Takeaway

The presenter argues that the recent profit-taking in grains is a healthy pullback after a strong August rally and does not invalidate the bullish trend. The speaker believes funds are committed to their long corn and soybean positions, anticipating that the upcoming September WASDE report will confirm a lower US yield, tightening the balance sheet and pushing prices higher.

What the presenter said

• The profit-taking round in grains was overdue and is healthy for the market to continue its move higher. [00:33]
• Funds seem committed to being long, evidenced by a strong bounce off overnight lows, with corn at one point trading 13 cents off its low. [01:06]
• To push the market significantly higher, the presenter believes there needs to be a confirmation of a lower yield from the USDA. [02:01]
• There is a large gap of over 7 bushels between Pro Farmer's corn yield estimate and the USDA's August figure, which has led to buying on the expectation of a sub-10% stocks-to-use ratio. [02:05, 02:23]
• Funds are likely holding a record, or near-record, long position in both corn and soybeans. [03:24]
• A September WASDE corn yield number of 178 or below would be very well supported by the market. [03:51]
• China has been buying soybeans aggressively this year, a notable change from last year's purchasing patterns ahead of harvest. [06:07]
• The presenter notes that the current El Niño is the strongest on record and could significantly impact South American production, which is critical given that world soybean stocks have not grown despite record Brazilian crops. [07:26, 07:44]
• Russia lowering its export tax through the end of the year took pressure off the wheat market today. [09:07]
• The cattle market is trading below long-term support as funds take profits, which the speaker attributes partly to the administration's focus on beef prices to combat food inflation. [10:40, 11:33]

Trade ideas

• None stated. The presenter's overall market view is that fundamentals for corn and soybeans remain bullish pending yield confirmation, while the cattle market is facing technical weakness and political headwinds.

Levels and data cited

• Price Levels:
  • December Corn: 550 (resistance)
  • July 27 Chicago Wheat: 805 (resistance, where the market topped out)
  • September WASDE Corn Yield: 178 (level that would be "very well supported")
• Data Cited:
  • Pro Farmer vs. USDA: August corn yield estimates differ by over 7 bushels.
  • USDA: August stocks-to-use ratio at 10.1%.
  • COT Report: Funds hold high, potentially record, long positions in corn and soybeans as of last Tuesday's close.
  • China: Purchased 7.4 million bushels of soybeans on the morning of the report.
  • Brazil: Produced back-to-back record crops of 171 and 186 million metric tons.

Risks and what would invalidate this

• The USDA may "slow-play" yield reductions in the September WASDE report.
• The ultimate impact of the El Niño weather pattern on South American crop production remains a significant variable.
• The administration's focus on food inflation could continue to weigh on cattle prices.
• Potential disruption to global exports from the Black Sea conflict.