Grains ended mixed on Monday with livestock and equity markets all higher.
Soybeans Finally Bounce
Tommy Grisafi with Nesvick Trading Company says soybeans and meal both saw a short covering bounce after a long string of lower days.
“Shorts took some profits off the table, which is not a big surprise,” he says.
However, weather forecasts look a bit drier after August 15 which he thinks parked some buying in soybeans as traders added some weather premium to the market.
“The crop isn’t made yet and remember last year it got dry into harvest and cut soybean yields,” he adds.
Demand is a Concern for Soybeans
With China still absent from the soybean export market there are growing concerns about demand going into harvest.
China has not purchased any new crop soybeans from the U.S. and may not without trade resolution and the Aug. 12 tariff deadline looming.
Grisafi says not only did futures drop in July on this concern, basis levels have collapsed for soybeans in many areas of the Corn Belt.
“My clients in North Dakota, I did notice some cash soybeans with an $8.80, $8.90 bid. And Michelle,
those numbers just don’t work for anyone. My bigger question is how wide could that basis get if the bushels, if we end up having a great crop here and no one to buy it right when we need them to buy them?”
December Corn Makes New Contract Lows
Corn futures gave up early gains, unable to follow soybeans, and the December contract fell to new contract lows.
Funds continue to sell corn and Grisafi says the market keeps grinding lower trying to determine how big the crop really is.
“It’s a race to the bottom to determine how big the national yield is with the strong crop ratings and favorable weather for most of the growing season,” he says.
How Low Will Corn Go?
He says corn futures made contract lows but December could fall below $4 and maybe even another 30-cents to price in a record crop.
And futures prices aren’t the only problem for farmers, as basis levels in the country have also widened out going into harvest.
That means cash corn is already down to the $3.50 level in some areas of the Dakotas.
“We’re talking $3.40, $3.50, $3.60 cash corn, where you have a poor basis, decent basis, maybe $3.75 corn.”
Wheat Also Hits Contact Lows
Wheat futures ended mixed with all three classes making new contact lows during the session.
The market ignored the weaker dollar, no doubt following the weakness in the corn market.
Grisafi says he was surprised an escalation of fighting between Russia and Ukraine also failed to support the market and he thinks it will be tough for wheat to bottom until the corn market bottoms.
“There is also just too much wheat in the world right now with the Northern Hemisphere harvest yielding ample bushels,” he says.
Marketing Advice Before Harvest
Grisafi says there are bushels that will need to move before harvest so what is his advice?
“Start looking at the carry. The more we get bearish in the front, the more they’ll reward you for your ability to store and hold it. Understand what bushels you can’t store. We’re coming to the point of year, you are going to have to market and prepare for what grain you can’t store. So the most important bushels to prepare for are the ones you can’t store. Also, just to note, great time of year to call your crop insurance agent and say, hey, if we keep going down based off the insurance I bought, how do those numbers look versus the yield you think you’re gonna have? So prepare for what bushels you know have to go to town, call the crop insurance agent and buckle up,” he explains.
Financial Markets More Attractive Than Grains
The stock market also had a nice recovery on Monday with tariff fears calming. The EU said they would delay their retaliatory response for six months to allow time to work on a trade deal, which seemed to calm the financial sector.
Grisafi says the resiliency of the stock market in the face of tariffs and other uncertainty has attracted investors or fund traders at the expense of the grain markets.
“The stock market and other outside markets are a more attractive place for investors to put their money,” he states.
Cattle March Higher on Record Cash
Cash cattle traded at record levels last week and helped fuel the rally in the futures on Friday and Monday.
Cash in the North live ranged from $242 to $247, dressed prices were mostly $383, up $3. Live sale prices in the South were $235 to $236, up $2 to $4 from last week.
Grisafi says the market is getting into rarefied air and he cautions producers to look at risk management through LRP or futures and options to protect downside risk.
