While grain futures prices remain well below their summer highs, prices do not yet seem ready to give up the fight.

Corn, soybean, and wheat futures have continued to trade in a consolidation pattern for the past few weeks, on key support levels on daily charts. The market needs fresh news to make a move - either fall lower from key support levels, or rally higher through overhead technical resistance on charts.

That fresh news will likely be delivered soon. Here are five important issues to watch:

The Fed and the U.S. Dollar

Since the Covid-19 economic fallout from over a year ago, the U.S. central bank has been implementing structured bond buying in an effort to keep interest rates low.

It has been largely expected that sooner than later, the Fed would announce that they will begin to taper additional bond purchases. On Wednesday this week, the Fed advocated that it will likely begin reducing the pace of its monthly bond purchases later in 2021 if the economy continues to show signs of improvement. This has been the most forthright commentary from them so far.

The U.S. Dollar index was cautious to respond on Wednesday, keeping the value of the U.S. dollar also in a tight trading pattern for now.

Why does the value of the dollar matter? A lower dollar is beneficial for U.S. exports, as it allows for other countries to potentially want to import more, due to currency exchange rates making U.S. commodities cheaper to purchase.

For the past two months, many commodities have been consolidating near historic price highs - waiting to see about global economies and which way the U.S. Dollar starts to move.

Chinese Economy

Earlier this week, the headline consuming both stock and commodity markets was regarding the Chinese company Evergrande.

Trade around the world was nervous about the potential global ripple effect a fallout from a major company like this could have on the world. Immediately it stoked fears and remembrance of how the Lehman’s Brothers bankruptcy fiasco affected markets back in 2008.

Looking back, Lehman’s filed for Chapter 11 on Sept. 15, 2008. The stock market, energies, and agriculture commodity prices nearly all sank lower from September 2008 until early 2009. (Corn in 2008 reached near $8 in summer and by December of 2008 was down to $3!)

The U.S. Dollar ended up trading higher from September 2008 until year end. The Lehman collapse had a lasting effect on commodities, at least for a few months.

So far it appears as though the Chinese government will step in to help make sure a company collapse does not occur, but this continues to be a situation to monitor.

Funds squaring positions into month end

Since the early summer price peaks, funds have slowly been reducing long positions. For soybean futures the most recent net long position reported by the CFTC for the funds was 55,380 contracts, well down from the peak of 180,014 in late April.

For corn futures the most recent net long fund position as reported by the CFTC was 212,229 contracts, nearly half from the peak of 401,993 reported in mid-April.

The end of the month and end of the third quarter are approaching with position allocating likely to still occur.

All eyes will be on how the funds continue to perform into fourth quarter. Likely some of their future buying or selling notion will depend on supply and demand fundamentals which will be revealed in upcoming USDA reports.

The Quarterly Stocks report

Speaking of the USDA, on Thursday, Sept. 30, USDA will reveal the quarterly stocks numbers for grains.

This report is eagerly awaited as many in the industry feel that old crop ending stocks are tighter than recent USDA reports have been indicating.

Why are some in the industry feeling this way? Because of the continued historically strong cash basis levels occurring throughout the Midwest.

This is “not normal” and is likely an indicator of farmers being sold out of old crop grains, and end users still in need of grain supplies in the weeks before harvest is well underway for most of the Midwest. The report will show remaining supplies of old crop grain stored in on farm storage, and grain stored in commercial storage.

Yield

Preliminary reports from clients and others in the industry suggest extremely variable yields across the Midwest.

Excitement, disappointment, as expected, and dismal are some of the ways to express what farmers are reporting as they discuss early harvest yields.

What does feel apparent, is that this harvest will likely not produce a national record yield for either corn or soybeans. Will it even be trendline is also coming into question.

As I discussed nearly one month ago, grain markets and many commodities continue to consolidate on both long term support lines and in a sideways fashion on charts. The missing pieces of the puzzle will be placed soon enough. And these are the five main price components to monitor for now.

Reach Naomi Blohm: 800-334-9779 and [email protected]

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