Rich Nelson with Allendale, Inc. says grains continued to rally on Wednesday.
Corn has now strung together three higher days and is approaching one-month highs and soybeans and wheat have seen even a longer stretch of higher days.
Funds continue to cover short positions in the grain markets with the downtrend line in soybeans taken out and strong technical signals in corn and wheat as well.
However, he says there is also a fundamental push coming from moderating yield expectations in South America and in the U.S.
The U.S. sentiment was reflected in their national annual yield survey which came in with a slightly lower corn yield than USDA at 182.5 bushels per acres, while soybean yields were slightly higher at 53.33 bushels.
However, he says the market has been pricing in even higher yield expectations and so this may be an early indication of what USDA finds for the September WASDE estimates.
“Its not exactly a lower U.S. yield we’re trying to price in, perhaps we would say its not as big of an increase coming as the market had prior expected. Keep in mind at one time soybeans, based on yield and export concerns were pricing in stocks numbers as much as 100, 120 million bushels over USDA’s most recent estimates. So I think we’re reining in some very bearish expectations here,” he explains.
He also points out that in the past few years farmers have harvested better crops than expected.
That combined with a pick up in demand, especially soybean exports, could sustain the rally for a while yet according to Nelson.
“On corn, if we don’t have a yield increase next week and we’re left with these stock numbers around 2.0 to 2.1 billion bushels this could allow this market to have a little upside, perhaps another 30 to 40 cents. Soybeans maybe another 20 cents or so,” he adds.
