Grains were quietly mixed early Tuesday, with cattle and hogs mostly lower.
Grains Mixed Ahead of WASDE
Allison Thompson with The Money Farm says grains were quietly mixed positioning ahead of the September WASDE.
Corn had a decent technical day on Monday and is solidly above the 50-day moving average but whether or not it can continue to push through resistance on December at $4.25 will depend on what USDA does with corn yield in the report.
How Much Will USDA Cut Corn Yields?
Average trade guesses show yield down about 2.8 bu. per acre to 186 bu. and Thompson says she wouldn’t be surprised if USDA slow plays cutting yield.
The crop has been severely damaged by disease and test weights will be impacted by dry conditions to finish the crop especially in the Eastern Corn Belt, but it may not show up until future reports.
However, she says the trend may be more important than the amount of the yield cut.
“Corn yields went up substantially in August and the market did not have an overly bearish response and so we could see the same trend in September,” she says.
Soybean Yield Cuts Minimal
She says soybean yield cuts may be minimal in the September report and the average trade guess reflects that at 53.2 bu. per acre, down .4 bushels from last month.
The soybean crop has also been hurt by late season dryness and disease but it may not be reflected until later reports.
WIll USDA Cut Soybean Export Demand?
The bigger question is whether or not USDA will cut export demand in the report due to the slow pace of new crop soybean exports and the lack of any sales to China.
Thompson says the market is still hoping for a China deal, even after the 90-day tariff truce was announced, and so the futues continue to hold.
It will be interesting to see if USDA reflects that in their export estimate or if they too hold optimism in their projections about getting a trade deal.
Cash Soybean Market Not as Optimistic
The cash market unfortunately is reflecting the lack of China business and as a result basis has widened substantially in North and South Dakota as well as Minnesota where Thompson is located.
She says some elevators have even indicated they may not take delivery at harvest on contracts as those bushels would have normally been exported to the Pacific Northwest.
Marketing Options?
Thompson says with the lack of a cash market and low prices she is advising producers to do some type of reownership strategy for soybeans and other grains on the board through futures or options.
“If we get a deal with China it will be reflected in the futures with a major rally and not in the cash market so producers need to be positioned accordingly,” she explains.
Is Wheat Trying to Bottom?
Wheat futures in all three exchanges posted a nice rally on Monday but failed to see much follow through buying on Tuesday.
Thompson says the market has been unable to put together more than a one day rally and while it is trying to bottom it is a slow process.
She is hopeful with spring wheat harvest starting to wind down the hedge pressure will start to subside and allow the market to rally.
Watching September Futures Expiration
The September contracts expire on Friday and Thompson is watching the price action for a signal of future price direction.
Often when one contract month expires it can set the tone for the deferred contracts.
