MARKET HIGHLIGHTS

• Markets trading higher overnight with wheat seeing the best strength.
• USDA surprised everyone yesterday with their big corn/bean yields.

• Stocks to usage levels are a little more bearish for corn than a year ago when Dec. futures made a low near 3.15.
• Bean stocks to usage is more bearish than how the 2016/17 to
• There will continue to be much debate over yields with earliest yields lacking of any major issues.
• FSA acres out yesterday afternoon would suggest the USDA currently is 0-500k too low on corn acres and around 1m acres too low on beans.
• China announced yesterday afternoon that they would like to expand their ethanol program nationwide by 2020 to reduce pollution and clear out corn supplies.  It is a ways away, but a potential new source for corn demand, which has been good but relatively stagnant lately.
• Corn continues to track similarly to 2005 when there was a bounce off the lows following the Sep. crop report before resuming the lower trend.
• Corn technically remains in a lower trend, but there is potential for a double bottom if yesterday is low holds.  Resistance is at 3.57 and support at 3.50.
• Beans bounced off moving average support yesterday in the mid-9.40’s.  Overnight resistance was seen at 9.60.  The market is mid-range with a lack of a trend.
• Wheat put in a bullish outside up day following the USDA.  Resistance is at 4.60 and support 4.15.
• USDA reported 167,370 MT of soybeans to Mexico for 2017/18.

WEATHER

• Rains seen moving across the N. Midwest the next couple of days.  The 6-10 has spotty showers, but then a more widespread event is seen during the 11-15 period.
• Temperatures are expected to run above average for much of the next two weeks.
• Overall, nothing too significant.

OUTLOOK

• Bearish corn/soybean numbers from the USDA have not had that much of a negative impact on corn/beans yet.
• The corn S&D is similar to a year ago, which makes me skeptical that we have seen our lows, so for now I think the path of least resistance is lower.  The China ethanol story could be big a few years out, but is not going to clear out any significant supplies in the near term.
• Soybeans had a bearish report yesterday and a bearish FSA acre report.  The market has been able to bounce, but there is a bearish seasonal that kicks in during the second half of September as well.  For all of those reasons, I think there is downside risk from here.
• Wheat had a strong bullish reversal yesterday for the third time since mid-August.  If corn/beans can stabilize, wheat may be able to attract some buyers following the bullish technical signals.