Headlines:

  • August brings soybean plunge, hurting grains too
    So much for “new month, new buying”. August began on a dire note for soybeans futures, which tumbled by 3.7% to close pretty much at their day low, dragging grains lower too. And headway was difficult for most New York-traded soft commodities too. The catalyst for the tumble in soy prices was ideas of benign US weather ahead, at a key period for the oilseed, with August seeing peak pod-setting, and at a time when the US crop in is better condition than had been thought. The US Department of Agriculture rated the crop overnight at 59% “good” or “excellent”, up 2 points week-on-week, and 2 points ahead of market expectations, although it has to be said, not a great figure by historical standards (bar the drought year of 2012).
  • US spring wheat slips to worst on record, as Idaho succumbs
    The drought-hit US spring wheat crop has deteriorated to its worst since at least 1994, as Idaho too succumbed to high temperatures – even as Midwest soybeans showed unexpected improvement. The US Department of Agriculture rated at 31% the proportion of US spring wheat rated in “good” or “excellent” condition as of Sunday, a drop of 2 points week on week. That was the lowest reading for a spring wheat crop on data going back to 1995, falling below 32% figures recorded late in the 2006 growing season. The latest decline reflected in part a further 3-point drop, to 29%, in the proportion of spring wheat rated good or excellent in North Dakota, typically responsible for half US output. However, it also reflected this time a 10-point decline to 53% good or excellent in the reading in Idaho, where the crop had held out pretty well.

Summary:

Soybean futures closed sharply lower today falling 36 ¾ cents. Wheat and Corn futures were also under assault suffering 12 ¾ and 8 cent losses respectively. Better crop ratings are forcing investors to take the premium back out of the market that previously held prices afloat. Concern is now mounting because better than expected crop rating will lead to larger crop sizes after all. Rating are expected to keep getting better given the favorable weather cooler weather forecasts for the next 6 – 10 days.

The weather based volatility that we are seeing is to be expected and will probably persist for the next 6 to 8 weeks. The next significant price direction demarcation might be initiated when the USDA releases its next report on August 10. After the July USDA report futures prices have largely been sideways for Beans and down for Corn and Wheat.

Crude Oil moved up to our minimum price objective/resistance level near 50.50 yesterday and today and rolled over today losing about 2¾ % on the day. We believe that 50.50 is a potential sweet spot where it could find strength above and weakness below.