Grain Notes 7/1/2020 AM Comments


Good Morning.  Corn and soybean futures were higher overnight.  September corn finished the overnight session up 6 ¾ cents, settling at 3.4825.  August soybeans were up 6 ¼ cents, settling at 8.85.  In the outside markets, as of 7:45am:  The US Dollar Index is up 0.088, trading at 97.479.  August crude oil is up 3 cents, trading at $39.30 per barrel.  Precious metals are all lower.  Industrial metals are mixed.  The Electronic Mini-DJIA is off 137 points, trading at 25,552. 
  • Yesterday was a textbook example of how one never knows what will come out of a USDA report.  USDA shocked literally everyone by projecting 2020 planted corn acreage at 92 million acres.  This figure is a 5 million acre reduction from March intentions, is 3.2 million acres lower than the average trade estimate, and is 1 million acres lower than the lowest trade estimate. 
  • Between the just the Dakotas and Nebraska, 2.1 million corn acres were shaved off of March intentions.  Minnesota, Iowa, Missouri, and Illinois together accounted for 800 million acres of the reduction.  Indiana, Ohio, and Michigan lowered their planted corn acreage estimates by a combined 700 million acres.  The only state in what is traditionally considered the “Corn Belt” that did not lower planted corn acreage from March intentions was Wisconsin, which added 100 million acres. 
  • After this information was made public, futures took off, trading to three-month highs in short order as the funds aggressively covered short positions.  The funds have been waiting for something, anything, to encourage a short-covering rally given their massive net short position held on corn. 
  • Before yesterday’s report, traders were scratching their heads trying to figure out if/when that opportunity would even arise this year.  It looked as if a weather problem was the only hope to see a fund-driven short-covering rally in corn.  With weather in mind, although yesterday’s acreage figure was the impetus for the rally yesterday and overnight, the extended forecast model for the Corn Belt is also helpful.  The current weather forecast for the majority of the Corn Belt is hot and dry for the next 15 days. 
  • The planted soybean acreage figure on yesterday’s report was not a shocker like the corn number, however, soybean futures also rallied nicely yesterday and overnight, sharing in the enthusiasm of the corn market.  USDA projected planted soybean acreage for 2020 at 83.8 million acres.  This figure is 300 million acres higher than March intentions, is 900 million acres lower than the average trade estimate, but is still above the lowest trade guess. 
  • Yesterday, the funds bought 30,000 contracts of corn, bought 20,000 contracts of soybeans, and bought 2000 contracts of wheat.  They are now estimated to be net short 253,950 contracts of corn, net long 52,000 contracts of soybeans, and net short 42,175 contracts of wheat. 
  • From a chart perspective, September corn charted a new three-month high both yesterday and overnight, at 3.4575 and 3.4875, respectively.  Further resistance is found at the psychological 3.50 level, followed by the double-high from March 19th and 20th, 3.6350.  Initial support lies at 3.40, followed by 3.30. 
  • August soybeans charted a new three-month high both yesterday and overnight, at 8.8375 and 8.8625, respectively.  Further resistance is found at the double high from March 25th and 30th, 8.9650, and then the chart gap from March 9th must finish getting filled in (8.9650-8.9975) before the August contract can trade above the psychological 9.00 level.  Initial resistance lies at 8.80, followed by 8.60. 
  • Opening calls are higher.
 
Have a great Wednesday.