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GRAIN MARKETS: Grains make strong start to short week

Markets pick up where they left off before holiday weekend.

By Ben Potter

The grain markets came off a long holiday weekend, but they didn't forget about the modest gains posted last Thursday and Friday, picking right back up where they left off in Tuesday trading. Soybeans in particular benefited from this forward momentum as dry Midwest weather and healthy export demand fueled another day of double-digit gains.

Weather prognosticators are watching Hurricane Irma closely this week. The storm could make landfall this weekend in Florida or the southeastern U.S. as a Category 4 or 5 hurricane. National Aeronautics & Space Administration data indicate that it has the highest sustained wind speeds (175 mph) of any hurricane since 2007. There is still great uncertainty regarding the storm's strength and exact path at this time, however.

In Texas, the cleanup and recovery from Hurricane Harvey continues, including the reopening of several refineries. That's good for energy prices: While crude oil was up for the day, it's still below $50 per barrel, while gasoline prices fell slightly after a run of sharp increases last week.

The Dow shed more than 200 points by midday trading, weighed down by continued tensions between the U.S. and North Korea. North Korea completed its sixth nuclear test over the weekend and said it had completed its first thermonuclear detonation.

Corn prices found more footing on Tuesday, with September 2017 prices trading 4.5 cents higher to close at $3.4425/bu. December 2017 futures finished 3.25 cents higher to close at $3.5850.

Ahead of the U.S. Department of Agriculture's next "Crop Progress" report, analysts expect no change in corn's good-to-excellent rating, which is currently at 62%. Farm Futures currently estimates 2017 corn yields at 167.8 bu. per acre, for a total crop size just below 14 billion bu.

Is the Corn Belt ready for frost? Historically, the median occurrence of the first 32°F freeze happens between Sept. 21 and 30 in Minnesota, the Dakotas, western Nebraska and Wisconsin. By Oct. 31, most of the Corn Belt has experienced a 32°F freeze. That's still weeks away, but a small portion of western Nebraska could see a potential frost Wednesday morning.

USDA corn export inspections hit 31.4 million bu., down slightly from last week but within the trade estimates, which ranged from 25.6 million to 33.5 million bu. Last week's export inspections totaled 31.7 million bu. The top three destinations for the week ending Aug. 31 were Mexico (10.7 million bu.), Japan (9.3 million bu.) and Colombia (3.11 million bu.).

Corn inspections exceeded USDA's forecast for the 2016 marketing year (which ended Aug. 31). Census exports are running ahead of inspections, which could cause USDA to raise sales estimates next week.

USDA reported corn export sales of just below 5 million bu. for delivery to Mexico during the 2017-18 marketing year, which began Sept. 1.

Preliminary volume estimates were 180,180 bu., down significantly from Friday.

Soybean prices posted another round of double-digit gains. September 2017 soybeans finished 19.5 cents higher to close at $9.6050/bu., and November soybeans added 19 cents to close at $9.6850.

Ahead of this week's USDA "Crop Progress" report, analysts aren't predicting any change to soybean ratings, estimating that 61% of the crop will be rated good to excellent. Farm Futures has raised its forecast for U.S. soybean yields to 49.1 bu. per acre. If realized, the 2017 crop would come in at 4.35 billion bu.

At 23.7 million bu., USDA soybean export inspections stayed in range of trade estimates of 21.1-25.7 million bu. Last week's export inspections totaled 26.3 million bu. Top destinations for the week ending Aug. 31 include China (14.1 million bu.), Japan (3.5 million bu.) and Mexico (2.4 million bu.).

Weekly soybean inspections for 2016-17 are down from last year but still above the five-year average. Total soybean inspections haven't matched USDA's forecast for the 2016 crop. However, census totals are ahead of inspections, which could mean that USDA's current forecast is too low.

USDA reported soybean export sales of just below 5 million bu. for delivery to China during the 2017-18 marketing year, which began Sept. 1.

Preliminary volume estimates were up moderately from Friday, at 183,533 bu.

Wheat prices saw healthy gains Tuesday, with Chicago, Ill., September 2017 soft red winter wheat prices gaining 10 cents to close at $4.3050 and December 2017 prices adding 4.25 cents to close at $4.43/bu. Kansas City, Mo., hard red winter wheat also posted gains. Minneapolis, Minn., spring wheat, on the other hand, took another hit, with September 2017 and December 2017 each losing another 2.5 cents.

USDA wheat export inspections only hit 9.3 million bu., down big from last year and well short of trade estimates that ranged from 18.4 million to 22 million bu. Last week's export inspections totaled 24.6 million bu. Top destinations are scattered across Asia, including exports to Japan (2.39 million bu.), Thailand (1.95 million bu.), Taiwan (1.56 million bu.) and South Korea (1.23 million bu.).

Ukraine officials said the country's wheat harvest will produce around 955.3 million bu., nearly identical to last year. Although fewer acres were planted to wheat this year, winter survival rate was higher. Of its total production, Ukraine plans to export around 588-625 million bu.

Preliminary volume estimates were 97,551 bu., up slightly from Friday's totals.

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