Morning Comments July 7, 2021

Grain

Our corn and soybean markets got whacked yesterday (corn down 40c, soybeans down ~90c) and after starting off weaker last night, we can see signs of recovery this morning with soybeans showing decent gains while corn floats around just shy of steady. One takeaway from yesterday’s price action: our markets have a liquidity problem, and simply put, an illiquid market is a volatile market.

The break yesterday reminded us all that big price swings will be “all part of the experience” this summer and that won’t be changing anytime soon. Look no further than soybeans, using round numbers: $1.30/bushel higher last week, $1.00/bushel lower yesterday, and a $0.40/bushel range so far this morning. If you have a position in that market, how does that make you feel? Does it make you feel like adding more, or does it make you want to stay on the sidelines? I suppose that depends on how much sleep you like to get. What we are seeing lately is that this challenging market has traders staying on the sidelines, lowering liquidity and raising volatility as discussed above. 

In other news, updated crop ratings were out yesterday afternoon (maps below). Corn’s good-to-excellent ratings were unchanged from last week while soybeans slid another 1%, down to 59% G/E. This is 12% lower than last year and the 5th lowest since 1996, which is likely the reason why our bean futures market is firmer today. Overall there is very little wiggle room for U.S. corn or U.S. soybean yields to decline, which means every six hours or so when the fresh weather maps are released our markets will react/overreact. I can’t really blame them; you can play around with numbers all you want, but if you take corn much below 175 bu/acre and soybeans below 49.5 bu/acre you start to run into problems. 

Currently:

Corn is 4 to 8 cents lower

Soybeans are 15 to 25 cents higher

July 7 Map 1
July 7 Map 2