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Mark's Market Talk

September 14, 2020

There is lots to talk about today following last weeks WASDE report. Going into last Friday’s report private analysts were in agreement that both corn and bean yields have suffered. In the past the USDA has been hesitant to change yields very much on the September report due to the nearness of harvest. This year they did lower both crops although not quite as much as the privates had. They reduced the corn yield 3.3 bushels to a national average of 178.5. They also reduced the harvested acres by 500,000, most of which came out of the Iowa windstorm. They lowered the bean yield 1.4 bushels putting the national average at 51.9. At the end of Friday’s trade corn was 3.5 cents higher on the day while beans advanced 18.5 cents. Both carry outs were reduced in this report but again they did not drop as much as expected.  Both products are enjoying a huge increase in export demand and that appears to be solid thru the winter months. Last week US beans were about 1.00 lower at our ports compared to South America. South America does not become competitive until late winter when their harvests will begin. The hot and dry August weather is still a hot topic as many argue the damage in a lot of areas was worse than some think. This question should be answered soon as it appears harvest will take off this week after a week of rain in many areas. Basis levels are being supported by both the export market and the US processors making sure they have ample supplies to keep their businesses running. We did see a dramatic drop in corn used for ethanol production last week, but it seems it was due to several plants doing some annual repair work ahead of harvest. After being short the market for well over a year the funds are now long corn so we will need them to continue to feed this market if we expect it to keep rising. Early harvest numbers will influence their thinking and will help shape the market as we head deeper into harvest. It was estimated Friday that going into the weekend the funds were long 200,000 contracts of beans. The record long position is 253,000 so this could be a signal that we may be starting to top out. For them to defend their position we need to see reduced yields and continued strong export numbers. A word of caution may be needed here. A month ago, if we had offered 9.00 for harvest beans, we would have had a line of farmers wanting to sign on. Now we are well above that number and the selling has slowed down. We all want and need all we can get from our crops. However, we must guard against getting caught up in a bull market that suddenly retreats so rapidly that you are left scratching your head. Bull markets deserve to be rewarded and today we are in a bull market in the bean complex. While beans have jumped in large steps lately the corn market has shown more of a turtle speed as it has slowly gained ground. The fundamentals look good for corn as the ending stocks have decreased a huge amount since March. Some, myself included, are convinced the corn crop has been overstated the past 2 years. If that is not the case the actual corn is well hidden somewhere. The commercials do not have it, the processors do not have it. And it could be argued that if the farmer had all of these reported stocks, they would have been taking advantage of the recent super basis being offered in the marketplace. It appears corn may be under valued right now and it will be interesting to see how this plays out during harvest and into the new year.
Posted: 9/14/2020 1:31:50 PM by Rob Matherly | with 0 comments

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