The third week of September was a good week for the grains.

Soybeans were posting new contract highs while corn and wheat were trading at levels not seen since early March. By the close on Friday, Sept. 18, December Minneapolis wheat had gained 31.5 cents, December corn was up 57.75 cents, and November soybeans were up $1.76.

There were a few concerns popping up, but the funds were aggressive buyers and China and an unknown destination were aggressively buying corn and soybeans. So, the market couldn’t top or see a major selloff with such strong demand, could it? Well when you least expect it, it happens.

The last full week of September brought a massive amount of selling into the grains. As of the close on Thursday, Sept. 24, December Minneapolis wheat had retraced 16.5 cents, December corn was off 15 cents, and November soybeans were 43.5 cents lower.

Is the rally over, or is this just a healthy selloff? That question won’t be known for a while yet, but at this point, it appears that the market could be in for a little more than just minor correction.

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The week started off with all of the grains coming under heavy selling pressure. Expectations that harvest progress would ramp up due to favorable weather forecasts combined with reports of better than expect yields pressured the market. Once the market started to falter, the funds started to liquidate positions which triggered computer-generated sell orders.

Selling calmed down slightly during the middle of the week due to the U.S. Department of Agriculture's Crop Progress report. The Aug. 21 Crop Progress report did not bring any big surprises to the market. Corn and soybeans are continuing to see crop development ahead of the five-year average, which is also reducing the effects weather can have on the crop. For corn, if there was a surprise in the report it came in the harvest category. USDA estimated corn harvest at 8% complete while the average trade estimate was calling for 13% complete, 5% slower than expected. This will help support corn as that leaves more in the field vulnerable to adverse weather. Soybean harvest was 1% ahead of expectations at 6% complete.

As for the crop condition rating, corn’s crop rating was slightly better than expected. Corn’s crop condition rating saw a 1% improvement. The trade was expecting to see a 1% decline, so conditions were 2% above expectations. All of the major states saw conditions either remain unchanged or improve, except for Ohio which declined 2%.

Soybeans crop rating was better than expected. The trade was looking for soybean’s crop condition to drop 1% as well, but instead it remained unchanged. As was the case in corn, all of the major states saw soybean’s crop condition remain unchanged or improved slightly, except for Nebraska, North Dakota, and Minnesota. North Dakota’s crop rating dropped another 5% last week as it appears the early September frost was a little worse than expected.

Wheat played a follower role this week as it looked for its own news to give it direction. Improving weather forecasts added selling pressure as late in the week forecasts were calling for rain in the U.S. Southern Plains as well as for the Black Sea region. Two-thirds of the Black Sea region is abnormally dry, which has been supporting Russian wheat prices. In addition, weekend forecasts are calling for desperately needed rain for Argentina. But the rain might be too late as Buenos Aires Grain Exchange estimates new crop wheat production at 17.5 million metric tons, 1.3 million metric tons lower than last year due to dry conditions and fewer planted acres.

Additional selling was tied to reports that U.S. winter wheat acres will be 2% to 3% above last year. Informa’s acreage estimate put all wheat acreage up 1.1 million with winter wheat acreage at 30.9 million and other spring wheat at 12.95 million.

Wheat export news continued to be lackluster at best with only routine sales being reported for the week. Reported sales for the week had South Korea, Taiwan and Japan all buying U.S. wheat. Exports were limited by a stronger U.S. dollar.

Corn was pulled down by spillover pressure from soybeans, along with good harvest conditions and reports of strong yields. Short and intermediate term weather forecasts are also negative corn as most of the U.S. is expected to see warm dry conditions for the rest of September, which should advance harvest progress. Long term forecasts are calling for another cold front which should push temperatures to be much below normal but precipitation is expected to remain below average.

It did not help corn’s case that private analyst Informa is estimating 2021 corn acres at 93.7 million, an increase of 1.7 million over 2020.

Brazil is reporting first crop corn planting progress at 23% versus 14% average. But Buenos Aires Grain Exchange is estimating Argentina’s new crop corn production at 47 million metric tons, down 3 million metric tons from last year due to dry conditions.

Export demand for corn continues to be strong as early in the week, reports had China buying 140,000 metric tons of U.S. corn while an unknown destination bought 320,000 metric tons. To top that news, last week’s export sales were sharply above expectations at 84.2 million bushels, with another 22.3 million bushels sold to China, bringing their marketing year total to 386 million bushels. After three weeks into the new marketing year, corn sales were at 38% of USDA’s expectations, a new record pace.

There is concern that China’s corn demand will not be as strong as earlier thought since after trading to new five-year highs, the price of corn in China has dropped significantly. On top of that, last week’s ethanol production was estimated at 906,000 barrels (the lowest level in 12 weeks) a decrease of over 20,000 barrels. Stocks were estimated at 19.997 million barrels an increase of 199,000 barrels.

Soybeans took the biggest hit this week, but it was also the marker that had seen the biggest gains. Profit taking, technical selling, and economic concerns all teamed up with harvest pressure to push soybeans into the red for the first lower weekly close in six weeks.

Export demand continues to be extremely strong, but traders seemed to disregard the reports. Last week’s export sales were above expectations and very impressive at 117.4 million bushels. China bought another 69 million bushels to bring their marketing year total to 707 million bushels versus 76 million bushels at this time last year. After three weeks into the new marketing year, soybean sales were at 61% of USDA’s expectations, a new record for this early in the marketing year.

In other soybean news, Argentina’s crush numbers for August were 20% lower than the prior year and year to date is 9% below last year’s pace. Dry conditions in Argentina caused Buenos Aires Grain Exchange to estimate the upcoming year’s production at 46.5 million metric tons, 3.1 million metric tons lower than last year.

So far, yields are being reported as better than expected, but this is from beans that were mature before the frost. Technical selling added pressure, from fund selling as well as from weak longs that are exiting positions.

In other news, all eyes have been on Washington, D.C. Federal Reserve Chairman Jerome Powell testified before Congress three times last week on the state of the economy. He reported the economic outlook remains highly uncertain and that the government needs to continue to stimulate the economy. The last stimulus package is expiring, the effects of contraction are being felt, and Congress needs to get more funds in consumers’ hands.

Cattle traded in a back and forth fashion, with support coming from a stronger cash trade and higher boxed beef prices. Gains were kept in check from position squaring ahead of Friday’s September Cattle On Feed report. Early estimates for the report are: On Feed: 103%, Placed: 106%, and Marketed: 97%.

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