CHINA remained in the headlines last week as its falling stock markets fanned bearish flames throughout the commodity complex, with soybeans and crude oil taking solid hits at times.

Things seemed to calm late in the week when an upward revision to the U.S. gross domestic product (GDP) at least temporarily shifted attention away from China and its troubles.

"The soybean market has hitched its wagon to China over the past 20 years. For most of that time, the relationship was fruitful, but when one customer controls two-thirds of the trade in a commodity, problems are magnified — a situation that has played out in the soybean market over the past few weeks," Bryce Knorr, Farm Futures senior grain market analyst, said.

"Don't expect the China story to go away quickly, despite a few belated moves by the People's Bank," he said. "The country is in the midst of a pivot as it tries to evolve from being dependent on exports to having an economy driven by consumers. The U.S. didn't accomplish that feat overnight, and it took plenty of panics, a depression and some wars to get the job done."

By late in the week, November soybeans had recovered much of what they lost in Monday's tumble but still were down from the previous week, when China's troubles first moved through the markets. Those troubles compounded the lingering bearish attitude for the U.S. Department of Agriculture's mid-August crop report.

Export sales

New-crop export sales of corn and soybeans were up in the latest week and topped trade forecasts by large margins in at least one wire service survey, while cancellations in old-crop business caused net reductions in both crops, USDA said in its weekly export report.

Old-crop corn had a net reduction in sales of nearly 5.2 million bu. as a number of countries cancelled purchases (Table). Some of those destinations may have opted to switch to new-crop supplies as the new crop year starts Sept. 1. Even with the latest cancellations, old-crop corn export sales remain on track to beat USDA's crop-year export forecast.

New-crop corn sales of 38.8 million bu. were up 42% from the previous week, led by Mexico, unknown destinations, Japan and Colombia.

Old-crop soybeans also had a net reduction in export business of 4.8 million bu. as cancellations by China, unknown destinations, Canada and others offset sales to the Netherlands, Indonesia and others. Even with the reduction, old-crop sales remain on track to beat USDA's estimate.

New-crop soybean sales of 53.6 million bu. were up from a week ago, with China, unknown destinations and Turkey as the leading buyers. In addition, USDA reported three daily soybean sales last week — all to unknown destinations — for a total haul of nearly 17 million bu.

Weekly wheat export sales of 19.4 million bu. were up 68% from the previous week, with Nigeria, Japan and South Korea as the leading buyers.

USDA reported soybean meal export sales of 56,100 metric tons for the 2014-15 crop year, down 11% from the previous week and led by Venezuela and Thailand. New-crop sales of 93,800 mt were led by the Philippines and Ecuador.

Old-crop sorghum sales of 1.93 million bu. were led by China. New-crop business was a net reduction of 1.81 million bu. due to cancellations by China.

Spring wheat harvest

The spring wheat harvest in North Dakota is quickly winding down, with a number of custom harvesters now focused on durum or canola.

What little spring wheat was being cut continued to yield in the 50-60 bu. range, with test weights near 60 lb./bu. A rain and wind storm about a week earlier knocked down some of North Dakota's wheat, but harvesters recovered much of it and still got good yields. The durum did not do as well.

"The durum crop looked pretty good until it rained on it," harvester Irvin Odegard said, adding that the rain "knocked about $2/bu. off of it."

He was referring to the lower grade of durum that came out of the fields after the rain and brought about $5/bu. Prior to the wet weather, Odegard said the durum was grading higher and worth about $7/bu.

As of Aug. 20, USDA put the spring wheat harvest at 75% completed versus the 47% average and discontinued the spring wheat condition rating. In top producer North Dakota, spring wheat was 70% harvested versus the 41% average. USDA does not provide harvest progress for durum wheat.

Cash sales freeze

As expected, farmer selling of corn and soybeans was at a near standstill after the crop markets tumbled following China's financial troubles.

There were a few instances in Illinois of farmers "giving up" and selling some corn, but otherwise, very little grain moved last week, according to Midwest grain dealers.

The Illinois sales were partially prompted by farmers avoiding a storage fee some elevators will charge beginning Aug. 31 that's designed to vacate grain ahead of the fall harvests. The one-time fee of 20-22 cents/bu. will be added to unsold grain that is still in the bins.

Elevators continued to ship corn by train to the Southeast poultry and ethanol markets. Even with harvest under way in that region, Midwest dealers said it apparently was not enough to supply end users there.

A central Iowa dealer continued to ship trains of corn to cattle feedlots in Texas and Arizona.

With little demand for corn or soybeans at the Gulf, river markets were quiet. Also, basis bids dropped at some locations as harvest nears. Water levels on the river have been good, and no shipping restrictions were reported last week.

One dealer speculated that some corn harvesting could kick off in southern Indiana this week as farmers try to take advantage of the 25-cent premium between the nearby basis and the harvest-time one.

Corn and soybeans are largely developing well throughout the region after recent rain. Yields will not match those of last year's crop but have improved from earlier expectations.

A central Iowa dealer said a company survey of the area's crop projects an average yield of 192 bu. per acre for corn and 52 bu. for soybeans.

In central Illinois, a dealer said a corn yield of 170 bu. should be common, although some corn may yield 140 bu. or less in fields that got too much water.

Market recap

It was another volatile week in the crop markets due to China's troubles battering equity markets, crude oil and soybeans.

However, by late in the week, the U.S. Department of Commerce gave commodities something to cheer about, reporting that the second-quarter GDP increased to an annualized rate of 3.7% — much better than the previous estimate of 2.3%.

That turned new-crop corn slightly higher for the week and put new-crop soybeans almost back to unchanged for the week. The September corn and soybean contracts are in liquidation, with open interest declining rapidly ahead of the first notice day.

Wheat markets continued to struggle. The higher dollar that followed the bullish GDP news could actually be bearish for wheat — which is already having a hard time competing with lower-cost wheat in world markets — since a strong dollar makes U.S. product more costly for foreign buyers.

In an Egypt tender last week, sellers did not even offer U.S. wheat, and Egypt bought grain from Russia.

Volume:87 Issue:d3