Commentary
Short covering was the theme in corn and beans today. Funds were sizable buyers covering shorts at an aggressive clip. Estimations for corn at 30 to 35k futures and options bought while beans saw funds cover 20 % of their short positions, 20% in bean oil and added 5% to their net long in bean meal. Worries over Brazil are many. There is a lot of noise out there, but Brazil is planting at their average at 2 percent planted. The issue is that rain was again taken out of the forecast for the next 10 days as drier forecast runs plague the producer. Argentina is experiencing some of the same issue but nowhere near the drought that’s occurring in Brazil’s number one growing area, Mato Grasso. Basis is climbing at Brazil’s ports giving the US advantage into China for now. To that end, China or Unknown destinations bought 160K metric tons of beans for future delivery today. A flash sale announcement with continuing drought was all the funds needed to decrease their shorts at an aggressive clip. Condition ratings for corn and beans were seen at 65 percent good to excellent unchanged on the week and besting expectations of 1 point better for each. Export inspections were strong for corn and tepid at best for beans. The USDA reports the US inspected 1.1 million metric tons of corn vs 710K a year ago. Most of the extra business was 310K metric tons to Guatemala. This week’s numbers brought the US up to the pace needed to make the USDA’s forecast. For beans, exports commitments came in at 490K vs 510K this time last year. Harvest progress for corn at 14 % while beans at 13 percent. The weather situation in SA is becoming more worrisome but that can change if rains verify in October. River levels are low at the Mississippi and there could be a massive dockworkers strike starting October 1st, that could be announced next week. The sleeper story is will China target US Ag in response to tariffs on Chinese EVs, Solar panels, and other goods come September 27th. US tariffs are set to increase from 25% to 100%. Outside of that look for beans to work higher 10.55/1060 should forecasts run dryer in the extended forecasts in S.A. However, a weekly close under 1019 would turn this market down this week with a downside target of 9.94 should weather improve amid harvest pressure.
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Sean Lusk
Vice President Commercial Hedging Division
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