Last week, corn was 22 higher, beans were 42 higher and wheat was 47 higher. The second most significant USDA report of the year will be released Thursday.
When a market moves sharply higher or sharply lower the 5 to 7 business days before a USDA report, those with profit in their futures account will take profit. They do not want to risk losing the profit already in their trading account by a surprise on the USDA report.
If the market had move smartly lower, short covering (buying futures to offset previously sold [short] contracts) will rally (move higher) the market.
If the market had moved smartly higher (as it was last week), those traders long the market (had previously bought futures contracts expecting higher prices) will liquidate their long positions by selling futures contracts to offset (cancel out) previously purchased contracts and the market will decline.
This process of the market declining after a rally the week before a report or vice versa is called “evening up” or “profit taking”.
After a big move up or down before a major USDA report, the only thing more certain than “evening up” or “profit taking” is the sun rise in the morning.
Do not be alarmed by this decline. The markets will over correct no later than Tuesday or Wednesday and then rally a bit before the reports are released at 10 AM Mountain time Thursday. Corn and beans will make new highs in a matter of one to ten weeks. Wheat making new highs is doubtful, but possible with the war in Ukraine.
Russian and Ukrainian negotiators will meet today in Turkey. Lower crude oil accelerated the weakness last evening.