GRAIN MARKETS: Futures close mixed

Corn takes a midweek dip; soybeans and wheat fight for modest rebounds.

Grain futures closed mixed on Wednesday, with even gains unable to generate any significant momentum as markets are stuck in a mid-August lull.

Other markets closed mixed. Investors sold stocks on Wall Street, taking the dollar lower as they found safe havens in gold and treasuries. A crop in crude oil inventories last week helped support crude oil, but the trade is also worried about potential for a hurricane to strike the Texas Gulf Coast by the end of the week. Midwest diesel prices spiked higher because production out of the Gulf Coast could be shuttered by the storm, draining supplies just as farmers start buying fuel for harvest.

Corn prices slid once more on Wednesday, with September settling 4.25 cents lower to $3.4175/bu., a new contract lower.

Prices continue to feel pressure from favorable Midwestern forecasts, with the National Weather Service predicting high temperatures in the upper 70s and low 80s over the next seven days. Aside from an arc that loops from eastern Nebraska to southern Iowa and down into southern Illinois and Indiana, the Corn Belt is currently set up with adequate soil moisture. The combination of mild temperatures and moist conditions are conducive for generating perceptions that an extended grain fill period is underway.

Ethanol production held up well this past week. Although production fell 7,000 barrels per day from last week, that was the second-highest rate on record. Even so, corn used to make ethanol may not be as much as the U.S. Department of Agriculture forecasts for the 2016-17 crop. Much will depend on how efficient plants were in squeezing biofuel from each bushel of corn.

China went on a bit of a buying spree. That’s because China’s corn prices rose after the Chinese government cut corn output forecasts due to lower acreage and yields. As a result, China imported more than 35.8 million bu. of corn in July. That’s a six-fold jump from a year ago, although total imports remain small.

Preliminary volume estimates clocked in at around 314,000 bu., down slightly from Tuesday’s tally of 326,081 bu.

Soybean prices are still down more than $1/bu. from their January 2017 highs but have managed to scrape together a small rally in the past two weeks, climbing on fears that actual crop production isn’t keeping pace with current USDA estimates.

Nearby September soybeans took a tumble at the open but fought to add another 1.25 cents to finish at $9.35/bu. Initial volume estimates were about 25% higher than Tuesday, at around 195,000 bu.

Worth watching this week is an unfolding trade situation with Argentina. The U.S. Department of Commerce added duties on Argentine and Indonesian biodiesel imports as high as 64%. Last year, the U.S. consumed 2 billion gal. of biodiesel – around half of which came from Argentina. U.S. soybean oil prices lifted 1.8% on the news.

USDA announced the cancellation of 25.3 million bu. of the old crop to China, but commitments to date have a comfortable cushion to absorb such losses and still meet USDA’s forecast for the 2016-17 marketing year. USDA also said “unknown destinations” bought 10.8 million bu. of beans, most of it new crop.

Wheat prices closed mixed on Wednesday. December soft red winter wheat futures made new contract lows before reversing higher to close with a 1-cent gain at $4.30/bu., but the nearby hard wheat contracts in Chicago, Ill., and Minneapolis, Minn., ended slightly lower at $3.9875 and $6.3925, respectively.

Burdensome global supplies fueled by a large Russian crop continue to weigh on prices, sending futures in Paris, France, to new contract lows too. Export sales figures out Thursday are expected to be down from the previous week’s good showing, despite a wheat market that’s very oversold.

Preliminary volume estimates are around 128,000 bu., down slightly from Tuesday’s total of 138,346 bu.

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