Market Commentary for 9/13/24
This week’s USDA report showed a corn yield estimate higher than what the trade was anticipating. However, the market’s reactions after the report suggest the trade doesn’t believe the yield increase.
Early Harvest Results
Drier areas of Nebraska and Ohio could suggest the national yield may go even higher in future reports. Many farmers in those areas have told me that fields with less than 1” of rain in the last 6 weeks are producing much better than expected. Most are telling me that early harvest yields indicate they have near or slightly above trendline yields.
Is The Year’s Low In?
Some market participants are suggesting that the market’s bullish reaction on Thursday and Friday to the bearish corn report could mean the lows for the year happened on August 27th at $3.85. While we won’t know for sure for several months, it’s certainly possible. One big factor may be the upcoming harvest pace. A fast-moving harvest could put pressure on logistics, forcing futures lower as farmers search for a place to store their crop quickly. However, if rains slow harvest progress, it’s possible prices may not make a new low as there will be plenty of time to grind through some of the crop.
Also, while it’s possible the lows are in, it doesn’t necessarily mean prices have to rally. Any price increase could slow the export pace, which would increase the carryout and hurt prices long-term.
What About the Funds’ Short Position?
The latest report shows funds have reduced their short position from about 350,000 contracts to around 130,000. Last year from September through May, funds never had a short position on that was much less than about 100,000 contracts. This could suggest that the funds may not cover any more of their short positions for now.
How Much Do Farmers Have Sold?
Farmers are VERY undersold for their 2024 crops. Most likely many will need to sell some crops to generate income before the end of the year. This could mean any rally will be met with selling pressure.
Bean Outlook
The USDA decided to wait another month to see what bean yields look like coming out of the field. While corn yields are doing well in dry areas, I don’t expect beans to withstand the August dry weather quite as well in some parts of the country.
Unfortunately for beans, there is too much supply globally and the US carryout remains burdensome even if the yield drops. While it plausible beans have hit this year’s low already, the upside potential will likely be limited until South America’s growing conditions are clearer in December and January.
Bottomline
For both crops, upside potential going into harvest will be challenging considering so little has been sold before harvest. The downside potential is still there, but the risk seems more and more limited.
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