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AgriFinance Market Update 7-12-19

Is the party just warming up or is it about over?  No one can give a correct answer at this point because there are too many variables to play out.   But, someone is nervous because December corn is less than 14 cents from contract highs.  November soybean futures are roughly 40 cents away from contract highs.  If there is a flip-flop in the weather forecasts over the weekend, expect strong downside pressure on prices as early as Sunday night.

Corn futures put in a spectacular day and week despite the bearish report yesterday.   Corn closed a dime higher, with futures up 15-17 cents on the week.  Soybean futures put in an impressive week technically.  Soybeans finished up 14 cents today, with a 34-37 cent weekly gain.   Wheat also had a great week despite harvest pressure.   Not a lot of action today with Chicago and MPLS futures finishing a penny higher and KC up a nickle.  KC added 22 cents on prices this week, followed by a 17 cent gain in Chicago futures.  MPLS futures struggled to add a couple cents to this week’s price.

The S&P 500, Dow and Nasdaq closed at record levels again.  Everyone is banking on an interest rate cut.  The DJIA finished +243 points higher at 27,332.   Gold was up $9.70/oz.  Oil was steady, and closed over $60/barrel.  The dollar fell -.230 points.

It is not a July 4 weekend, but weather forecasts matter Sunday night.  As of this afternoon,  the forecasts are threatening dry and extreme heat across the Midwest the next two weeks.  The forecasters are in agreement this time around – which is very concerning. It usually means they are wrong!   The big question mark is the path Tropical Storm Barry takes after it hits Louisiana tonight or Saturday.  Experts are predicting a 3-4 foot rise in the Mississippi River at New Orleans.   Some areas may see 12-25 inches of rain.  Serious flooding is expected in the Delta.  If  TS Barry fails to send rain into the cornbelt, futures will continue their march higher.

 

Funny to read commentary that traders are just now figuring out that there may be some issues with this crop.  Ya think?  The big “unknown” is exactly how much yield has been dinged from late plantings.  We have never planted so much of the crop  this late, so we will see have to see how everything shakes out.  It is difficult to estimate the crop because some areas look crazy good and other areas look crazy ugly.   For the first time ever, the USDA will not have objective field data to use in the August report.  The USDA will use a farmer survey, satellite data and models based on crop ratings to come up with their yield estimate.  The USDA will roam the fields for the September report.  The USDA will also have a chance to revise acreage in August. Unfortunately, the FSA will release their first set of data from farm certifications the same day as  the USDA report is released.  How much of the info will the USDA use???

Meanwhile, take a look at this vegetative map comparison from last year to this year.  You can draw your own conclusions.  Hot and dry conditions will not help the next couple of weeks.

It is easy to get wrapped up in a market rally, and then end up being disappointed.   We can not lie, the charts look really good tonight.  But, it seems every time we get close to a run-away market – something interrupts the process (like a govt announcement, change in forecast, etc).   IF, by chance the trade gets really nervous next week…the  first target September corn will shoot for is $4.68.  If December corn punches through $4.73, the sights will be set on $5.00.   August soybeans need to find a way to push through $9.25 3/4 to find their way to the target of $9.44 1/2.   The goal for November soybeans is $9.42.   All these levels are within reach.

What if timely rains fall and sellers crash the party?  September futures will seek out $4.25 and the one month low of $4.13.  December futures will likely fall back to the $4.20-4.30 area.  August soybeans may slide to $8.71. November soybean may slip under $9.  Be prepared.   The good thing is that a set back in prices may not put a fork in the rally.   The market will still have to deal with acreage adjustments, yield estimates and other weather concerns until this crop is in the bin (which might be December for some).   Happy trading.

Have a nice weekend.

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