For many a generation, parents have delighted in reading their children the classic story, The Little Engine Who Could. I suspect that most of us are familiar with the tale. Still, just in case you need your memory refreshed, it is about a small train engine that is called upon to pull a long train of cars up and over a high mountain after the original engine broke down and several other “big” engines found excuses for why they were not available to take on the task. Finally, the little blue engine is brought in to try and tug the cars up over the hill and with grit, determination, and repeating to itself, “I think I can, I think I can,” it was successful in pulling the train up and over the seemingly insurmountable hill. Of course, the moral of the story is that we can all succeed with determination and a positive attitude. In 2007, this story was listed as one of the “Teachers Top 100 Books for Children” by the National Education Association.
By now, some of you are probably thinking you came across a version of “Mr. Hueber’s Neighborhood” instead of a market update, and I can assure you I am not wearing a cardigan sweater, nor is it a Beautiful Day in This Neighborhood unless you like gray and rainy weather. That said, I couldn’t but help and think of that story as I watched the trade in the soybean market over the past few weeks. After failing to generate any upward momentum, a new engine appeared to have taken over, and believing “it could,” low and behold; we are at the highest point traded since June of 2018.
Let’s do keep in mind that just like that little engine, the bean market will finally reach the peak and as we all know, it is downhill from there. Granted, we have not reached to the same heights as we did on other trips between 2016 and 2018, but do take note that weekly indicators are currently as high as they have been at any time since, and would appear to suggest the summit is close. Yes, the current engine appears to be using Chinese soybean purchases for fuel, but even that will reach a point of diminishing returns. I would like to think that we can make a stab at that 50% retracement of 9.94 ½ and could even print a 10 in front before this is all said and done, but I would suggest now is not the time to be greedy, as I do not want our next story to be a retelling The Fisherman and His Wife, by the Brothers Grimm.
The streak of daily export sales has extended into this morning. The USDA reports that China purchased another 238,000 MT of beans and 132,000 MT were sold to unknown destinations.
With less than two months until election, President Trump had a decision to make; alienate the farm vote or those in the oil industry. Turns out he decided to side with ag, and more specifically the ethanol industry as he has instructed the dozens of retroactive blending exemptions that have been requested by the refining industry, be denied. Granted, the number of exemptions handed out quadrupled during his administration, which already eroded support in corn states. Sources say part of the decision stems from concerns that not only had this weakened support for the President at the farm sector, but it was also reflecting negatively on Iowa Senator Joni Ernst’s reelection bid. All that said, I would not be too certain that this will be the last we hear about this battle as somehow or another, the refining/oil industry seems to be able to bring it back to life again and again.
I have not found official verification but I suspect that weekly export sales will be pushed back to Friday morning due to the Labor Day break. That means we have two reports to work through on Friday but no doubt most of the attention will be directed to the production and supply/demand release. Once again, here are trade survey estimates to set the stage; For corn, the average estimate for yield came through at 178.3 bpa (-3.5 from Aug.), giving us a total production estimate of 14.89 billion bushels. The 2019/20 carryout estimate stands at 2.234 billion and 2020/21, 2.456 billion. The average bean yield estimate is 51.8 (-1.5 from Aug.), with the estimated production coming through at 4.294 billion. 2019/20 carryout is expected to slip to 603 million bushels and the 2020/21 number down to 467 million. The 2020/21 wheat carryout is expected to change little at 925.5 million. Looking at the world ending stocks, corn for 2019/20 is expected to total 310.9 MMT and for 2020/21, 311.11. Beans for the 19/20 at 95.7 and 20/21, 93.11, and finally wheat in 19/20 at 300.46, the rising to 315.81 in 20/21.