S.
How Low Will Cattle Prices Go?
Cattle futures took out long term uptrend lines in place for the last six years on Monday and saw continued selling and fund long liquidation on Tuesday.
So, how much lower will prices go?
“I think we’ve got a ways to go down. The market is getting hit as we don’t know where this meat’s going to come from. And I think just the uncertainty about all of the details is really what’s got the market a little bit up in arms.”
