Takeaway

The presenter argues that Friday's lower close in grains was pre-holiday profit-taking, not the end of the bull rally. Strong underlying demand for soybeans and the expectation of commercial buying on dips provide support, but the market faces risks from a record fund long position in corn and beans and potential disappointment from the upcoming USDA report.

What the presenter said

• Grain futures closed lower on Friday due to pre-holiday profit-taking, with wheat seeing more technical damage than corn and soybeans. [00:20, 00:36]
• Wheat market weakness was amplified by rumors of a potential peace agreement between Russia and Ukraine. [00:43]
• The presenter's primary concern is the record long position held by funds in corn and beans, though commercials are expected to be buyers on any significant break. [01:10, 01:32]
• The market is trading corn well below the August USDA number, which could lead to volatility if the USDA doesn't cut yields significantly in its next report. The speaker notes the USDA often "slow plays" September adjustments. [04:27, 04:53]
• Soybean demand is viewed as very strong, supported by daily export sales to China/unknown destinations and robust domestic crush margins. [07:22, 08:03]
• The speaker sees no evidence of demand rationing yet, suggesting prices for corn and beans may need to rally higher to slow demand. [08:25, 08:32]
• The cattle market is struggling to sustain rallies due to a lack of fund enthusiasm and political headlines, but it is attempting to hold its August lows. [10:05, 10:17]

Trade ideas

• None stated. The presenter's view is that the grain rally may not be over due to strong demand fundamentals, but the large fund long is a significant risk. The wheat market is considered difficult to trade on geopolitics, and the cattle market needs to see the cash market lead before a bottom can be confirmed.

Levels and data cited

• Price Levels:
  • Wheat: Resistance "north of seven bucks," potentially towards 7.10.
  • Corn: Currently trading at 177-178.
  • Soybeans: Currently trading "53-ish."
  • Crude Oil: Trading "north of $90."
• Data Cited:
  • S&P Global: Corn estimate of 180 ahead of the WASDE report.
  • USDA: New crop soybean exports are double what they were last year.
  • USDA: Recent soybean export sale of 9.2 million bushels to unknown destinations.

Risks and what would invalidate this

• Funds hold record long positions in corn and beans, which could lead to significant selling pressure if they decide to liquidate.
• The USDA could "slow play" yield cuts in the September report, leading to market disappointment and increased volatility.
• Geopolitical news, such as Russia-Ukraine peace talks or escalations, can cause unpredictable price swings in the wheat market.
• The cattle market lacks fund enthusiasm, making it difficult for rallies to be sustained. Political announcements can also negatively impact the market.