August 3 – Rains Lead to Lower Corn and Soybean Prices

The streets of Chicago have been a maze of road construction this summer. So, it was quite a site to see hundreds of construction workers flee as spot storms pummeled the city in small bursts all day today. Heading into July, small storms had been a major problem across the Midwest. The drink was missing some farms while dropping hail and massive rain pellets in five-minute flashes.

On Thursday, rains finally moved across large regions of the Midwest, offering the region a badly needed drink. Meanwhile, we just received some bullish news for crops from Informa, which we cover in our daily recap of trading from the Chicago Board of Trade.

Corn Prices Settle Lower

On Thursday, the September corn futures market dipped 1.25 cents to close at $3.635. Meanwhile, the December futures contract for corn slipped 1.25 cents to close a tick below $3.78.

Today, private analysts at Informa released their crop yield estimates.

Sure enough, they are below the USDA’S July estimates.

The firm today projected yield expectations of 165.9 bushels per acre.

The USDA also released its weekly crop export numbers during the day. According to the agency, the nation exported 475,000 tonnes. That’s well above the l0w-range estimate among analysts at 350,000 metric tonnes.

We noted last week that a serious battle is about to happen between the United States and Brazilian farmers. With Brazil looking at a massive crop this year, things keep going from bad to worse in terms of logistics across central Mato Grosso, the largest producing state in the country.

We reported that farmers were running out of storage locations, and pretty soon – we were going to see a lot of crops scattered across the soil. Bloomberg published a fascinating article with A picture. It’s quite a site to see. [1]

Soybean Prices Slide Due to Rains

The September soybean futures contract dropped 16.75 cents to close the day at $9.54. Meanwhile, the November soybean futures contract dropped 17 cents to close at $9.605.

Prices declined in line with the downturn of canola futures in Winnipeg and European rapeseed prices.

On the bullish side of the fence, Informa reported that it expects U.S. soybeans to come in at 47.2 bushels per acre.

The USDA announced that the country exported 600,900 metric tonnes. That’s well above the low-end estimate of 300,000 metric tonnes, but still well below the high-end of 1,000,000 metric tonnes.

Wheat Prices Dip Lower, Japan Buys American 

The September wheat futures contract dropped three cents to finish the day just below $4.58.

The USDA announced that the United States exported 145,500 metric tonnes last week. That figure is well below forecasts reported by Reuters between 300,000 metric tonnes and 500,000 metric tonnes.

Meanwhile, Reuters reported that Japan has purchased more than 132,000 metric tonnes of wheat from Australia, Canada, and the United States. According to a report, Japan purchased 1,840 tons of western white, 13,300 of hard red winter and 24,940 of dark northern spring.

This is an important reminder that today’s market is really centered on quality. Higher proteins are trading at a nice premium in a tight market.

While we anticipate that next week’s WASDE report will see a decline in yield expectations, it’s an important time to know your grain quality. As we learned in our conversation with Courtney Boryski, buyers are looking to make deals with independent producers.

But she also indicated that it is much easier to get a deal done when you know all of the specifications of your grain. Be sure to read more of our conversation with Boryski right here. Then, start testing your grain and post an offer on FarmLead.

WASDE Report on Tap

Looking toward next week’s WASDE report, Brennan has been offering his insight into expectations. We’ll be down on the floor of the Chicago Board of Trade on Aug. 10 when the report is released to capture instant reactions.

Naturally, we can’t expect a massive reduction in yield expectations. Reuters offered some data this week that is quite compelling and suggests that what so many of our team has been saying about grain quality isn’t going to show up in this report.

Basically, the USDA has a history of slashing its yield estimates, but it’s hardly significant. The USDA has slashed its yield estimates nine times in August over the last 20 years, Reuters explains. That figure is just 45% of the time. And during those cuts, yield expectations have declined by an average of 4.6%.

Now, 2012 actually skewed the data. Back then, the agency slashed expectations by 15.5% at a time that most of the Midwest was hammered by drought conditions. Reuters explains that even if the agency did slash current estimates of 170.7 bu/ac, then we’d see an estimate of 165.1 bu/ac. That figure would be the fourth-largest yield estimate since the USDA began collecting data.

Do we really believe that 165.1 is going to be the final?

 

 

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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