Will price support hold, analyst asks
The next question the market needs to answer is, “Will support at the Sept. USDA report low hold?”
So far it has, as the market formed an upside reversal after the Sept. 10 report and rallied nicely in corn and soybeans, despite the report being quite bearish – both for U.S. and world numbers.
However, after rallying for about a week following the bearish report, the market is now faltering. In typical fashion, the market seems to have trapped anyone who sold a bearish report, and punished them for one week until most probably liquidated their short positions. That clears the way for the market to drop hard … if we break that support.
Weather forecasts continue to call for above-normal temps and below-normal precip for the next two weeks. There is a bit of rain in Missouri and Illinois today, but only light rain elsewhere in the eastern Corn Belt. Essentially, this is going to lead to a rather rapid harvest as we enter mainstream harvest.
We moved to more aggressively selling grains a week after the report, skeptical the post report rally was anything more than a bear trap. So far, that seems to have been a very wise decision. Pro Ag has sold three to four crop years in the past 12 months aided by the wisdom of knowing that, after six years of bad prices, selling at the lows was no longer a good alternative. In fact, there was virtually no risk storing $3.10 corn futures and $8 soybean futures levels. That patience paid off immensely for the two to three years of crops in our bins or owned on paper.
Twitter had fun with that idea during the pandemic, but we were fine with that when we deposited our profits in the bank in the past year!
Will it be wise now to sell $5 corn, $12.50 soybeans, and $7.90 HRS wheat for 2022? We have something to protect here vs. the $3 corn, $8 soybeans, and $4 wheat everyone fell over each other to sell during the pandemic and trade war. There were plenty of marketing advisers who recommended that. We just couldn’t see where that wisdom was coming from!
Crop conditions released yesterday showed 1% improvements in both corn and soybeans, with corn at 59% rated G/E, and soybeans 58%. Pro Ag yield models rose .76 bu to 178.4 bu corn (vs. 176.3 USDA), and dropped 0.05 bu to 49.3 bu soys (but we lost the 1988 crop year in ratings).
So, it appears that both corn and soybean conditions are rising during harvest, usually a sign that crops are better than expected. With little risk of frost this year as crops are advanced (+4% ahead dented corn, +10% mature; soybeans +10% dropping leaves), the crop will probably continue to improve through normal frost dates. That means prices are bound to move lower as we harvest this crop. And, 10% of the corn is already harvested and 6% soybeans, so it will advance quickly in the coming weeks.
That will spell trouble for corn and soybean markets because if we fall below the upside reversal formed on the bearish Sept. report day, both will be susceptible to larger losses.
Note that sorghum is also advanced (+5% mature), with conditions much better than last year (56% rated G/E vs. 51% last year). Sugar beets are 12% harvested, with a good situation for harvest with more moisture now in the ground making it easier to lift the beets from the soil. Winter wheat is 21% planted (3% ahead of normal), and 3% emerged (1% ahead).
Pasture/range condition is 24% G/E, down 1% and just slightly below last year’s 27% rating.
Soil moisture is 50% adequate surplus topsoil (-1% this week) but still slightly below last year’s 58% rating. Subsoil is 48% rated adequate/surplus, -1% this week and below last year’s 57% rating. The soil moisture problem is still in the northwest, but it has improved immensely from Aug. 20. In fact, the outlook for 2022 crops also improved in the northwest Corn Belt with the fall rains arriving. Dry weather is also depleting soil moisture supplies nationwide now, but no one minds since it is also helping harvest.
In summary, it's been a fun ride higher the past 12 to 15 months; the market made great strides to help us forget $3 corn, $8 soybeans, and $4 wheat. Yet, those market lows are still on charts, and because of that are always in reach during almost any 12-month period (just like $7.70 corn was within 12 months’ reach last May when prices were $3). Markets fluctuate with the times, and we must remember we are mere humans, not gods.
Saturday morning webinar
View our Saturday 7 am webinar at www.progressiveag.com/videos . This week: We explain pricing of 2022 and forward crops, and the best way to do it.
Ray can be reached at email@example.com.
Ray is President of Progressive Ag Marketing, Inc., a top Ranked marketing firm in the country. See http://www.progressiveag.com for rankings and link to data from Top Producer Magazine and Agweb.com.
This material has been prepared by a sales or trading employee or agent of Progressive Ag Marketing, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Progressive Ag Marketing's Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.
DISTRIBUTION IN SOME JURISDICTIONS MAY BE PROHIBITED OR RESTRICTED BY LAW. PERSONS IN POSSESSION OF THIS COMMUNICATION INDIRECTLY SHOULD INFORM THEMSELVES ABOUT AND OBSERVE ANY SUCH PROHIBITION OR
RESTRICTIONS. TO THE EXTENT THAT YOU HAVE RECEIVED THIS COMMUNICATION INDIRECTLY AND SOLICITATIONS ARE PROHIBITED IN YOUR JURISDICTION WITHOUT REGISTRATION, THE MARKET COMMENTARY IN THIS COMMUNICATION SHOULD NOT BE CONSIDERED A SOLICITATION.
The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future
results. Trading advice is based on information taken from trades and statistical services and other sources that Progressive Ag Marketing believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that advice we give will result in profitable trades.