August 27, 2020
Grain futures turned sharply higher overnight as rain stripped away from the weekend.
Grain futures turned significantly higher in the early morning hours at 4 o’clock when the major forecast models strip needed precip on the Eastern Plains, Iowa, and Illinois this weekend and next week. These forecasted rains were supposed to stop the deterioration in those areas from their rapid crop condition decline. That idea now is in jeopardy with the crop yield forecasts in fast decline.
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The realization that the September WASDE report will be based on actual test plot data will anticipate yield potential now nationally collapsing to trendline. It’s interesting how trendline now is considered bullish, which is indicative of how the market has changed color in its trading. The bottom line is that the index funds have switched from being negative commodities from the spring to now turning positive, with them abandoning wanting to be short corn anymore. This has a short-covering rally catching most bears that are still stuck on linear regression and production models versus demand, one of wondering what’s going on. Initial rallies from lows from market lows always overdo perceptions of what they can do.
The USDA at 8 AM reported 740,000 tons of salt corn sold to China along with 140,000 tons of corn sold to an unknown destination.
Hurricane Laura has made landfall in E TX/W LA and in the next 48 hours will work through the Delta and into TN/KY. Heavy rainfall of 4-6″ will exist just a bit west of major Delta crop regions. Totals of 2-4″ will spread across corn/soy areas of MO, TN, KY, S IL, and OH. Notice also that separate precip will impact the N Plains and Upper Midwest. The EU solution suggests that dryness will linger into the first full week of Sep across the Central Midwest, while the need for moisture there is immediate. Uncertainty over early Sep rainfall has returned. Model changes will be monitored acutely in the days ahead.
Cash cattle trade for Wednesday followed earlier week trends. Live trade in the North was $1.50 lower at $105 and dressed sales were $2 lower at $166-167. The W Cornbelt market tumbled $2-4 with trade at $104-105 but on par with the Great Plains cattle trade for this week. Boxed beef trade was again higher. Choice boxes gained $1.77 to $231, and select was up $1.85 at $214. The choice/select spread reached a $17.34 choice premium, which is the 2nd highest on record for late August. A year ago, the spread was at $23 in response to the Tyson fire.
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Eugene Graner is the founder and President of Heartland Investor Capital Management Inc. As a veteran commodity analyst, broker, and CTA that eats, sleeps, and breathes commodity futures, his priority is to bring clients the latest and most useful information of the markets along with uncannily accurate futures predictions. By balancing risk and reward, Eugene uses his proprietary trading strategies to develop the best possible trading approaches for his clients. He has 28 years of experience in the industry and his voice has been heard around the United States. He is heard on multiple radio stations throughout the day, also has been featured on CNN, Bloomberg, Wall Street Journal, and The New York Times, and is the go-to guy to for multiple TV network stations for interviews about market news weekly.
