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Hard Red Wheat(KEK18)

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Grain Spreads: Harvest Versus Conditions

Walsh Trading - Mon Sep 25, 3:33PM CDT


Crop conditions have corn improving by two points while bean conditions lost two points. Will the decline in beans lead USDA to drop national yield below 50 bushels per acre? They could but number one producer Illinois gained 6 points in the good to excellent category while number two producer Iowa was unchanged at 47 percent. The USDA will release their results on October 12th, while nearer term we have the on-farm stocks quarterly report on Friday. Everyone seems bearish on corn given the projected balance sheet at 2.2 billion bushels, a more than ample carry amid no demand, yet it won’t go down much with todays close 4 cents higher at 4.81. On the flip side, everyone seems bullish on beans, and they keep moving lower, with a new monthly low hit today at 1284. However, they rallied into the close to finish 1 cent higher.

Spec open interest has increased on the short side on corn. China’s August bean imports from Brazil are up 46% year over year, U.S. exports to China are down by 58%. Demand is going to be an issue down the road for corn, but for now I see the producer storing corn and those with good insurance probably won't sell below the cost of production. On the flip side, I could see producers selling 12.50 to 13.00 soybeans. As of today, the spot market for Brazil is more competitive than the US. River levels are low, and Barge Freight is high which keeps the flow of soy to port low. Export Inspections this week, reported by the USDA, were 480K vs 290K last year. This keeps this year on pace with last year’s accumulated inspected shipments. Harvest progress for beans is at 12 percent with corn at 15 percent. Keep in mind we are coming up on month and quarter end, so we could see some evening up prior to Friday amid some short covering by funds. No trade recommendations in today’s report. 

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