Morning Comments September 16, 2021

Grain Bins

Markets are continuing to show some strength this morning after a decent performance yesterday. 

As we spoke about yesterday morning, the market has for now digested all of the negative to price news it wants to hear and is instead now focusing on the bullish 'what ifs.' 

Lots of chatter yesterday about disease taking the top end off of some of the earliest harvested corn. Tar Spot had been relatively unknown for many outside of Michigan here over the last couple of years it seems, but with the right conditions of warm and wet in July, it appears to have exploded over much of Michigan, Indiana, Ohio, Illinois, with some reports of it into Eastern Iowa.

There are a ton of factors at play when it comes to just how badly the disease can impact corn. With the wrong genetics and no fungicide, some reports indicate a farmer could expect to see upwards of a 50 bushel per acre yield loss, though with the right genetics and well timed fungicide applications plant health seems to maintain and yields remain unaffected.

Of course, the corn most impacted by the disease will be the first harvested, hence the big uptick in concern over yield potential these last couple of days. For many it will be a matter of weeks before we get an actual handle on what, if any, overall yield loss we will see.

Over in soybeans, we started the day with China and Unknown both cancelling a chunk of purchases for nearby shipment. While we knew China had made some relatively large purchases for October beans out of Brazil, the idea we're seeing cancellations just weeks before harvest gets rolling definitely still stung. 

Bean bulls shrugged it off, however, quick to point out that China had paid an extreme premium out of Brazil to ensure shipment and ownership. 

Thoughts that Chinese supplies must be short and margins must be decent to cover this type of value helped beans recover from the opening sell-off relatively quickly. At the same time though, others are quick to point out that high ocean freight and limited export capacity makes the price somewhat comparable to U.S. offers all things considered and is, therefore, a missed opportunity to move bushels we won't get back without a delayed start to Brazil harvest.

NOPA crush and ethanol grind came out yesterday as well. Beans crushed in August came in slightly higher than expectations as crushers were able to find some additional supply ahead of harvest and margins were decent. Taking yesterday's numbers into consideration it appears as though the USDA could raise old crop crush 5-10 mbu in next month's USDA report, but that really doesn't mean much in the whole scheme of things.

Ethanol production was a touch higher last week as well, with a pretty decent sized drop in ethanol stocks. It appears as though gasoline demand remains strong even in the face of Covid concerns. 

Looking ahead, we're definitely testing an important resistance level in November soybeans with $13.00 not only psychological, but also where we've seen the run up stop these last few days. A breakout above $13.00 could push us to $13.40, a failure may have us testing $12.70 again. Corn is working hard to make its way back towards $5.50 as well with a push above $5.35. A failure and we probably work our way back towards $5.10.

Commodity index is still roaring strong, so while inflation chatter may be a touch quieter than it seems to have been these last few months, it's definitely still an issue and something that will likely keep prices supported even in the face of a more bearish supply and demand picture. 

We're likely to ride this range until we get a reason not to. Confirmation of actual production will be that reason and that's weeks away. Get comfortable adding sales at the high end of the range and being aware of what cash values are doing locally if you know you have bushels to move at harvest.