About This Episode
Chris Barron and Grant Shimek wrap up a week in a market that ground lower with nothing supporting it. Corn closed below the week of July 11, which Shimek says historically is not a good thing to have happen, and traders are watching a chart gap just under $4.20 on December corn. He treats a probe under that level as recoverable, but warns that a market without a bullish narrative can drift for a long time, going further on both time and price to test your resolve.
Dryness is showing up in pockets along the Mississippi River Valley and into Illinois, and Chris is hearing from growers whose late-planted corn is rolling. Shimek's point is that dry alone does not move the board; the market needs heat to get excited. He sees the August 12 revised acreage and crop production report as the trigger, and thinks a couple more weeks of dry weather working in unison with a supportive report could produce the kind of August or early September spike hedgers can actually use.
On spreads, soybeans held ground while corn gave it up, and Shimek expects beans to hold some premium into August when the crop matters most. Basis has softened, 10 to 15 cents in parts of the East where ethanol plants have shut down and 2 to 8 cents across the West, and August basis contracts are feeling that pressure. His marker for the following week is beans back above $8.90 and December corn above $4.20 at the close, or the charts have taken damage that will take time to rebuild.
“It's a grind. And there's nothing to support it here. The bull's not being fed of any kind and hasn't been for a while.”
— Grant Shimek
Key Takeaways
Corn closed below the week of July 11, with a chart gap sitting just under $4.20 on the December contract.
Shimek's markers for the next week: soybeans back above $8.90 and December corn above $4.20 by the close.
Dry weather alone will not move the market; it needs heat, and probably a second trigger in unison.
He points to the August 12 revised acreage and crop production report as the event that has to give the market something positive.
Basis softened 10 to 15 cents in parts of the East as ethanol plants shut down, and 2 to 8 cents in the West.
Soybeans held ground while corn eroded, and he expects beans to keep a premium as August arrives.
Full Transcript
Chris
Barron: And it all comes down to this. Two on, two out, bottom of the ninth. The Farmers lead by one. Full count. Here comes the play at the plate.
Grant
Shimek: And it's the Ag View Pitch.
Chris
Barron: Welcome everybody to another episode of the Ag View Pitch. And we're kind of wrapping up a week here of markets that kind of did a lot of not too much this week. And I've got Grant Schiemek on here with me to have a little conversation on Wrapping this week up. Grant, how's it going this afternoon?
Grant
Shimek: Good, good. You?
Chris
Barron: Hanging in there, just kind of watching some of this corn in some of these dry areas start to roll up, especially some of the stuff that was planted late. In our area, we had about a third of the crop went in kind of on the late end of the window in that June timeframe, and that stuff's really showing some stress right now with this, with the dry weather.
Grant
Shimek: Right, yeah, I'm hearing that in a few areas, some parts of Mississippi River Valley and over into Illinois too, starting to dry out.
Chris
Barron: Yeah, definitely. So I guess just wanted to, uh, have a little conversation with you. Won't be very long one here, but just kind of see what your thoughts were from the week. I know they're, you know, it seems like, you know, what do we talk about here when, uh, there's just a lot, not a lot of news out there. Anything that we should be thinking about or looking at on the markets right now?
Grant
Shimek: Well, that's definitely true. It's a grind. And there's nothing to support it here. The bull's not being fed of any kind and hasn't been for a while. And we're drifting lower. We did close below the week of July 11th, which historically to me isn't a very good thing to have happen. I think there's a lot of people still looking at the gap that is still on the chart just above $220. I don't think that it means anything necessarily if we fill that gap. I know it does to some people, but I think just as long as it's just a probe and a jab under $420, I think that's something that can be recovered from. But in any event, we need some kind of narrative to build to be bullish. Otherwise, we can do this for, for some time. And the market has a way of going always a little further and a little longer, whether it be time and/or price, to really test your resolve.
And, you know, when it comes to hedging opportunities, you know, this year has been tough for a lot of people to find that moment where they were willing to lay off risk in many cases. But that's just what we're dealing with.
Chris
Barron: Gotcha. What, what do you think? I mean, it just feels like we've been kind of leaking here and, and on, on the prices, as you kind of just alluded to, but, you know, are we are we still kind of in a technical trade attitude with no fundamentals being there? I mean, how, what are we going to need to spike, you know, to give us, to feed the bull, I guess is a better question. I mean, we're starting to hear some dry weather concerns. You look at the drought monitor from the week before to where it is, you're starting to see some little dry areas pop up. How long does it take the market from a fundamental standpoint to start to do anything for this? I know that's the question I'm getting from some of the guys who are in the dry areas. They're calling now and saying, hey, we're dry, we're dry, you know.
Grant
Shimek: Right, right.
Chris
Barron: Well, what's—
Grant
Shimek: for dryness, the thing we lack right now is temperature. So yes, it's dry, and as a producer, you can walk out and see the cracks in the ground, and you know you haven't gotten moisture for, in some cases, And I talked to a guy along the Mississippi, far southeast corner of Iowa today, and he hadn't had rain in some time. And but it lacks heat. The market, typically, you got to have heat to get the excitement there. But if we can continue the dry pattern, it's probably a couple of weeks out. And we'll probably need something else. To kind of be a trigger, but maybe a couple things in unison with that will make things happen. Obviously, you've got on August 12th, we've got the revised acreage report and crop production. So that is probably— one would have to think there has to be something positive in that.
That can't be cold water yet again in a major way and expect that we can just keep— we're gonna recover and the and, and ramp from it. So I really think we have to have some positive price action out of that report on the 12th. And then that combined maybe with some other elements like this drying out is going to be enough to, to turn the, turn the ship and get us kind of one of those August, early September moments where we get some spikes up and it was something we can work with.
Chris
Barron: I have a question for you a little bit on the, on the spread difference. You know, you look at corn and soybeans and, you know, it seems like, you know, corn was going down, beans were going up there some during the week, and it was almost making me wonder, you know, is there some action going on there where people are playing that a little bit and, and taking advantage of that narrowing up a little bit? Is there anything, any, anything going on there, do you think? Because I know, you know, Dwayne's talked about, you know, well, if this corn market starts to go up, beans got the really got a bigger, maybe a bigger story just because of where they're at price relative to corn and wheat. But if, if corn and wheat drift lower, you know, what's your thought there?
Grant
Shimek: Well, number one, you're right this week. I mean, if anything, beans held ground while corn gave it up. And there's you can assume there's some play going on there just because of historical spread values. Uh, and your question was if corn— as far as if corn and wheat would continue to erode, is that what you're saying?
Chris
Barron: Well, yeah, I mean, if they continue lower, I mean, do you see that gap narrowing at all, or do beans just stay that far out right now?
Grant
Shimek: As we Obviously, as we get into August, much more key for soybeans. Soybeans can probably hold some kind of premium just in and of that while corn and wheat had some erosion. I think that's possible, at least going into next week. So without a doubt, and naturally it doesn't look very exciting, but just by default, then these spreads have some improvement.
Chris
Barron: Okay. On, on basis, and that's kind of probably the last thing unless you can think of anything else. But basis has been, you know, really strong in a lot of areas, but it has softened up in a few pockets. And had some news yesterday with Pete Meyer on the other podcast we did talking about some of the ethanol plants actually closing down in the east now. Just because, you know, the basis got up to where, you know, they were paying $5 for corn and nobody— and they still couldn't shake corn loose or enough You know, do you— what kind of impact do you think, you know, some of these ethanol plants shutting down, particularly in the East, and, you know, does that have much of an effect in your opinion on basis as we move back towards the West? Or is that something we need to be watching?
Grant
Shimek: It's, uh, it all matters. And it definitely is not good for the psychology of the market because it's— because we had basis come in, you know, in some parts of the East $0.10, $0.15 off of what it was 2, 3 weeks ago. And definitely in here in the West, $0.02 to $0.08 in a lot of locations that I've looked at this week. Absolutely. It doesn't, it doesn't help. We do have, and this is obviously more of, more of an issue for soybeans, but at the moment, but anybody had some basis contracts on the August, those things have some pressure. There's some flow there that this naturally happens. So, you know, we get past the end of this month and we start a new month. I think that's where we need to see that basis hold together or it ends up being a lot like other years where you get in the August, September timeframe.
And you know how many times you heard the situation where like, where's all this grain coming from? And you have that second harvest. I don't— not— I'm not trying to make the make the case that that's what we're going to see this year. But those are the types of things that are in the back of everybody's mind as we flip the calendar from July to August in any year.
Chris
Barron: Right. Sounds good. Well, you know, like I said, there's not a lot we can really talk about here, so we didn't keep this long. But is there any final thoughts or anything that you can think of that we need to be paying attention to as we kind of wrap up here for the week?
Grant
Shimek: You know, if we go into next week, especially Monday, Tuesday, and we, and we run the stops below where we've traded, say, the last couple of weeks, say beans under $8.90 and corn probably under that gap on the Dec under $4.20, that can happen. I would just prefer that and probably do need to see that we're back above $8.90 on beans and above $4.20 on corn when we end next week. Otherwise, we'd probably have done some damage. It's going to take some, some basing and time to rebuild.
Chris
Barron: Okay, well, thanks a lot, Grant. Appreciate it. Like I said, we wanted to keep this one short, and then we'll be in touch with you a bunch more as things develop, because as you and I talked before we started the podcast here offline, there is so much variability out here and so much unknown. Volatility will probably continue.
Grant
Shimek: Yeah, that's right.
Chris
Barron: All right, well, hey everybody, thanks, thanks a lot for joining in on this podcast with the Ag View Pitch, and we will catch you next time. Thanks a lot. Thanks for joining us on today's episode of the Ag View Pitch. As always, you can reach out to us at cbarron@agviewsolutions.com or duanel@netins.net. We'll catch you next time on the Egg View Pitch.