GRAIN MARKETS: Soybeans drop late as Brazil speeds through harvest

Corn lower for the day but higher for the week, while wheat slips.

Bob Burgdorfer 1, Senior Editor, Farm Futures

February 4, 2017

5 Min Read
GRAIN MARKETS: Soybeans drop late as Brazil speeds through harvest

Soybean futures dropped 1% on Friday and closed lower for the second straight week amid reports that the harvest in Brazil’s important Mato Grosso state is well ahead of last year’s pace.

Corn and wheat also finished lower for the session in uneventful trading, but both were higher for the week. Corn had support early in the week from a few daily export sales and better-than-expected weekly export business.

Fund selling was noted in the three markets. Large funds entered the week net long corn and soybeans.

Outside markets were active, with Wall Street bounding higher. A bullish job report plus President Donal Trump easing restriction on banks lifted that market. The Dow Jones Industrials were up about 180 points when the crops closed, crude oil was up 25 cents a barrel, gold was down $2.10/oz. and the dollar rose for the third straight day.

Export highlights from the U.S. Department of Agriculture and Reuters include:

- Ethiopia seeks to buy 720,000 metric tons of optional-origin milling wheat, with offers due by Feb. 3. Shipment will be within three months of when letters of credit are opened, which could be March to May.

Corn closed about 2 cents lower, with March remaining just under chart resistance for the 200-day moving average at about $3.69/bu.

Funds were noted sellers in the past week after having favored the long side of the market. Commodity Futures Trading Commission (CFTC) data released after Friday’s close showed that they had turned net short during the week ended Jan. 31.

Thursday’s weekly export sales were good and topped the weekly pace needed to meet USDA’s annual forecasts. The daily sales to Japan and unknown destinations will be added to a future weekly export. 

The corn harvests under way in Argentina and Brazil may be slowed by rain, but forecasts favor drier conditions in the coming week. European corn for March was a fraction higher at about $4.66/bu. China’s corn market reopened after that country’s weeklong New Year holiday, with corn for May at the equivalent of $5.80/bu. The price reflects conversions from local currencies and metric tons.

The Chicago Board of Trade (CBOT) estimated Friday’s corn volume at 216,722, compared with Thursday’s actual volume of 307,822. Open interest in Thursday’s flat market increased by 2,809, with March down 10,439 and May up 2.787.

March corn settled 2.25 cents lower at $3.6525/bu. and May was 2.25 cents lower at $3.7275.

What to look for: USDA updates U.S. and world crop supply/demand tables on Thursday. The trade expects U.S. corn ending stocks to be trimmed from January’s estimate of 2.36 billion bu. and world stocks to be down from January’s 221 million mt.

Soybeans moved lower throughout the session to post their second straight weekly loss. Funds were noted sellers as reports surfaced of rapid harvesting in Brazil’s Mato Grasso.

Also, a private firm in the U.S. raised its estimate for Brazil’s soybean crop to 106.5 million mt. However other estimates were more modest. In trade surveys for the upcoming USDA crop report, estimates averaged Brazil’s soybeans at 104.1 million mt. In January, USDA had the crop at 104 million. The average estimate for Argentina dropped to 54.4 million from USDA’s January number of 57 million. Farm Futures has its estimates at 104 million and 54 million, respectively.

Soybean meal and soybean oil finished lower. China returned from holiday on Friday, with soybeans for May delivery closing higher at the equivalent of $17.04/bu.

CFTC data on Friday showed that funds reduced their net long positions in CBOT soybeans by about 20,300 contracts during the week ended Jan. 31.

CBOT estimated Friday’s volume at 176,595, compared with Thursday’s actual volume of 200,676. Thursday’s open interest decreased by 4,071 contracts in the flat market, with March down 12,865 and May up 5,746.

March soybeans closed 10.25 cents lower at $10.27/bu., and May was 10 cents lower at $10.3725. New-crop November dropped 8.75 cents to $10.0975.

What to look for: Trade estimates are out for the USDA report, with the average forecast in some surveys putting soybean ending stocks at 412 million bu. versus January’s estimate of 420 million. Farm Futures' guess is 400 million bu.

Wheat futures closed a few cents lower in mostly light trading that reflected declines in corn and soybeans. Winter wheat was higher for the week, while spring week was lower for third straight week.

March soft red winter wheat remained above the 20-, 50- and 100-day moving averages, with the 200-day looming about 25 cents overhead.

Winter wheat in the High Plains will be for the week, with warm weather expected in the 6- to 10-day period. Monthly condition ratings early in the week showed slight improvement in Oklahoma hard red winter wheat and Midwest soft red winter wheat but a slight decline in the Kansas crop.

Friday’s weekly CFTC data showed that funds increased their net short position in soft red winter wheat by 8,238 contracts and took more than 10,000 contracts off of their net-long position in hard red winter wheat.

CBOT estimated Friday’s soft red winter wheat’s volume at 102,390, compared with Thursday’s actual volume of 129,058. Thursday’s open interest decreased by 4,389, with March down 6,149 and May down 307.

Chicago, Ill., March soft red winter wheat closed 4.25 cents lower at $4.3025/bu., and May was down 4 cents at $4.43. Kansas City, Mo., March hard red winter wheat dropped 3 cents to $4.405/bu., and May was off 2.5 cents at $4.535. Spring wheat for March dropped 2.75 cents to $5.5825, and May slipped 2.75 cents to $5.56/bu.

What to look for: The average trade estimate for the wheat stocks report was 1.176 billion bu. in one survey, down from last year’s 1.186 billion. Farm Futures expects the report to come in at 1.184 billion.

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