After a sideways week of non-eventful trade, headline traders took control to end the week.  As has become a seemingly annual occurrence, China once again signed framework contracts to buy a specified volume of soybeans from the U.S. over the next two years.  Initially the market had very little reaction to the announcement Thursday afternoon.  However, after the Fed Chair made comments pointing to better world economic indicators and a likely interest rate hike yet this year, the “algo” traders sent the market higher on positive headline news.  Accelerating the gains on Friday morning was another announced sale of soybeans to China and a stronger tone to the financial markets.

Looking ahead, the weather looks very conducive to harvest progress.  Most of our trade territory should see new beans flowing steady by early next week, if it hasn’t already started.  Corn harvest looks to be close behind as well.  We have heard of some isolated cases of stalk integrity issues that are forcing producers to go after the corn sooner rather than later.  The big question in most areas is how much impact did the diseases have yields, in both corn and soybeans.  Only time will tell at this point.

Local basis has held mostly steady over the past week.  Some pockets of strength have been noted in the ethanol and soy crush markets.  Space constraints are likely to play a part in basis movement through the end of harvest.  Basis has the potential to stay firm until available storage space is filled, after which it is likely to fall off.  A sustained board rally could also pressure basis.

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CHS – Rochester Grain Team
Kasson: 507-634-7545 ext 7
Ostrander: 507-657-2234

This was a week of transition: Transition from trading government numbers to trading harvest activity and yield.  Early on there ideas that yields would be reduced more in the October round of reports.  As the week progressed, more and more yield results were reported from key states of Illinois and Iowa with varying results.  Keep in mind these yield reports are from early harvest activity and not necessarily indicative of the crop as a whole.  The market has agreed with that sentiment, giving up the gains from last week, realizing there is still a lot of  harvest left.  Soybean yields thus far have been  at or above average, leading traders to believe the USDA number is fairly accurate, perhaps even low.

Now that harvest is kicking in and futures have taken a tumble, market focus is shifting to two very intertwined concerns: basis and ownership.  Typically basis is falls dramatically once harvest really gets rolling.  However this year could be different.  Many elevators still have substantial inventories of old crop grain on hand as storage obligations.  And with cash prices well below cost of production producer selling is expected to be minimal, making space and ownership ongoing concerns.  Enter basis.  In this situation basis could be forced to do the heavy lifting to entice selling, thereby transferring ownership to keep the supply pipeline charged.  Proceed with caution though, as any type of rally is likely to be short lived.  One likely scenario is that elevators will allow only a predetermined amount of grain to go on open storage before forcing grain to be sold, or put on Delayed Pricing, relieving the ownership struggle.  Once the ownership struggle is relieved, basis is very likely to fall in its typical fall fashion.

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CHS – Rochester Grain Team
Kasson: 507-634-7545 ext 7
Ostrander: 507-657-2234

Market reaction to today’s USDA report was riddled with volatility but ultimately sent corn higher on the day, pulling soybeans along for the ride.  As printed the report was nothing bullish.  Corn was slightly friendly while soybeans were slightly negative.  Initially November soybeans traded sharply lower but buying in the corn market pulled soybeans back to unchanged.  As always, it is the number as printed that gets the trade reaction, not the actual number.  Headline traders rule the trade on report day.  Sunday night’s open and Monday will be more indicative of future trade direction as the numbers are digested more fully.

National average corn yield was lowered 1.3 bushels per acre to 167.5.  The corresponding reduction in total production dropped expected carryout for next year to 1.592 billion bushel, a net decrease of 121 million from last month’s estimate.

On the soybean balance sheet yield was increased 0.2 to 47.1 bushels per acre.  Given the near perfect growing conditions seen over the past three to four weeks, this small adjustment was taken mostly in stride.  Locally, some concern has surfaced regarding Sudden Death Syndrome and White Mold in soybeans and their resultant yield destruction.  Thus far though, the greater marketplace has not taken notice.

On the cash front, harvest is right around the corner which means the end user is playing a waiting game, buying only what is need to bridge the gap to cheaper, more ample, new crop supplies.  Watch for basis to continue to soften in the old crop, particularly if the board does continue to march higher.

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CHS – Rochester Grain Team
Kasson: 507-634-7545 ext 7
Ostrander: 507-657-2234

This Material has been prepared by a sales or trading employee or agent of CHS Rochester and should be considered a solicitation.  The information contained in this presentation is taken from sources which we believe to be reliable, but is not guaranteed by us as to accuracy or completeness and is sent to you for information purposes only.  There is a risk of loss when trading commodity futures and options.  CHS Rochester bases its recommendations solely on the judgment of CHS Rochester personnel.