- Soybean futures pushed to new rally highs on Friday amid a drier forecast for IA and the northern half of IL. Early this week, the forecasts had suggested 2-3″ of rain starting this weekend. Nearly all that rain has now been removed from the forecast.
- Soybean meal led Friday’s rally, with December pushing through the 200-day moving average and closing at a 5-month high.
- The CoT report showed that funds were buyers last week of 2,230 contracts of soybeans, taking their net long position to 109,288 or the most since March 2018. Funds covered their net short soybean meal position and were net long 2 weeks ago. Last week funds sold 7,419 contracts and were long just 3,560. In soybean oil, funds have been net-long since early July, and spot futures traded at the highest price since January. Funds bought 10,166 contacts last week and are now long 67,690 contracts, the most since February.
- Late season heat/dryness is driving Chicago soy prices higher. Crop condition ratings are expected to slide another 2-2% on Monday but will still be above the long-term average of 56%.
- Chicago corn futures ended slightly higher amid another tranche of export sales and as crop good/excellent ratings on Monday are expected to fall another 2-3%. US exporters sold 324,000 mt to unknown destinations, likely Japan or Mexico. The market continues to be dominated by supply and the risk of lower yields in NASS’s Sep report.
- In the last two weeks, managed funds have bought/covered an estimated 123,000 contracts. On Tuesday managed funds were short a net 61,000 contracts, vs. 110,000 the previous week. We estimate funds’ short today at just 49,000 contracts. This the smallest net short in late August since 2016.
- Amid this rare late Aug yield threat, the market has lost its natural seller in the producer. Yet, Dec corn is now just $0.10/bu below this day in 2019, and is overvalued amid projected end stocks of 2.5-2.7 billion bu. The big picture theme is of production expansion in S America and the Black Sea. Enough rain looks to fall in Argentina to allow planting to begin in the weeks ahead.
- US and world wheat futures ended weaker. Market-specific news is lacking. Stats Can and ABARES in Australia will release updated production estimates in the next 10 days. Both are expected to offer larger crop estimates. Stats Can’s release is due on Monday. ABARES’ release is due on September 5.
- Managed funds on Tuesday had established a net long position in Chicago worth 1,500 contracts. Fund length in Chicago today is estimated at 16,000 contracts, the highest since mid-April.
- Slow farmer selling in Europe and the Black Sea has kept cash fob prices there elevated. But eventually this supply will enter the global pipeline, likely when the Southern Hemisphere begins.
- Australia’s return to the world market is a big deal and will act to prevent a repeat of last year’s dramatic Nov-Feb rally in world cash trade. Like corn and beans, this rally is based on the loss of (European) supply. Supply-driven rallies will continue to be rewarded. Chicago July ’21 futures are overvalued above $5.60 in our opinion.