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GRAIN MARKETS: Did the mini weather rally hold up?

Icy temperatures could keep heating up some grain prices.

By Ben Potter

Wheat finished the second session of 2018 with another round of modest gains, as frigid temperatures across the Midwest and Plains continue to put winter wheat yields at risk. Soybeans also held on for some small gains, while corn prices eased slightly after traders made some small adjustments.

Most temperatures in the central U.S. will stay 10 to 20 degrees below normal conditions heading into Thursday, with warmer weather not expected to arrive until next Monday or later. Drier-than-normal conditions persist for now, although the latest 8-to-14-day forecast, out yesterday, shows a probability for wetter conditions to arrive between January 10-16.

On Wall St., hot tech stocks pushed the S&P 500 index past 2,700 points for the first time. The Dow was also up 75 points in late morning trading to 24,843. Most energy prices rebounded 1-2% Wednesday morning, with crude oil prices surpassing $61 dollars per barrel The U.S. Dollar and gold prices both firmed slightly.

Commodity funds were net buyers of soybeans (+3,000), soyoil (+3,000), soymeal (+2,000) and wheat (+2,500) futures on Wednesday, and were net sellers of corn (-3,500).

Corn prices went mostly sideways in a Wednesday session that featured some technical selling, with March futures finishing down a quarter-cent to $3.53, and May futures unchanged at $3.6125.

Corn spot basis bids across the Midwest were steady to firmer, with several locations reporting 2 to 5 cents higher, with one anomalous processor in Iowa reporting a boost of 10 cents.

According to the latest ethanol production data, monthly corn used for ethanol was slightly higher from the month prior. Efficiency slipped, however, with ethanol plants able to squeeze a little less than 2.8 gallons from every bushel of corn used, compared to nearly 2.85 gallons the month prior.

For the first half of Ukraine’s 2017/18 marketing season, the country’s grain exports fell by about 10%. Some of that simply has to do with Ukraine’s 2017 grain harvest, which came in 5.6% lower than the country’s record-breaking 2016 efforts. Corn exports so far have totaled 228.3 million bushels, with another 411.5 million bushels of wheat exported.

Preliminary volume estimates were for 156,226 contracts, down moderately from Tuesday’s final tally of 204,283.

Soybean prices were propped up a second consecutive day on dry forecasts in Argentina. January prices climbed 4.75 cents to $9.5975, while March futures added 4 cents to close at $9.6875.

Soybean spot basis bids were unchanged at many Midwestern locations, with an Ohio elevator reporting 4 cents higher, and with mixed results at area river terminals (one Illinois location was up 3 cents, and another was down 1 cent).

Argentina began slowly rolling back its soybean export tax, from 30% to 29.5%. The overall plan is to gradually reduce the tax to 18% over the next two years, in increments of 0.5% for 24 months. Argentina also plans to cut the export tax on soymeal and soyoil from 27% in December to 15% by 2020.

Preliminary volume estimates were for 98,773 contracts, down slightly from Tuesday’s final count of 105,684.

Wheat prices gained additional traction as the Plains and Midwest expects deep-freeze temperatures to continue through the end of the week. March Chicago SRW prices added 2.5 cents to close at $4.36, while March Kansas City HRW prices gained 5.25 cents to close at $4.40 (a six-week high). Spring wheat prices added smaller gains, with March MGEX futures picking up another 1.75 cents to close at $6.1875.

How severely is the latest cold snap affecting winter wheat yield potential in the U.S.? The latest Farm Futures modeling shows overall yield potential is down nearly 2 bu. per acre, to 47.9 bpa nationwide.

A state-by-state look at winter wheat yield potential, however, shows some unevenness that may correlate to several factors, including overall temperatures and snow cover.

For example, a band of states further south that have seen lower snow cover are also seeing lower yield potential compared to the month prior, including states such as Colorado (-5.0 bpa), Kansas (-3.0 bpa), Oklahoma (-4.7 bpa), Missouri (-2.8 bpa) and Illinois (-2.8 bpa).

Meanwhile, some states further north are protecting yield potential better, with Nebraska (0.7 bpa), South Dakota (0.9 bpa) and Montana (1.3 bpa) all showing slightly higher yield potential compared to a month ago.

Preliminary volume estimates were for 121,637 CBOT contracts, a 12.8% gain from Tuesday’s totals.

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