GRAIN MARKETS: Markets patiently wait for a wildcard.

Week starts where last week ended – with mostly narrow trading.

October 10, 2017

5 Min Read
GRAIN MARKETS: Markets patiently wait for a wildcard.
Stock market background designCredit: FeelPic/iStock/Thinkstock

By Ben Potter

It was another day of narrow trading on the grain markets. With USDA closed Monday for the Columbus Day holiday, the markets have to wait another day for the agency’s Crop Progress report. Past reports have showed a sluggish harvest pace so far, with additional extensive rainfall late last week possibly slowing progress down even further. Even so, big global supplies continue to loom, and if the U.S. hauls in what it’s currently projecting, that only adds to supply concerns. Corn prices were down slightly, with more moderate losses logged for soybeans and wheat.

Another round of rainfall should come through the Midwest by next weekend, adding some much-needed moisture to abnormally dry soils but potentially stalling the pace of harvest once more. The 7-day precipitation forecast from NOAA shows much of Iowa, northern Illinois, southern Wisconsin and Michigan will see an additional 2” to 3” of rainfall through next Monday. And significant portions of the Corn Belt will receive 1” or more of rainfall during this time. 

Meantime, Hurricane Nate made landfall near the mouth of the Mississippi River this weekend as a Category 1 storm. That makes it the fourth hurricane to make landfall on the U.S. in 2017 – the most active season since 2005. So far, Nate has knocked out power to about 100,000 people along the Gulf Coast and is delivering more rain to southeastern states. 

Wall Street remains fairly buoyant on the hope of corporate tax cuts (which critics deride as only benefiting the wealthy and creating $1.5 trillion in revenue losses). Some of the proposals include cutting the corporate tax rate to 20% (from 35% now), eliminating the estate tax, and truncate the individual tax rates from seven categories to three – 12%, 25% and 35% (the current top rate is 39.6%). The Dow was 30 points higher in midmorning trading and is up nearly 3,000 points since January 1. Crude oil prices are up slightly but trading back below $50 per barrel. Gold was also up for the day Monday but has seen a general slide since early September.

Corn prices are running into some technical selling and seasonal harvest pressure, but prices held mostly steady, with November 2017 and March 2018 futures both losing a half-penning during Monday trading. November futures closed at $3.4950 and March futures closed at $3.6275. Prices have bigger opportunities to rise (or fall) on Tuesday and Thursday, when USDA releases its next Crop Progress and WASDE reports. 

Spot basis bids for both corn and soybeans were up at river terminals, thanks to lower barge rate costs that have given merchants some wiggle room. Barge rates were significantly higher last week due to Ohio River lock malfunctions and generally lower water levels, which have been partly replenished from a round of rains in the Midwest late last week and through the weekend. Elevator bids were mostly steady. 

As markets wait patiently for Thursday’s USDA World Agricultural Supply and Demand Estimates (WASDE) reports, a group of industry analysts predict the agency will not make major revisions to its September estimates. Predictions for corn yields are slightly down, from 169.9 bpa to 169.8 bpa. Total production is also projected down slightly, from 14.184 billion bushels to 14.171 billion bushels. Farm Futures, which participates in the survey, contributed yield estimates of 171.2 bpa and a production total of 14.293 billion bushels.

Corn speculators have added 10,772 short position contracts this past week, for a total volume of 170,553.

Preliminary volume estimates were for 154,487 contracts, down moderately from Friday’s volume of 231,165.

Soybean prices fell victim to some technical selling Monday, with prices slowly slipping throughout the day. November futures finished 5.5 cents lower to close at $9.6675, and March 2018 futures dipped 5.75 cents to close at $9.7725. 

Ahead of the next USDA WASDE updates on Thursday, industry analysts are predicting the agency will not change its September yield estimate of 49.9 bpa, and expects a slightly higher production total for 2017 (4.437 billion bushels). Farm Futures, which participates in the survey, projects a 50.0 bpa yield and 4.477 billion bushels in total production for the 2017 U.S. soybean crop.

Just as the pace of harvest is relatively slow this fall in the U.S., the pace of soybean planting in Brazil is also behind – depending on what you’re comparing, exactly. At the beginning of October, Brazil soybean planting was 5.6%, almost half of the 10.4% pace from 2016. However, that’s right in line with the five-year average of 5.3%. In the largest production state of Matto Grosso, soybean planting is 5% complete, compared to 17% a year ago and 6.6% for the five-year average. The latest reports also indicate Brazil has sold 14% of its 2017/18 crop, moderately lower compared to 26% for the five-year average.

Soybean speculators removed 1,808 short position contracts last week to lower the total volume to 15,596.

Preliminary volume estimates were slightly higher than Friday, with 199,502 contracts.

Wheat prices sagged, as rains on the Plains were good for the grains – just not grain prices. Large global stocks and relatively weak demand for U.S. wheat also weighed down prices. December Chicago SRW futures fell 7.5 cents to close at $4.36, while December Kansas City HRW futures fell 6.25 cents to close at $4.3050. December MGEX Spring Wheat prices stayed close to unchanged all day, finally settling in 0.5 cents lower to close at $6.2375.

Soil moisture levels are forecast to improve further through October 16 in areas that include Oklahoma, western Kansas, Nebraska, eastern South Dakota, western Iowa, Minnesota and Wisconsin.

Ahead of next Thursday’s October updates to the USDA WASDE report, a group of 29 analysts predict U.S. wheat reserves will come in at 944 million bushels, which is up from USDA’s September estimates of 933 million bushels. Farm Futures, which participates in the survey, projects ending stocks of 928 million bushels. 

Wheat speculators got rid of another 7,919 short position contracts last week, cutting down the total volume to 86,679.

Preliminary volume estimates were for 98,484 contracts, up from Friday’s totals of 84,076.

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