August 31 – Market Commentary

The Week in Three Numbers

113.15 Million - The number of bushels needed to hit the 25/26 WASDE Export predictions, 97% more than the previous week's exports. Final export numbers for the 25/26 marketing year come out Thursday.

8% - Percentage of the Kansas corn crop that has been harvested, greater than last year's rate of 1% and above the five-year average of 4%.

1.76 Billion - The total RINs included in the Administration's announcement of Small Refinery Exemptions for 2025, of which EPA is proposing 100% re-allocation.

Markets

Please don't shoot the messenger, but I'm not sure we can call it a "low-commodity-price" environment anymore…

Not only did we set new bold green numbers in corn, wheat, and soybeans… but December corn is the highest it's been since 2022 and even closed slightly down from the 52-week high, which was hit during the day on Friday. November soybeans is the highest since 2021. Same with wheat.

This chart shows the December corn futures for 22-26 with 2022 in green and 2026 as the jagged black line.

Not only is it the highest price, but we're not even close, and until the technical picture changes, the charts are bullish as no technical resistance appears on the charts.

The soybean and wheat charts do not look dissimilar.

Russia and Ukraine are still at war. China has begun entering the market again. The ProFarmer tour projected lower production in both corn and beans. And the weather is hot and dry. All of that leads to new highs in all three commodities with no resistance on the charts.

The ProFarmer tour estimates for corn were by far the lowest the market had seen.

With reduced yield and reduced production, the stocks to use ratio is vastly thinner than the August WASDE report. Meanwhile, the weather forecast doesn't show anything that will push back against ProFarmer's estimates as expectations are for more hot and dry weather.

The rally this last half of August is somewhat unheard of. August isn't generally when high prices are set. Weather really ignited the funds and they get involved, which has led to some concerns about availability of the corn supply. That was really sparked into flame by that ProFarmer report.

However, let's look at the Dec 26-Dec 27 chart.

We're looking at less than a 10-cent spread as of this morning. If this was really a short-term supply problem, you might be looking at a 30-50 cent spread or more. So, it seems as though the long-term outlook is bullish with decent demand.

September WASDE will be the next time we get information about what we're actually seeing so will give the market it's next major point to either confirm the bullishness or pull it back a little.

Unfortunately, production will likely be a big problem in Kansas. The drought monitor does a great job capturing the situation everywhere but NE Kansas…

We'll get another update next week, but the August Crop Production report showed this rather well. We're looking at quite nearly a hundred million fewer bushels despite nearly two hundred thousand more acres planted.

The Kansas crop has also not improved…

And soil moisture levels have deteriorated…

It'll be interesting to see what the USDA does in the September WASDE, which will be released next Thursday.

On the weather side, it looks like another hot week. Temperatures are expected to be in the mid- to upper nineties throughout the week, with heat indexes breaking triple digits.

Meanwhile, just about everywhere but the corn growing region is expected to get some, albeit very little, moisture through Thursday.

With prices significantly higher than they've been in a very long time, I certainly hope you've started to at least consider marketing your new crops coming in during the fall.

What could change this? A few things could be the likely culprit. Demand falls short of expectations. We did come in a little less on exports than WASDE had projected, albeit while still exporter significant quantities, but if China decides to drop out of the market for beans that could be a big drag. There's also the challenge that as prices increase for grain, demand should fall off a little bit.

And as combines begin to roll across the country, keep an eye out for harvest reports from the Midwest. Despite ProFarmers' estimates, the "I" states are the one area of the country that doesn't seem to need a drink… at least not on the drought monitor.

Also, it can't go unmentioned that despite this runup in prices, inputs are still absurdly expensive. So, even if we're not in a low-price environment anymore, it will take a lot of work to get out of the low-margin environment.

Looking Ahead

Only one major report is coming this week as we head into the long weekend and a shortened trading week next week.

Tuesday - Grain Crushings and Co-Products Report

Stay safe out there!