Harvest is Moving Fast

Wheat and corn gave back some of their gains overnight from yesterday’s rally, while soybeans recovered some of the losses from Monday’s session. Crude oil continued to fall, reaching its lowest price since August 27 while S&P futures were modestly lower.

Wheat posted an 18-cent gain in Monday’s trade, fueled by concerns of flooding in Texas, and dry weather in the US Plains. After the close, USDA’s crop progress report showed 47% of the winter wheat crop was in good-to-excellent condition, which was lower than last year’s reading of 59%. USDA also showed harvest was moving fast, with corn at 75% harvested while soybeans reached 87% harvested.

Weekly export inspections were impressive for soybeans this week, coming in at 2.6 MMT versus trade expectations of 1.8 to 2.1 MMT. Meanwhile corn and wheat exports continue to come in at the low end or below expectations. YTD exports for corn are 26% behind last year’s pace and wheat is 18% off. USDA expects both crops to see exports roughly unchanged year-on-year, so a lagging trend is problematic.

S&P futures (ESZ5) and the US Dollar index (DX-MZ5) dipped on Tuesday, as investors locked in some of the sharp gains seen over the last month ahead of the Federal Reserve's policy meeting and results from Apple. The Fed begins their two-day to discuss the need for an interest rate hike. Markets are pricing in only around a 7% chance of a rate hike this week, but will be watching be for clues to whether "lift-off" could come at its next meeting in December.

Crude oil (GCLZ5 / QMz5) continued to be pressured falling below $44 a barrel for the first time since late August. API will release their inventory report this afternoon while EIA will release their report Wednesday morning. Analysts look for a 5th straight week of higher stocks with the average estimate pointing to a 3 million barrel increase in crude oil inventories.

The risk of trading futures, hedging, and speculating can be substantial. Grain Hedge is a dba of Foremost Trading LLC (NFA ID: 0307930)

—Cody Bills