ProFarmer finds smaller corn, larger bean crop than USDA

Corn - Corn up close - by PixelAnarchy via All-free-download_com

Howdy market watchers! 

The stage is set!  There are now only two tickets for the highest office in the land.  Incumbent Vice President Harris and her running mate Walz accepted the Democratic nomination on Thursday while RFK, Jr., suspended his campaign on Friday, endorsing the Trump-Vance campaign.  Now, let the games begin.  

It is now to the state-by-state campaign trail to convince voters as to whose views are most important to the issues of most concern to the majority.  While there are plenty of social issues on the agenda, it feels that the economy is going to be of critical concern to all voters as conditions tighten and the job market softens.  

Some optimism developed on Friday, however, with Fed Chair Powell speaking from the Jackson Hole Symposium about coming rate cuts.  “The time has come for policy to adjust,” remarked Fed Chair Powell at the open, foreshadowing a greater degree of likelihood that the first interest rate cut will indeed come at the FOMC’s September meeting that will be announced at 1 PM CDT on Wednesday, the 18th.  Despite much rhetoric that a rate cut has been priced into the market, the equity markets surged with all major indices closing up over one percent.  

What a wild ride the month of August has been in the markets with nearly all losses in the first week being regained through Friday’s close with one week left until a new month begins.  The potential for rate cuts adds buoyancy to market optimism, but we will likely know in the week ahead just how much of the expectation was priced in with a slew of economic data released each day next week along with corporate earnings to gauge consumer strength.  
 

Dow Jones Industrial Average recovers nearly all early August losses


The US dollar came under even greater downward pressure Friday with more certainty of interest rate cuts and is now at the lowest level since late December last year when the dollar index bottomed.  Depending on the coming data releases, we could see the US dollar break that low. One would sure think such a dramatic plunge in the US dollar would spark buying interest across commodity markets, especially considering how much commodities have already fallen, but the wait continues. 
 


Crude oil and metals did surge on Friday and we will see how these rallies evolve next week.  The grain commodity complex, on the other hand, just cannot catch a bid.  

September grain options expired on Friday, which often brings some weakness to the futures contracts and that it did.  Soybeans managed to hold gains with China buying US origin every day this week, but wheat and corn continue to be pressed.  The wheat market, in particular, should benefit from more news of emerging demand around the world and the weaker US dollar, but not yet.  

We saw another new low in both the Chicago and KC wheat contracts on Friday with the session close near those lows.  The charts just do not look good and we desperately need a trigger to spark a reversal.  

The corn market managed to hold its ground somewhat better after Friday highs at the 9-day moving average, but closed near session lows although held last Friday’s new low by just over one penny.  Corn picking is well underway now in Oklahoma and will soon begin progressing north to larger production states where yield and production really count.  

ProFarmer released consolidated estimates from this week’s Crop Tour with national corn yields and production coming in below USDA’s latest figures.  ProFarmer called US corn yields at 181.1 bushels per acre (bpa) versus USDA’s August 12th update of 183.1 bpa while ProFarmer’s production came in at 14.979 billion bushels versus USDA’s 15.147 billion bushels.  The opposite held for soybeans with ProFarmer expecting a larger crop than USDA’s latest forecast.  The ProFarmer Crop Tour pegged national soybean production at 54.9 bpa and production at 4.74 billion bushels versus USDA’s 53.2 bpa and production of 4.589 billion bushels. This clouds the corn picture slightly with few estimates seeing this year’s corn crop below 15.0 billion bushels. 
 

2024 Crop Estimates National Corn and Soybeans_AgWeb.jpg


These soybean sales to China are critical as the US soybean crop continues to get larger.  There is also the threat of dryness in Brazil that this soybean market will need in the coming months to hold these levels or risk further deterioration.  

Corn and soybean conditions were held steady this week at 67 percent and 68 percent Good-to-Excellent, respectively.  US spring wheat conditions improved and are well above 5- and 10-year averages and has added some downside pressure on the wheat complex.  The anticipated Canadian rail strike that halted all rail traffic in Canada this week resulted in quick, government intervention on Friday, resuming operations on one of the two railway lines.  However, discussions are still ongoing on the agreement.  This uncertainty also added downside pressure to the wheat complex although there is reason to think that this could have supported markets. Either way, I would expect this issue to get resolved and be a non-issue in next week’s trade.  

Cotton conditions have started declining and with the rebound in equity markets and crude, there could be bottoming action here and potential move higher after trading above the downward trendline.  
 

ICE December Cotton futures


The cattle market managed to find support this week after the recent deluge of selling.  Front-month feeder contracts reached the 9-day moving average while deferred months are lagging these earlier months.  

It was report week with the monthly Cattle-on-Feed report released at 2 PM by the USDA, which was after the 1:05 PM livestock market close.  Pre-report expectations were for on-feed figures for August 1st to be the same as last year from higher placements offset by much higher marketings.  However, as was my concern, placements came in higher than expected at 105.8 percent placed versus 104.0 percent anticipated.  Furthermore, marketings were lower than expected at 107.7 percent versus 108.2 percent guessed by the trade.  This brought on-feed figures to 100.3 percent versus 100.0 percent expected.  
 


Ultimately, the on-feed number wasn’t as far off as the placements and marketings seemed, but still may add some downside pressure to start next week.  It is the funds versus the fundamentals.  Volatile swings in the futures markets do not reflect reality as many of us see it given continued liquidation of the herd that has yet to start rebuilding.  

The cash markets are good evidence of the tightness in supply to meet continued strength in demand.  Fed cash cattle finished the week with highs at $184 in Texas.  Having said that, we still need the futures contracts to cooperate to enable supply chain hedging and not adding undue concern of a bleaker economic picture.  

Of great frustration, the USDA elected not to offer LRP on Friday given the Cattle-on-Feed report.  This is just another limitation of this government product that producers need to be aware of that is not always communicated beforehand.  I advise those with cattle exposure to have both a futures account as well as LRP to have more flexibility in your risk management strategies.  

Sidwell Strategies offers both in one place and so join the Sidwell Team today!  Sidwell Strategies is the one-stop shop to protect cattle with futures, puts, LRP or a combination of all, which is probably the best strategy overall.  If you’re ready to trade commodity markets, give me a call at (580) 232-2272 or stop by my office to get your account set up and discuss risk management and marketing solutions to pursue your objectives.  Self-trading accounts are also available.  It is never too late to start and there is no operation too small to get a risk management and marketing plan in place.  

Wishing everyone a successful trading week!  Let us know if you'd like to join our daily market price and commentary text messages to stay informed!

Brady Sidwell is a Series 3 Licensed Commodity Futures Broker and Principal of Sidwell Strategies.  He can be reached at (580) 232-2272 or at brady@sidwellstrategies.com.  Futures and Options trading involves the risk of loss and may not be suitable for all investors. Review full disclaimer at http://www.sidwellstrategies.com/disclaimer


On the date of publication, Brady Sidwell did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.