Markets

GRAIN MARKETS: Soybean rally hits a snag

Corn and wheat also trade lower in a tough Wednesday session.

By Ben Potter

Soybeans gave up about half of Tuesday’s double digit gains, dropping about 5 cents in Wednesday’s session. Corn made smaller downward adjustments, meantime, and some wheat prices lost as much as 2% as some usual suspects (a firming dollar, low trade, high supplies) resurfaced.

Expect cooler weather to move into the Corn Belt starting Thursday. Daytime highs will be slightly lower than normal throughout much of the Midwest, with the Plains recovering with some higher-than-normal temperatures into the weekend. Most of Thursday’s precipitation will occur across the South, with some light flurries possible in parts of the Dakotas and Minnesota.

Stocks wear near-unchanged at midday, with the Dow down 3 points to 24,172. The House and Senate move closer to hammering out differences between their two tax bills. Energy prices fell significantly Wednesday, with crude oil down more than 2.4% and gasoline down more than 3% in early afternoon trading. The U.S. dollar strengthened modestly, as gold and copper prices also firmed slightly.

Corn prices were steady for much of the day but finished slightly lower, with December futures slipping a half-cent to close at $3.3925, and March futures dropping a penny to close at $3.5275.

Ethanol production levels have reached new all-time highs last week, after plants produced an average of 1.108 million barrels per day. That pushed inventories 500,000 barrels higher, and ethanol futures slipped 3% after the news broke.

Production through the first quarter of the marketing year suggests USDA could be as much as 100 million bushels too low on its current forecast for corn used by ethanol plants. That may partly offset the slow pace of exports when the agency updates its World Agricultural Supply and Demand Estimates (WASDE) report on December 12.

Speaking of WASDE, as many as 27 industry analysts provided estimates on key production figures ahead of the report. That includes an average trade guess of 2.478 billion bushels of 2017/18 U.S. corn reserves, 440 million bushels of soybean reserves and 939 million bushels of wheat reserves. The corn and soybean volumes are slightly lower than USDA November projections, while the wheat volume is slightly higher.

For 2017/18 global reserves, the analysts estimate 7.976 billion bushels of corn, 3.593 billion bushels of soybeans and 9.811 billion bushels of wheat. All three figures are slightly below USDA November projections.

Analysts also estimated 2017/18 South American corn and soybean. Those projections include corn production of 1.646 billion bushels in Argentina and 3.669 billion bushels in Brazil. The projections also include soybean production of 2.076 billion bushels in Argentina and 3.979 billion bushels in Brazil. All four figures are slightly below November estimates, except for Brazilian soybeans, trending 11 million bushels higher.

Ahead of Thursday’s USDA weekly export sales report, a group of trade analysts expect corn exports for the week ending November 30 to come in between 31.5 million and 51.2 million bushels.

Monsanto’s chief executive of South American operations predicts Brazil’s upcoming summer corn crop could drop 20% to 30%. Rodrigo Santos says “corn buyers have expressed concern over [Brazil’s] corn supplies next year.”

Grain traveling on U.S. rails saw an uptick last week with 25,712 carloads, up 2.8% from a year ago. Cumulative volume in 2017 has reached 1,065,502 total carloads, which is 2.4% lower than 2016.

Preliminary volume estimates were for 209,478 contracts, down moderately from Tuesday’s total of 256,758.

Soybean prices have been lifted in recent days, mostly on concerns of how dry weather in South America could affect the 2017/18 crops in that area. But lackluster trade data, along with a round of profit taking, caused prices to sputter on Wednesday. January futures still held above the $10 mark, losing 5.75 cents to close at $10.0275. March futures also lost 5.75 cents to close at $10.1475.

U.S. soybean exports in October came in at 347 million bushels in October. That’s 16% below October 2016’s record-breaking volume and 6% lower than October 2015. Meantime, Brazil’s soybean exports from September through November have come in 15% higher than its own record-breaking volume from 2015.

Ahead of Thursday’s USDA weekly export sales report, a group of trade analysts expect soybean exports for the week ending November 30 to come in between 36.7 million and 60.6 million bushels.

USDA issued a correction from its November 30 announcement regarding a large export sale of soybeans to China. The volume of that sale was initially reported as 19.3 million bushels for delivery in 2017/18; the corrected volume is 14.4 million bushels.

Preliminary volume estimates were for 327,593 contracts, which was moderately higher than Tuesday’s total of 278,424.

Wheat prices got clipped on ample world supplies, and as the U.S. Dollar has steadily inched up to a two-week high. Winter wheat took the bigger hit, with December Chicago SRW futures dropping 7.5 cents to close at $3.9850, and December Kansas City HRW futures falling 8.25 cents to close at $4.06. MGEX Spring Wheat contracts also traded lower, with December futures slipping 5.25 cents to close at $6.0375.

Ahead of Thursday’s USDA weekly export sales report, a group of trade analysts expect wheat exports for the week ending November 30 to come in between 9.2 million and 16.5 million bushels.

Jordan has purchased 3.7 million bushels of hard wheat, sourced from optional origins, in a tender that closed Wednesday. The grain will be shipped between March and April, 2018.

Russia’s agriculture minister says the country’s 2018 grain production could be 1% to 2% higher than 2017.

Preliminary volume estimates were for 91,264 CBOT contracts, up moderately from Tuesday’s anemic total of 69,562.

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