Is this something more than a Turnaround Tuesday?
At first blush, one could chalk up the pressure we are witnessing in the grain/soy markets this morning to typical Turn-Around-Tuesday type trade. While that may be the case, particularly in the wheat and corn markets, over in beans, the pressure is looking a bit more ominous. Not only was the rebound for the close in beans rather anemic on Monday, but the breakdown this morning has pushed a number of contracts into lower lows for this current slide. Yes, the weekly conditions report for beans did reflect a 2% improvement (60% good/excellent), and temperatures have moderated from the extremes we had experienced last week. Still, it would appear that the trade is willing to let August weather-risk premium slowly leak from this price balloon.
We are still quite away from labeling this an actual “bear” market, but I would point out that long-term indicators turned negative back in June. Part of the premise of technical analysis is that it will provide signals before the underlying shift in fundamental become evident.
Corn conditions, in turn, slipped 2% lower to a 62% good/excellent rating, and while not disastrous by any stretch, they are well behind the 72% rating a year ago at this time. We should soon begin seeing trade estimates for next week’s report, and no doubt, the industry will be looking for a reduction from the current trend-line estimate. I have seen a few yield numbers tossed around, ranging from 177 bpa to as low as 174. A quick review of the rest of the conditions report tells us that 91% of the corn is silking, and 38% has reached the dough stage. 86% of the beans are blooming, with 58% setting pods. Winter wheat harvest has reached 91% complete, and spring wheat is now 17% harvested. The conditions for spring wheat did improve 1%, but at 10% good/excellent, that is not saying much.
The safrinha corn harvest moved ahead by 10% this past week, reaching 49% complete. This compares with 61% harvested a year ago. Dr. Cordonnier commented that this was undoubtedly some of the earliest planted corn and, as such, will probably have been some of the best yields. As such, he lowered his estimate by another 2 MMT this week. He also noted that the winter wheat in that country had been negatively impacted by freezing temps. The Argentine corn harvest has now moved up to a bit over 81% complete.
In the macros this morning, we find energies under decent pressure, metals weak, financial instruments extending yesterday’s solid gains. The US Dollar is now flat after early selling any equities lower after early strength.
