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Limit Up

By Tori Uhland

October 10, 2023

With the USDA Quarterly Stocks report now behind us, the next focus is on the October 12th World Agricultural Supply and Demand Estimates (WASDE) report, as well as US harvest progress and South American weather. Harvest across the United States is moving right along with mostly clear weather forecasts not causing any delays. It is finally starting to feel like fall in the Midwest, but temperatures are expected to return to above normal levels in much of the corn belt, which will keep harvest pace clipping along. Harvest is expected to be well over a third done by now. For corn, the Quarterly Stocks data wasn’t friendly enough to offset the weakness brought on by wheat and soybeans. It was also confirmed that the carryout (according to the USDA, at least) will likely stay over two billion bushels. The futures prices in corn have been disappointing to many of you, I’m sure. Harvest pressures are limiting any rallies in the corn market. The December contract will probably have a difficult time getting back above the $5 level long-term, and outlooks point more towards the $4.50-$4.60 zone. Strong resistance lies at the $5 level, and prices will likely have difficulty breaking through that until harvest is at least half done. StoneX analysts also raised their yield estimate to 175.5, compared to the USDA’s estimate of 173.8, which wasn’t positive news for the prices.

The USDA numbers for wheat were very bearish across all classes. Production numbers were above the highest guess despite the dry growing conditions throughout the season. It is another reminder that wheat has nine lives, and doesn’t need a lot of rain, just a little at the right times. Bullish news for wheat has been hard to find, although the markets got a boost last week from reports of a cargo ship acquiring some damage after hitting a sea mine in the Black Sea. They were also supported by China’s surprise purchase of US wheat, which was their largest in two years and the first flash sale of wheat since November 2022. China bought a significant amount of wheat from Australia last year, but Australia is facing poor yields from a major drought. If this continues, we may see more Chinese demand for US wheat. There have been several reports that Asian flour millers are looking for alternative supplies beyond Argentina and Australia, so that is positive news for US wheat.

Soybeans also had bearish news from the September 29th report. Without worsening South American weather, a strong reversal to the upside will be tough to come by. Soybeans also face the issue of river transportation problems, which could cause supplies to back up in some areas if they are unable to move them down the river. Chinese demand for all commodities was essentially non-existent last week due to their Golden Holiday, so there hasn’t been much bullish news to trade on. Weak crude oil has pulled soybean oil lower, which has also put pressure on beans. It is expected that China will be back to buying US beans after their holiday since Brazil offers are absent, which is supportive news.

December cattle prices fell below a key support level last week, but then closed above that level for a couple of days. The US dollar turned lower, but equity and bond markets rebounded, which may have helped support the markets momentarily. December hogs traded to their lowest level since May 30.

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