Corn Market Update

? Prices:

• September Corn (CU): $3.80, up 1/2 cent; inside day higher
• December Corn (CZ): $4.04, up 3/4 cent
• September/December Spread (CU/CZ): -24, down 1/4 cent; new contract low at -24

? Market Headlines:

• Weekly ethanol data from the EIA this morning showed average daily production in the week ending August 15th at 1.072 mil bbls/day, which was down 1.9% from last week but equal to production in the same week of the marketing year last year. This is also the lowest daily production figure since the week of May 23rd earlier this year.

• Ethanol stocks in the week were seen similar to last week at 22.688 mil bbls, which is down 3% from the same week last year.

• Corn usage in the week was estimated at 105.9 mil bu, which brings cumulative usage in the marketing year to 5.300 bil bu; this compares to 5.175 bil bu through the same week last year and the USDA's full marketing year forecast of 5.470 bil bu. Usage needs to average just 85 mil bu per week the next two weeks to meet the USDA's forecast.

• Day three of the Pro Farmer crop tour seems to be uncovering similar results to the first two days according to scout posts on social media. Scouts in the east are noting a similarly high amount of variability to that seen through IN yesterday, while in the west, scouts have noted a bit of disease pressure but say overall the crop looks really good, with initial yield estimates up noticeably from both last year and average.

Summary:

Aside from yield numbers and crop chatter coming from the Pro Farmer tour again on Wednesday, it was a relatively quiet session in the corn market with there not a lot new on the news front. Basis weakness has been a story across the countryside this week ahead of new crop harvest, with every small gain in futures being mostly offset with a subsequent weakening of the local cash bid. We're having a somewhat difficult time determining exactly when this begins to change with the crop seemingly getting bigger every day, but would note domestic demand in Brazil has been stronger than expected this season, which has caused the export market there to have to bid up for bushels.

Soybean Market Update

? Prices:

• September Soybeans (SU): $10.15, up 2 cents; inside day higher
• November Soybeans (SX): $10.36, up 2 1/4 cents; inside day higher
• September Soybean Meal (MU): $292.00, up $4.60/ton
• September Soybean Oil (LU): 51.20, down 0.48 cents/lb
• September/November Spread (SU/SX): -21, down 1/4 cent; new contract low at -21 1/4

? Market Headlines:

• It was all about the crop tour again on Wednesday, with scouts again finding similar crops to those that were found on days one and two of the tour. One scout on the western leg pegged pod counts up more than 10% from last year and up nearly 40% from two years ago, while scouts in the east mentioned a somewhat surprising lack of disease pressure.

• Nothing really new on the pending SRE ruling that has been in the rumor mills in recent days, though sources familiar with the situation on social media continue to indicate that a decision could be made as early as the end of the week.

Summary:

It was a slow news day in the soybean market on Wednesday, with pending biofuel policy decisions continuing to hang over the bean oil market and there being little other of note that wasn't crop related to talk about. We know we're repeating ourselves, but pricing in the beans beyond harvest is almost entirely about exports and whether China returns to the US market. The continued absence of the number one bean buyer in the world would mean USDA likely has exports overstated which means ending stocks are likely understated.

? Prices:

• September Chicago Wheat (WU): $5.05 1/2, up 7 cents; outside day higher, and new contract low at 4.94 1/2
• December Chicago Wheat (WZ): $5.28 1/4, up 7 cents; outside day higher, new contract low at 5.17 1/4
• September/December Spread (WU/WZ): -22 3/4, unchanged

? Market Headlines:

• Sources are indicating that a snooping around by China on wheat export prices from the US was the reason for the strength in the market today, which would coincide with the fact that FOB values near five-year lows should at some point spur some sort of demand.

• Australia's Bureau of Statistics showed the country's wheat exports for June at 2.54 MMTs, which is down slightly from the 2.592 MMTs shipped in May. Cumulative exports in the marketing year have now reached 17.6 MMTs.

Summary:

Wheat remains wheat, with the mid-week rally seen today largely being the result of prices simply getting too low. We see the market as having a global lean for the foreseeable future as harvest in the US has all but wrapped up and export competition, especially out of Russia, looks to remain elevated in the short term.

Corn

• Sep corn has managed to avoid making new contract lows over the past week for the first time in a while, though the market continues to trade within the wide range created on the August WASDE report day.

• Support this week will start at the current contract low at 3.68 3/4, and then will be seen below here at last summer's low just above 3.60, which has been our major downside objective. Should these levels fail, the 2019 low at 3.35 1/2 then becomes major support.

• On the top side this week, the market will see resistance first in the 3.90 area, which marks 50% retracement of the most recent down move, and then above here at the even $4 level. On a close above $4, the mid-July high is then at 4.11 and then there is an open chart gap still from 4.13 to 4.17 1/4.

• RSI has rebounded slightly over the past week and is seen at 42.4 today.

Soybeans

• After rocketing higher last week, the soybean market has returned to more of a choppy/sideways pattern in recent days, with values unable to break through the 100 and 200-day moving averages on a closing basis. These, at 10.17 and 10.20 respectively, mark first resistance this week, with last week's high at 10.29 then above here.

• Then the Sep contract still has an open chart gap from 10.35 1/2 to 10.36 1/2, which continues to be our longer term upside objective.

• Support this week will be similar to last week, with the first level again being the even $10 level; 32% retracement of the recent up move also coms in at 10.03, while 50% comes in at 9.95 1/2. On a failure of this area, the recent low for the move at 9.62 is major downside support.

• RSI this week is seen in neutral territory at 55.4.

In Other News

• Livestock markets were mostly higher, with cattle again scoring new contract highs:
• October live cattle: $234.85, up $3.50; new contract high at $235.62
• September feeder cattle: $358.10, up $5.67; new contract high at $358.87
• October lean hogs: $89.95, down 20 cents

• Outside markets traded sideways/mixed for the most part on Wednesday:
• Crude Oil Futures: up around $1.10/bbl
• Stock index futures: The Dow Jones index is unchanged, the S&P500 index is down 20 points, and the NASDAQ is down 160 points
• US $ Index: near unchanged

• EIA also updated petroleum stocks data in this morning's weekly report:
• Crude Oil Stocks - down 6.014 mil bbls to 420.6984 mil bbls
• Gasoline Stocks - down 2.72 mil bbls to 223.57 mil bbls
• Distillate Stocks - up 2.343 mil bbls to 116.028 mil bbls
• Implied gasoline demand in the week was estimated at 8.842 mil bbls/day, compared to 9.000 mil last week and 9.193 mil in the same week last year.

Weather Outlook

? Short-term Forecast:

• Not a lot new to speak of in terms of mid-day weather forecasts on Wednesday, as the coming cooling of temps and lack of moisture into the weekend remain the dominant features for the Midwest.

• The EU model forecast continues to see spotty shower potential in the northern/northwestern Corn Belt into and through the weekend, with little to no precip expected for the rest of the Corn Belt largely into the end of the month.

? Extended Forecast:

• The EU's AI model outlook is attempting to return precip to the eastern Midwest into the first part of September, but neither the EU or the GFS models are picking up on this, which is keeping confidence low. The west and southwest look to see the best rainfall chances in the extended period, but concern is rising regarding flash drought conditions in parts of the eastern Corn Belt.

• The GFS is warmer than the EU for the western US in the 10-15 day period, but otherwise, there continues to be little new on the temperature front, with well below normal air temps expected to linger through the Corn Belt through likely at least the first week of September.