Here at the Chicago Board of Trade, it was a day of mixed trading. Headlines from Washington and Wall Street dominated the lunch-time chatter, and people are wrapping their heads around the release of minutes from the Federal Reserve’s July meeting on monetary policy. The central bank is split on whether to raise interest rates again in 2017 and how significant of a threat inflation is to the broader U.S economy.
While the prospect of rain has some traders optimistic that crop quality is likely to improve in upcoming progress reports, the reality is that it is simply too late for some growers across the Midwest.
Soybean prices reversed course during the day on news that Chinese buyers were gobbling up U.S. crop. But weak export figures and wet weather dampened prices in the corn and wheat trade.
Here’s our daily recap of grain prices from Chicago.
Corn Prices Dip Despite Ethanol Production Gains
In Chicago, the September corn futures contract dipped 2.75 cents to close the day above $3.52. The December corn contract dipped 2 cents to finish at $3.665. The downturn came despite reports from the USDA indicating increased demand from U.S. ethanol producers.
Ethanol inventories hit 21.828 million barrels last week. That’s about a half-million-barrel increase from the week prior. While we saw a large downturn in stocks in the eastern half of the country, we saw a big uptick on the West Coast and down to the Gulf refinery network.
Bearish data from South America weighed on sentiment. The Buenos Aires Grain Exchange projected a big uptick from last year’s corn production. Analysts projected that the acres planted 13.34 million acres.
That’s a 5.8% uptick from last year’s figure of 12.6 million.
Though rains across the northern Plains have been the subject of headlines over the last week, it’s too late for many farmers in the region. The North Dakota Corn Growers Association and the Stockmen’s Association have launched efforts to help farmers who have suffered from drought this year. The Corn Utilization Council is asking for donations for farmers to help ranchers who have faced the dilemma of selling off their herds due to a lack of feed.
The USDA has already called certain portions of the state Disaster Areas, while there is drought disaster emergency from the governor’s office.
China Props Up Soybeans
Soybeans turned higher after some early losses. Though the September futures contract was unchanged at $9.21, the November contracts added a penny to close at $9.335 after bouncing off a seven-week low.
Thank the Chinese for the uptick. A trade delegation agreed to purchase 140 million bushels of U.S. soybeans on Tuesday, and traders took that as a bullish sign. But everyone needs to pay attention to the growing challenges ahead for the market.
First, pre-harvest sales of new crop soybeans haven’t been too hot. In fact, they’re at their lowest levels in eight years… and we all remember that we had a serious trade crisis back then. While the global economy has dramatically improved – companies have plenty of liquidity and only geopolitical threats are rattling the markets from time to time – it is a supply issue that is weighing down sales here in the states.
South America’s massive soybean crop is driving down prices. There is so much soy in Brazil that farmers have run out of places to put their crop. According to reports, Brazil has already exported 53.37 million metric tonnes of soybeans for 2017.
That’s 3.5% higher than the entire 12 months of 2016.
Wheat Prices Mixed as Rains Enter Focus
Spring wheat was the big winner today. The September Spring Wheat futures contract in Minneapolis popped more than 15 cents to close the day at $6.735. The December contract added 14.25 to close just below $6.85.
In Chicago and Kansas City, it was a different story. In KC, the September Hard Red Wheat contract dipped 7 cents to close the day below $4.20 per bushel. The December HRW futures contract fell 7 cents as well and finished the afternoon at $4.47.
Down on West Jackson Boulevard, the September SRW contract traded down 10.25 cents to close below $4.20. The December contract at CBOT lost 9 cents to close at $4.47. The downturn was driven by the increase of rain across the northern Plains, which should help to plant. In some isolated areas, we’ve heard reports of at least seven inches of rain in the last week.
We’ll be looking for updates from the USDA on exports tomorrow. We’ll also be looking into the impact of Russia’s massive crop on the global markets.