The markets await the USDA report on the 8Th. The beans remain steady on ideas the harvest is winding down, and the thought may be that the yield has declined a bit on the tail end. This in my opinion is hoping and wishing for the bulls. However the market may rally into the report. The exists a amount of people buying beans and selling feed grains. This trade may be getting long in the tooth. I don’t know how much it is worth to push a 2.9-1 bn vs corn ratio. We shall see. The bean basis is also narrowing a bit which is to be expected this time of year. A bit of a rally to keep the pipeline full. Looking at the future. The crop is big and ample especially as compared to the carryovers of the last few years. What is different this year is the fact that south America is loaded with old crop supply and a reasonable start to planting. Not Perfect but ok. The export pace of the US is most likely overstated going forward by 50-100 million bushels. This swells the new crop carry. The global numbers remain huge. Closing in on 100 million tons. How many beans do we need at $10.00. Lets consider the by products. The availability of alternative protein is out there. Not to mention declining corn prices and plenty of DDG available. I just don’t see the bull story in protein, the crush margins as a whole. There remains a moderate story for oilshare, but perhaps more on a relative basis than flat price after the recent rally. If the market catches a bid and does infact rally into the nov report, use this rally as a opportunity to catch up on old crop sales, and look at the new crop at or above $10.30
The corn short has swelled to approx. 200 t contracts. The wheat is 90-100 t . These are some very healthy numbers so close to a report. Now the yield reports continue to come in impressive. The corn has a lot to deal with from a global stand point, as feed grains in general are ample . Having said this I want to start to watch the corn market balance sheet on a global scenario. Given the price relationships we may be in the lower end of a range, especially if the market continues to erode into the nov report. This scenario looks probable. A spike low here could set up a longer term bottom. The trick will be finding a long term reason to own the market. I have also suggested a rally in beans may present a cross hedging opportunity. There is a lot to do yet before year end.
feel free to call for a conversation regarding the market in general, as always quantify your risk
Be Well