Outside markets have offered little impetus this week, as soybeans and corn consolidated recent advances at around 16 dollars/bushel and 8 dollars/bushel, respectively. Traders are awaiting the upcoming USDA report on August 10, which will offer a first look at the yield potential of these battered crops.
Based on private estimates we feel that the market could be in for a negative surprise, as corn may come in as much as 20 bushels/acre below the July estimate and soybean yields may drop another 4 bushels/acre. Although a certain amount of demand destruction is already under way, we feel that corn and soybean prices may have to go a lot higher to discourage enough demand to meet the substantially reduced level of supply.
So where do we go from here? The market remains indecisive, although from a technical point of view we should see a breakout from the current triangle formation over the next week or two. Given that there is also an important USDA report coming up next week, we should see a much more active market in the days ahead. We would be buyers of December on a break towards 66/67 cents, since we feel that the longer-term outlook doesn’t justify prices below that level.
Plexus Cotton Limited