Takeaway

The presenter notes risk-off profit-taking in grains ahead of the WASDE report, driven by fears that official yield estimates are too high. The speaker believes the impact of the dry finish, particularly on corn, is being underestimated and that harvest results will be crucial. While grains are correcting, livestock markets appear to be stabilizing, with feeder cattle holding up and both live cattle and hogs potentially having bottomed.

What the presenter said

• Ag markets were mostly lower, with risk-off profit-taking in grains ahead of the WASDE report. [00:20, 00:30]
• The actual impact of the dry finish on crop yields may not be reflected until the October report, but the speaker believes it has reduced yields more than currently believed. [01:57, 02:09]
• The presenter believes a more realistic corn yield is 177 bushels per acre, below the average trade guesses. [01:31]
• Wheat prices are being influenced by Black Sea geopolitical events, including a drone attack on a Russian port and news that Russian exports may be downgraded. [04:45, 05:47]
• The market is heavily influenced by algorithmic traders reacting quickly to headlines. [05:07]
• In livestock, feeder cattle are holding up better than live cattle, supported by a corn market that has been down for five consecutive days. [07:00, 07:46]
• The presenter suggests the cash live cattle trade may have bottomed, and the hog market also appears to have put in an early seasonal bottom. [08:06, 09:29, 09:53]
• China's methodical buying of soybeans suggests that price pullbacks are well-supported. [04:16]

Trade ideas

• None stated. The presenter's market view is one of caution ahead of the WASDE report, focusing on the discrepancy between market yield expectations and the potential reality from the dry finish to the season.

Levels and data cited

• Corn Price: Currently about 23 cents off its high, with potential for a 28-32 cent correction.
• Corn Yield Estimates:
  • Reuters survey: 178.2 bushels per acre
  • StoneX: 182.9 bushels per acre
• Soybean Yield Estimates:
  • Reuters survey: 52.5 bushels per acre
  • StoneX: 53 bushels per acre
• Export Sales: USDA reported flash sales of 16 million bushels of soybeans on Wednesday morning.
• Russian Exports: News story cited that exports for the coming year have been downgraded.

Risks and what would invalidate this

• The dry finish on crops may have reduced yields more than the trade currently believes.
• Geopolitical events in the Black Sea region continue to create uncertainty for exports.
• Algorithmic trading can lead to rapid market reactions to headlines, detached from fundamentals.
• Funds may prefer stocks over commodities, limiting the return of speculative money to the ag markets.
• A potential Canadian trade war could negatively impact the agricultural sector.