Grains moved slightly lower overnight in a choppy session. Yesterday’s rally in old crop beans is certainly a testament to looming supply issues. The inability of new crop corn or beans to stage any significant bounce from recent lows may be evidence of trade perceptions of potentially record yield in many areas. Major stock market indices continue to push higher despite what many believe is an overall bearish economy. The US$ index looks poised to test calendar-year lows, a factor that likely has some risk premium built into the beans/wheat in particular.
Crop ratings were left mostly unchanged yesterday. Corn is rated 71% good-excellent while beans were rated 67% good-excellent. In general, crop ratings should begin to deteriorate this late in July, something we’ve not yet seen as weather conditions remain ideal.
Some areas in the western Corn Belt saw more rains overnight with some areas receiving in excess of 1 inch. More rains should be seen into the weekend providing for excellent growing conditions. Heat remains a non-factor headed towards the end of the month.
The mid to late summer timeframe can often be a choppy trading affair. We advise that speculators play the market very conservatively during this timeframe. Despite the trade’s perception of large corn yields, the market has been unable to make new lows thus far this week. Hedgers should take a look at re-owning any cash sales made at higher levels as option prices have come down drastically. We do not advise exiting hedge positions at any point. Producers hanging on to old crop corn may want to hang on a little bit longer while those owning old crop beans can still sell at historically high prices. A rebound in the US$ may find grain prices moving drastically lower if weather remains bearish.
Opening calls are 2-4 lower corn, 5-7 lower beans and 3-5 lower wheat.
