August 9 – Grain Markets Rise Ahead of August WASDE Report

Corn prices pushed higher as international grain traders prepare for the release of the August WASDE report on Thursday morning. Wheat prices also pushed higher on expectations that the USDA will cut its yield projections for the year. The U.S. agency left yields unchanged last month, leading analysts to question the government’s motivation.

Consensus expectations call for a downturn in yields. As Brennan explained in Wednesday’s Breakfast Brief, tomorrow could produce one of the most volatile experiences in quite some time. Of course, tomorrow’s report ultimately won’t mean much in a few months as numbers get twisted and revised all over again.

Weather is not expected ahead of the report in many regions, so limited precipitation was not a topic of conversation down at the Chicago Board of Trade. Instead, the day was people setting their positions and looking for insurance in case of a major price swing.

Here’s our recap from Chicago on Wednesday.

Corn Prices Tick Higher

With drought conditions pummeling the northern Plains, traders were chattering about the upcoming annual tour of corn and soybeans in the Midwest starting next week. But until we start to get feedback from the fields, eyes are fixed on the USDA. Today, there was a little bit of data to absorb. Weekly ethanol production increased by 10,000 barrels per day over the week ending August 4. Stocks of ethanol inventory increased in every region of the nation except for the Rockies.

Today, the September corn futures contract at the Chicago Board of Trade added 2.25 cents to close a notch above $3.72. The December contract added 2.5 cents to close above $3.86.

Brennan pointed out this morning that the average corn yield expectations have declined to about 160 bushels per acre. Bloomberg’s recent poll estimated yields at 165.9 bushels per acre. Reuters’ survey projects 166.2 bushels per acre.

They’re all certainly wrong! But who will be the closest? Brennan has pegged his estimate to 167 bushels per acre.

I’m in agreement with his estimate, and I’ll put a hard figure on it. Though I’m not trying to play a victim in the Price is Right, I’ve got a 2.2% decline from last month’s report – sitting at 166.9 bushels per acre.

The average decline in the nine times that the USDA has cut the estimate over the last 20 years in the August report is about 4.6%. There are 11 times that a cut never came. And that 4.6% is influenced by the 15.5% decline from 2012.

Brennan also talks about a number of factors that many seem to be. For starters, our Doug Kirk explained this week that disease and crop progress issues like tip back aren’t going to be a part of this report. We’ll have to wait…

Which is fine by me, since I prefer the summer to the long winter in Chicago.

Soybean Prices Going Green

Soybean prices were flat to negative today.

There was some reaction to the 130,000 metric tonnes of exports that were canceled, according to the USDA.

The September soybean futures contract lost a penny to close at $9.66. The November contract was flat and finished a notch above $9.73.

The August soybean contract in Chicago was flat and finished at $9.63. The September contract lost a penny to close at $9.66. Finally, the November soybean contract was flat at $9.73.

Tomorrow’s report will likely see a downward revision in yields. But it appears that most people aren’t calling for a significant downturn in old-crop inventory levels.

As Brennan explained this morning, Bloomberg’s poll revealed an average yield expectation of 47.4 bushels per acre. Reuters’ survey sat at 47.5 bushels per acre.

Brennan has pegged his number at 47.6 bushels per acre. For more on carryout and other expectations, read his grain markets insights here.

Wheat Prices Turn Green

Wheat prices finished the day in Chicago in the green. The September wheat contract added 2.5 cents to close at $4.595. The December contract added 2.75 cents to close just below $4.87

The same was to be said in Kansas City and Minneapolis. But the September and December Hard Red Wheat contracts were up 3.5 cents. The September contract closed below $4.64. The December contract ended the day at $4.91

At the MGEX, the Spring Wheat contract was up 2.75 cents for September. The contract finished at $7.3075. For December, the contract added 2.5 cents and closed at $7.455.

For tomorrow’s USDA report, we’re keeping an eye on ending stocks for 2017/2018 calendar year. We’re seeing revisions down to about 256.7 million metric tonnes as estimates flood our inboxes. That would be about a four-million metric tonne decline.

While the numbers are likely to decline – there’s a lot of chatter about abandonment in the Dakotas and Montana. We discussed last month that abandonment figures could be significant as farmers have turned to bailing up those fields for feed. As we noted yesterday, even if they had been able to see positive growth in the fields, local elevators weren’t paying nearly enough to offer a nice profit, which led to the planting of many alternatives. While high-quality spring wheat is finding a premium, farmers are invited to post grain deals on FarmLead to see if they can secure a better price than what they might receive locally. This is an opportunity to set your price for free and to find willing buyers outside of your area who may be looking for fill a program or quota. Again, it’s free to post.

Total wheat production in the United States is estimated to fall 43 million bushels thanks to deteriorating conditions in the spring wheat market. BRUG estimated total production to hit 1.717 billion bushels. Can you guess how many metric tonnes that is?

If you need a quick refresher, be sure to check out FarmLead’s new grain unit converter.

Spring wheat abandonment will be a number to watch for, as there are reports of acres being bailed up for feed. Export sales, ahead of tomorrow’s report, are expected to range 250,000-450,000 MT for the 17/18 marketing year, with last week’s sales running just 145,549 MT.

Farm Bill in Focus

U.S. House Agriculture Committee Chairman Mike Conaway said yesterday that he expects the 2018 farm bill to be completed on time. [2]

(But this is Congress we’re talking about… so don’t hold your breath.)

During a statement at the International Sweetener Symposium, Conaway reiterated that the Trump administration expects a strong farm bill and for it to be stamped by October 1, 2018.

(First, they have to decide what color paper to print it on…)

Conaway has said that he and other committee members have heard a lot of stories this year about declining farm incomes and weak commodity prices. They are hoping that legislation would help resolve both problems.

Well, let me be the first to ask Conaway to see if there are other solutions out there. Technology certainly can play a role, and platforms like FarmLead can help farmers earn more for their grain. By bringing more buyers to the market, we help producers find the best price, negotiate on their own terms, and get back to what really matters in their day-to-day operations. We’ll be sure to send him a note.

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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