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Equity sell-off continues, commodities get a boost

Hundred-point swings have become a norm for the Dow recently and the index finished trade Friday at 11,143.31, down 301.31 this week, on Thursday.  Oil fell on demand concerns losing $1.52 settling at $85.53 a barrel.  Gold hit record highs over $1,800 en-route to a settlement of $1,752, up $92.30 on the week.  The dollar index fell sharply as global economic issues weigh on the market.  Despite the major sell-off in equities, grain commodities fared well.

Corn rallied 25 ¼ cents, Thursday, as the USDA revised ending stocks and production lower.  For the week, corn is up 10 ¾ cents, settling at $7.13 ¾ on the December contract.  With the USDA pegging yield at 153 bushels per acre, it appears that July’s heat had a larger negative effect than previously anticipated.  The full effect will not be fully known until the combines roll.  Exports were reported as 948,600 MT, which is up 22 percent from the previous week and up 6 percent from the prior 4-week average.

Soybeans were the laggards of the grain markets and were down 4 cents to finish Thursday at $13.32 on the November contract.  The market benefited from a bullish surprise coming from the USDA when the yield forecasts were dropped.  The commodity continues to trade in the $13-14 range that it has been stuck in for months.  Exports continue to disappoint at 144,800 MT, which is down 29 percent from the previous week and down 25 percent from the prior 4-week average.

The USDA report was mostly neutral for the wheat market, but wheat did follow corn higher this week adding 10 cents on the CBOT December contract, finishing trade at $7.32 ½ today.  Excessive rains for the spring wheat areas gave way for a revision lower for the crop, although overall wheat production was left virtually unchanged.  Exports were reported as 632,300 MT, which is up 34 percent from the previous week and up 21 percent from the prior 4-week average.

Agricultural commodities have held their ground in the face of a massive global sell-off in equities.  Grains received a nice boost in prices Thursday as the USDA reports revised production lower for corn and soybeans.  Exports remain relatively weak as we head towards the end of the marketing year.  Weather in the coming weeks will drive the market as we near harvest.

The month of August has not been kind to spot corn basis: down 9 cents on average across the country. The Eastern Corn Belt has been a major area of weakness, with most elevators in the area dropping basis for spot delivery by 13 cents or more. Since the first of August, we have seen barge rates along the Ohio River increase on a cent per bushel basis, and this has helped move basis lower in the region.

Recently, we have seen barge rates across most major river systems increase. As these rates increase,terminals along these rivers are forced to drop basis levels to compensate for rising prices. Following rising barge rates, Louisiana Gulf export basis was down four cents since the beginning of the month, further pushing basis down at grain buying locations up river.

Another major driver of spot corn basis in August was basis levels at key ethanol plants. Ethanol plants lowered spot corn basis by 15 cents on average since August 1, and particularly in the Western Corn Belt, this looks to be putting downward pressure on the cash market.

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