The Commstock Report

Reco Day 3: Sell 20% of 2024 soybeans at $11 March futures. Above you will find today's installment of Morning Market Talk. Cattle Trade Hits the Brakes You can click on the picture above to take you to this morning's episode. https://youtu.be/axy0jzWrZCE On the Grains USDA stocks reports are out this morning, all eyes will be on the quarterly stocks, which there have been September surprises before. In the last four of five years that has been the case, with the 2019 and 2020 being the biggest outliers. Give last year’s crop, the strong basis in the west, we would expect the burden of proof to be on the bears. Not one year in the last 20+ years has USDA increased the previous year’s production materially. The average reduction in those four of five years has been 193 million bushels. The most likely scenario is for 2023 yield to be unchanged and the adjustments made in the Feed/Residual category as exports, for all intensive purposes, came in right on trajectory. Which leads me to the next point, 2024 crop finish is less than ideal in the northern belt, what does the September 2025 stock report look like if no revisions are…

Grains look follow through higher after a strong week, but selling pressure may be found as harvest accelerates. The forecast is almost completely clear this week, so it will be full go out in the country. In the Headlines December corn futures were up 16 1/4 cents last week. November beans jumped 53 3/4. December Chicago wheat futures climbed 11 1/2 cents and Dec KC wheat futures gained 12 3/4. October live cattle were up $1.27 while Oct feeders finished the week better by $3.17. October lean hogs were down just fractionally and the December contract lost 85 cents last week. New broke heading into the weekend that Israel's military had killed the top Hezbollah leader in Lebanon. Israeli officials announced another top commander was also killed on Sunday. Airstrikes against Lebanon continue while Israel debates a ground invasion. Lebanon and its supporters from Iran have not acted to retaliate, but widening of the conflict has the potential to underpin bullishness in the oil market. Spotty rains popped up for Brazil over the weekend, but totals were mostly minimal. The Amazon looks like it will receive moisture this week without much of it spilling over into Mato Grosso or other…

Fall started this week and seemed to leave the speculators buying into what is usually known to be a more bullish seasonal period just ahead for grain futures. For speculators to continue covering short positions is one thing, but is expected that sustained strength for grain prices would rely on the commodity trading funds eventually building significant bullish bets again. "A bull market always needs to be fed," so the direction of the managed money position will itself depend on a steady flow of friendly news and data.   The next test for sentiment begins on Monday already, with USDA issuing the Grain Stocks and Small Grains Summary reports. This is the update that can include the yield and acreage revisions for the previous crops. The average trade guesses slightly favor seeing reductions to last year's corn and soybean production estimates. The ranges of the ending stocks estimates show the extreme alternatives of corn stocks being as low as 1.655 billion bushels with the most bearish view for the 2024 carryout to rise back above 2 billion. Soybean stocks are currently pegged in the area of 350 million bushels, with a range extending up to almost 450 mbu, after measuring…

On the Grains Good morning, finally Friday, although it doesn’t matter during harvest season other than we generally see pre-hedge at the close, I would expect that the western belt makes good progress this weekend while the east may be out for a few days. Today we get the Commitment of Traders report, while we all know that data is delayed, one would expect to see the funds cover beans and corn by lightening up on the shorts. Now, here is what I will be watching, I get the fund covering action that is taking place since it’s the end of the quarter, end of the month, however, if we see this continue after we turn the page to October then we got something working in the grains. Yesterday we put a reco out on March soybeans at $11.00, the November 100 DMA sits right at $10.79, a 31-cent carry would give us a little wiggle room to get that filled. If we can get a push to that we are justified in making some additional sales, if the rains start falling in Brazil it will be hard to get ahead of the market and make additional sales. This content…

There are families who have begun to contemplate what the result of the November election will have on the tax consequences on assets and estates. We had a call with our tax advisor and accountant last week to review where we were in our estate plan and whether there were additional actions that should be taken to protect wealth and mitigate risk. The current capital gains tax rate is 23.5%. That is as good as it is going to be with the risk all on the side of that tax rate rising. Same with the estate tax exemption, currently approximately $14 mln per person and $28 mln per couple (rounded off). Not a lot of farm families will be impacted by the current level of exemption. These exceptions however were established by 2017 tax law which expires at the end of 2025. If Congress doesn't extend them in a new tax law deal, the exemption automatically shrinks by half. If the exemption is reduced to $7 mln per person, the Urban Brookings Tax Policy Center estimates the number of estates owing money will more than double from 4000 to 9000 in 2026. ,LA (Kamala) is promoting a 40% capital gains…

On the Grains Good morning, Thursday’s export sales report will be the driver for the bulk of today. Overnight crude oil was down sharply, down over a dollar when writing this. Wheat appears to offer some help this morning, with Paris trading higher and domestics following. Paris Milling wheat has about $8 to go and check the recent highs. Yesterday’s flash sale to Mexico for 180,000 MT of corn was a boost but I was looking for some beans as well to confirm the rumors earlier in the week of 20 cargo trading, maybe we will see that today. Soybean futures continue to march higher today, eyeing the high from earlier in the week, just remember we’re nearing the weekend and will probably see some pre-hedging take place tomorrow. This content is for members only.Register Already a member? Log in here

Part 3 of 3 When a tariff is placed on China…China doesn't pay the tariff. The buyer of the Chinese made product sold in the US or EU does. If a tariff of 60% was put on all Chinese goods being imported, the buyers of those goods have a tough decision to make. How much do they raise their prices to compensate? …the full 60%, which would be a shock to their customers, or do they eat some of the margin taking a loss themselves? If Trump looks strong near Election Day, I would expect trade with China to surge. For example, a maker of US grain handling equipment said that the only place that he could currently get some component he needed was from China so he bought a 3-year inventory of the part hoping to avoid a trade disruption or tariff hike. The supply chain is global with parts sourced from all over the world. A 10-20% tariff imposed on all US imports from everywhere may mean there is nowhere else to source goods but domestically. If those sources do not currently exist here then industry would need to expand to create the plants and local supply to…

On the Grains What a day yesterday in both corn and soybean. While we did hit some technical and sales objectives the market was unable to hold gains into the close. As we mentioned yesterday, China is going on a week long holiday starting October 1st and rumors of large purchase’s ahead of that week, up to 20 cargo’s or 1.2 MMT. The market has continued to slip since I started to write this report, now hovering at close in support. The US is the cheapest FOB beans and we should be getting that business, if it did actually happen.  Watch for flash sales today to confirm, without confirmation, yesterday’s high will remain formidable resistance.  This content is for members only.Register Already a member? Log in here

Little has changed in Brazil's weather forecast for major growing areas since last week. The market is becoming increasingly sensitive to a potential delayed start of the rainy season. One Brazilian grain trader contact described this rally as "bullshit". His reason was that a late start to Brazil's soybean crop didn't mean anything to the final size of the bean crop. He argued that it will have a greater impact on the second crop corn crop that followed. While he is correct, the market is still going to react to it. It is no different than if the planting window in the US got pushed back two weeks. It doesn't mean the crop is a disaster as it has time to recover. But the market is still going to react.   We have spoken with local contacts that typically get an early jumpstart on planting in Mato Grosso and yet are sitting idle. Temperatures are consistently hitting triple digits. Wildfires are popping up everywhere, creating a constant haze blocking out sunlight. It is not a fun place to be right now. Based on the current forecast, there is an increasing likelihood that planting pace will fall below average. Does that…

On the Grains Shockingly stable is what I will call the overnight trade after yesterday’s impressive rally, we have been able to hold the bulk of those gains. Does this corn market have the gusto to test the 100 DMA at $4.32 December? Time will tell, what I do know is that the phones were busy yesterday with producers paying attention to what was taking place in Chicago. While the conversations were related mostly to beans, plenty of calls were on where we needed to target orders on corn were also fielded as well- more on that later. It feels like we’re close to another wave of selling for both commodities. This content is for members only.Register Already a member? Log in here