8/29/2022

The pendulum swung in either direction today depending on the commodity. Price action overall was mixed in grains with sharp moves higher in corn and wheat and steep losses in soybeans. It is possible to trade opposite directions in related commodities on a short-term basis but at some point, soybeans will anchor corn back, sending fresh length to unravel, or corn will lift soybeans with it. Outside money has come back into corn and wheat with what appears to be Wall Street exiting stocks and indices to pump money into certain areas of the commodity market. At the end of last week, the Federal Reserve and the ProFarmer crop tour provided the perfect combination of headlines to drive money in that direction. With the USDA at 175 and ProFarmer at 168, we have a corn yield range to trade and likely end up in the middle. The market reacted appropriately to what the tour found for soybeans. The pump up in the US soybean acres along with a nice crop is spelling trouble for anyone bullish here but crush margins remain just that: a margin. Processors will keep bidding for soybeans as long as there is demand for the oil and meal. Lost in the noise today was our weekly export inspections report. Corn inspections were within the trade range at 689k tonnes shipped. Soybeans underperformed with 437k tonnes inspected for shipment.

Corn gapped higher on the open (again) and made a close above the 100-day moving average for the first time since late June. We now have a single upside gap at 728’2 and a trio of downside gaps. A third gap in a single direction is typically viewed as an exhaustion gap (where the market bulls run out of steam). How long do we sustain this momentum before returning to trade the USDA yield of 175?