August 28: Farmer Subsidies Cause Soybeans to Slide

Soybean prices slumped on Tuesday thanks to a large selloff. Ongoing concerns about trade between the U.S. and China complemented expectations for a record American crop. Following the announcement that the U.S. will provide subsidies to farmers affected by the trade war, some farmers have begun selling their soybeans and factoring in the $1.65 per bushel subsidy that they will receive from the government on 50% of 2018 production.

The markets are anticipating the results of conversations between Canadian trade officials and the Trump administration. On Monday, the U.S. announced it has struck a deal with Mexico on trade, which offered a boost to automotive companies. President Trump has threatened to proceed with the bilateral deal if Canada doesn’t make certain concessions in NAFTA negotiations.

Here’s what else you need to know about grain prices in Chicago.

Farmer Subsidies Cause Soybeans to Retreat

A selloff hit the soybean complex again on Tuesday. December soybean contracts dropped to $8.3325 per bushel.

Once again, concerns about a record crop continue to weigh on sentiment. However, a new factor has emerged that could present a problem with the demand side of the equation. Increasing concerns are emerging that African swine fever is spreading through the Chinese hog complex. This could curb demand for soymeal and soybeans across the market.

Today, the USDA reported a private sale of roughly 200,000 MT of soybean cake and soymeal for delivery to Mexico. Shipments are part of both the 2018/19 and 2019/20 marketing years.

Dryness in Europe Not Enough to Support Corn Prices

Corn prices found early support thanks to news that dryness continues to parch the European crop. However, weakness in the soybean complex continues to weigh down other commodity prices. Corn prices are now at their lowest levels since the middle of July

September corn prices shed 5.25 cents to end the day a tick above $3.56. The March 2019 contract dropped 5 cents to close at $3.69. Yesterday’s Crop Progress report provided little reason to show concern about the U.S. corn crop. Corn rated G/E was unchanged at 68%.

As Brennan noted this morning, NAFTA talks have picked up in the wake of the U.S.-Mexico deal agreed upon on Monday.

Wheat Prices Mixed In Chicago

In Chicago, December SRW prices added 0.75 cents to close the day a tick above $5.23 per bushel. The March 2019 contract fell 0.5 cents to close just under $5.46.

Kansas City wheat prices slipped Tuesday. The December contract shed 2.25 cents to end the day under $5.28. In Minneapolis, the December MGEX contract fell 1.75 cents to end the day at $5.77.

Today, India’s farm ministry said that the country’s production hit a new record in 2017/18 at 99.7 MMT. This could affect global stocks in upcoming WASDE reports given that India is such a large producer of wheat.

However, the markets did find support from news out of Russia. Today, IKAR announced that it had cut its 2018 estimate for Russian wheat output from 70.8 MMT to 69.6 MMT. IKAR also cut its total grain output figure from 112.8 MMT to 110 MMT.

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About the Author
Garrett Baldwin

Garrett Baldwin is a content strategist and editor at FarmLead. He covers the global grain markets and public policy issues related to the agricultural industry. He is a graduate of the Medill School of Journalism at Northwestern University. He also holds a Master’s Degree in Economic Policy from The Johns Hopkins University, an MS in Agricultural Economics from Purdue University, and an MBA in Finance from Indiana University.

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