March 21: Grain Markets Flat Before Federal Reserve’s Rate Hike

We saw slight gains in the grain markets today. Corn prices and soybean prices in Chicago eked out small gains as markets paid greater attention to market activity in New York and public policy matters in Washington D.C.

Today, Congress unveiled a $1.3 trillion spending package that will keep the government’s lights on through September 2018. Meanwhile, the Federal Reserve announced a 0.25% hike to its benchmark interest rate. That means the cost of money is going up and that the U.S. dollar will see some additional strength as the Fed attempts to keep inflation levels in check.

Let’s look at what fueled grain markets today at the Chicago Board of Trade.

Wheat Prices Lead Grain Markets Today

In Chicago, SRW contracts for May added 0.5 cents to close the day $4.535 per bushel. The July contract gained 0.5 cents to close a tick above $4.69.

In Kansas City, May HRW contracts slipped 4.5 cents to end the day at $4.655. The July contract dipped 4 cents to close just under $4.84 per bushel.

In Minneapolis, the May spring wheat contract lost 4 cents to end the day a tick above $5.89. The July spring wheat contract fell 3.75 cents to close just under $5.99.

Traders are watching the forecast to determine the severity of anticipated rains in the week ahead.

Tomorrow’s weekly export sales will influence the market Thursday. Carving through analysts’ expectations, export sales range from 100,000 MT to 300,000 MT for the week ending March 15.

To the international markets, Jordan has not made any purchase from its big international tender on feed barley. The nation is struggling to secure barley this year due to issues surrounding quality assurance and payment terms.

Today, Rabobank projected that U.S. acreage for both winter and spring wheat would come in at 47 million acres. That’s about a 1.3 million acre increase from last year. The group also expects that U.S. stocks will slump for the second consecutive year to 810 million bushels.

Corn Prices Tick Higher in Grain Markets

Corn prices ticked slightly higher in Chicago.

May corn prices added 0.5 cents to close the day at $3.75 per bushel.

July contracts added 0.5 cents to end at $3.83.

Traders were paying close attention to the latest export sale. The USDA said that South Korea has purchased 138,000 MT.

That’s a solid sale ahead of tomorrow’s export sales update tomorrow, and it is the fourth largest sale of corn reported this week.. Trade estimates for tomorrow range from 1.4 MMT to 2.1 MMT for old crop sales. New crop estimates range from 100,000 MT to 200,000 MT.

Today, the Energy Information Administration announced that ethanol production increased last week by about 24,000 barrels per day. It’s not a huge boost, and markets were optimistic that ethanol inventory levels fell 523,000 barrels week-to-week.

Markets were digesting the ongoing threat of a trade war over the recent tariffs announced by the United States on steel and aluminum. Today, the European Union petitioned to the U.S. government for an exemption on these products. However, the EU has said that it is considering tariffs on U.S. corn exports, which total about 2% of American corn shipments.

Down in Argentina, Rabobank slashed its corn yield expectations by nearly 10%. The firm set production at 33 MMT.

Soybean Prices Rise on Argentine Woes and Chinese Demand

Soybean prices ticked higher. May soybean prices added 1.5 cents to end the day just under $10.30. The July contract added 1.5 cents and closed at $10.405 per bushel.

Tomorrow, the USDA will report soybean export sales for the week ending March 15. Trade estimates range from 100,000 MT to 300,000 MT.

The ongoing threat of a trade war is weighing on trader sentiment. That was apparent when soybean prices barely reacted to the news that China will require more than 100 MMT of imports in 2018/19. The USDA said Wednesday that Chinese demand would hit that level, two weeks before the April WASDE Report.

The USDA said in a statement that American farmers will face significant competition from exporters like Brazil and Argentina, all while eyeing the prospect of restrictions or tariffs from their largest customer, China.

China is also considering tools to encourage its farmers to produce more soybeans. However, China is facing limited in arable land and lackluster yields. The USDA said that Chinese production will come in around 58 MMT.

Down in Argentina, it appears that conditions for the soybean crop are heading from bad to worse. While the USDA currently projects total soybean output of 47 MMT, Rabobank is predicting a very dire situation. Analysts say that Argentina’s production will fall under 40 MMT. This would be the lowest crop output in six years and would limit the nation’s export potential for soymeal.

Rabobank still projects that Brazil’s crop will come in at 114 MMT.


Canola Prices Higher on USDA Production Cut

Canadian farmers are set to plant more than 24 million acres of canola in the new marketing year. The crop offers more opportunity to profit than its alternatives like wheat, despite the similar acreage rise for the latter crop category. Farmers have pushed both higher, thanks in part to the India tariffs that have limited optimism on lentils and peas.

However, the USDA doesn’t believe that higher acres will warrant greater production. The USDA attaché in Canada projected a 0.8 MMT decline in canola production to 20.5 MMT in 2018/19.

Earlier today, I chatted with Brennan Turner about what’s happening. Brennan explained that rotation issues are clearly at play.

“When canola is planted on top of canola, yield potential declines by 15%,” he said. “You’re not going to get the same huge crop that you would have in natural rotation.”

May canola prices added CAD $1.20 up in Winnipeg to close at CAD $521.00. The July contract added $1.30 to close at CAD $526.60.

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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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