Takeaway

The presenter argues that despite a post-WASDE dip, the fundamental bull trend in corn remains intact and will likely continue through year-end. The core driver is a tight US stocks-to-use ratio, which the speaker believes could tighten further on additional yield cuts and anticipated Chinese buying following an expected removal of import duties later this month.

What the presenter said

• The USDA's 2.2 bushel per acre cut to the corn yield was largely priced in by the market. [00:29]
• The bull trend in corn is expected to continue until at least the end of the year, with the potential for higher prices if there's any further decline in yield or an increase in demand. [00:46, 01:07]
• The US corn balance sheet is tight, with the crop 1.5 billion bushels below last year against record demand, pushing ending stocks to 1.5 billion bushels and the stocks-to-use ratio below 10%. [00:51]
• The presenter believes the final US corn yield will be lower, around 176 bushels per acre, a potential drop of another 2.5 bushels from the current estimate. [01:33]
• Current prices do not reflect the risk from the Black Sea conflict, where corn and wheat exports are significantly below normal. [01:53]
• China is expected to buy US corn and wheat at a meeting in Washington D.C. in the coming weeks. [02:06]
• The speaker is skeptical of the USDA's record Iowa corn (219 bu/ac) and soybean (64 bu/ac) yield estimates, citing adverse weather and lower yields in surrounding states. [02:22, 02:37]
• While soybeans have a record large crop, they are also meeting record large demand, and the speaker sees potential for ending stocks to fall below 240 million bushels. [06:43, 08:03]
• Wheat has ample global supplies, but upside price risk is tied to the duration of the Black Sea war, which has cut Ukrainian and Russian exports to 40% and 37% of normal, respectively. [08:32]
• Investment funds are buying commodities, including grains, due to inflation fears, rising energy prices, and a falling US dollar, a trend the presenter expects to continue into Q1 or Q2 of next year. [09:32]
• The cattle market recovery is expected to continue, with lower fed cattle numbers projected into February and a cash market that has already made an early seasonal bottom. [11:57]

Trade ideas

None stated. The presenter summarised the market view that corn remains in a bull trend, soybeans are capped by current levels, wheat upside is dependent on the Black Sea conflict, and the cattle market is in a recovery.

Levels and data cited

Price Levels: * Corn: The speaker considers the 525 to 550 range to be "fairly priced". * Soybeans (November futures): The 1325 to 1350 range is seen as a level that "caps the market".

Data Cited: * US Corn: USDA yield lowered by 2.2 bu/ac to 178.5 bu/ac. Speaker's yield estimate is 176 bu/ac. Stocks-to-use ratio is below 10%. * US Soybeans: USDA yield at 52.8 bu/ac. USDA ending stocks at 310 million bushels. * World Grains: World corn ending stocks lowered by 2.6 MMT. European corn crop estimated at 50 MMT. World wheat ending stocks up 3 MMT. * Black Sea Exports: Ukrainian wheat exports are 40% of normal; Russian wheat exports are 37% of normal. * China: Expected to drop its 10% duty on US grain and soybean imports at the September 24th meeting.

Risks and what would invalidate this

• A further fall in the US corn yield or an unexpected increase in demand could push corn prices higher.
• The presenter views the USDA's record yield projections for Iowa as suspect and a potential source of future bullish revisions.
• Drier weather forecasts for South American soybean planting could tighten the global balance sheet.
• The ongoing war in the Black Sea could persist longer than the market expects, creating upside risk for wheat prices.
• Any significant winter weather problems could negatively impact record large beef outweights and disrupt the cattle market recovery.