For the first two days of the week, corn has gained 20 cents and filled the gap on the daily chart at 392.6. Beans are up approximately 36 cents. Chicago wheat up just over 11 cents. The grain market got a surprise yesterday as the USDA announced that Sep 1st on farm stocks came in at 300 million bushels less than expected. Beans were revised lower by almost 70 million bushels as well. The reasons given for the big misses versus the average trade guesses coming into yesterdays report was that the USDA overstated last years production. Cool and wet late led to disappearance and overstated yield for beans of a bushel per acre while corn’s miss of 300 million bushels could be the largest miss or overstatement given by the Gov’t. Certainly a head scratcher and to me raises more questions than answers. Funds are heavily short corn, coming in at approx. 162,500 contracts while short beans about 42 K according to CFTC position data that was released last Friday. In my view these are now overstated. In short look for more short covering. We will see some producer selling soon here but I look for funds to cover on any dips for now. Yesterdays data had more to do with last years carry. Due to late maturity dates for corn and beans, weather can still be an issue here for this years crop. Crop sizes are less than last year and ending stocks could be reduced further. There are still major questions on harvested acres, on what has been actually planted. Harvest therefore will slowly emerge and might not be 50 percent for either crop by month end. Weather will determine how quick harvest goes. Old crop/new crop spreads have been bid up on short covering as shorts are bailing.
Longer term percentage hedges for beans, I would look to be a buyer of July Soybean 940 puts. Finance the cost by selling 2 1100 calls for even money. That ratio is trading at a 15 cent debit. Its not time yet, but we are getting closer to where I might start thinking for a small percentage hedge of what a producer might be keeping in the bin to use option pricing for protection. Please join me every Thursday at 3 pm Central for a free grain and livestock webinar. Signup is free and a recording link will be sent to your email. Sign Up Now