September 5 – Soybeans Surge after Allendale’s Bullish Call

Traders on both sides of the U.S.-Canadian border were returning to their desks on Tuesday after the long Labor Day weekend. While a broader selloff hit U.S. equity markets, the grain complex saw a rise in grain prices on the floor of the Chicago Board of Trade.

Soybean prices increased by double digits in Chicago while HRW contracts in Kansas City gained more than 6 cents.

This week, several members of the Chicago FarmLead team are traveling to Ottawa to explore new goals and start focusing on ways to help farmers get the best price possible for their grain.

Here’s our daily recap of the grain markets from our office in the Canadian capital…

Corn Prices Push Higher

In Chicago, the December corn futures contract added 3.25 cents to close the day at $3.585. The March 2018 futures contract added 3.25 cents to close the day at $3.71.

The uptick came after several analysts argued that the USDA is touting overly optimistic yield expectations in its monthly report. Ahead of WASDE, Richard Feltes at RJ O’Brien said that “limited” returns in the Midwest could imply that the USDA is “overstating corn yields.”

The USDA currently has a yield estimate of 169.5, a figure that was the result of a smaller-than-expected decline from the June report. Brennan expects that the yield figure will come in closer to 167.1 bushels per acre, a small uptick from the 166.9 that I mentioned last month.

The USDA released its weekly grain quality and progress report at 4 p.m. EST. The report indicated that quality conditions deteriorated for the week ending Sept. 3.

The percentage of corn rated good-to-excellent last week dropped from 62% to 61%.

Conditions deteriorated significantly in Colorado, where the percent of G-E rated corn fell from 73% to 55% in a week. Quality also slid in South Dakota (46% to 42%), Michigan (55% to 53%), and North Dakota (50% to 48%).

Conditions improved in Wisconsin, Iowa, and Illinois.

Soybean Prices Surge After Allendale Report

The November soybean futures contract rose 19 cents to close the day at $9.685. The January 2018 and March 2018 contracts also increased by the same amount.

As Brennan explained this morning, the markets were reacting to Friday’s yield figure from Allendale Brokers. That figure was significantly more bullish than most of the other numbers that have been tossed out in recent days.

Allendale set a yield estimate of 47.1 bushels per acre.

That’s far more bullish than Brennan’s current estimate of 48.5 bushels per acre.

It’s also going in the opposite direction of what FC Stone said last week. FC Stone hiked their estimate from 47.7 bushels per acre to 49.8 bushels per acre. The USDA’s number is sitting at 49.4 bushels per acre.

Allendale’s estimate signaled the argument that soybeans were undervalued by $1 from this morning’s opening price. We’ll see who is right when the USDA releases its monthly WASDE report next week.

The other key news today is the ongoing war of words between the United States and Argentina after the former issued big levies on biodiesel imports from the latter nation. The decision came not long after the EU slashed tariffs on the products after a four-year stretch.

We’re going to dive more into this story next week, but for now, there is a lot of disagreement over whether the EU will provide enough of a market for Argentine exports. Some argue yes, others argue no.

Soybean quality was unchanged this week. For the week ending Sept. 3, the percent of soybeans rated G-E game in at 61%.

That figure is still off from the 73% from the same time in 2016.

Soybean quality improved in Illinois (up 1 percentage point to 58%), Kentucky (up 2 points to 75%), and Minnesota (up 1 point to 73%).

Quality declined in South Dakota, North Dakota, and North Carolina.

Wheat Prices Mixed

In Chicago, the SRW contract gained 4.25 cents to close at $4.43. The March 2018 futures contract (that’s right, it’s already time to pay attention to the March spreads) added 3.25 cents to close the day above $4.63.

In Kansas City, the HRW price added 6.25 cents to close the day at $4.45. The March HRW contract added 6.25 and finished the day at $4.625.

In Minneapolis, the results weren’t positive. The Spring Wheat contract for December was off 2.75 cents and finished at $6.29. The March contract dipped 3 cents to close at $6.40.

The USDA announced that exports hit more than 252,500 metric tonnes last week. That’s a big downturn from the previous measuring period and the same period last year. How much?

We’re talking about a 62% decline from the previous week and a 60% drop from last year.

This afternoon, the USDA reported that 89% of the spring wheat crop had been harvested. That’s an uptick from 76% last week and well ahead of the five-year average of 78%.

But tomorrow’s report from Stats Canada may be more revealing. BRUG has set expectations for July 31 wheat stocks to come in around 6 million metric tonnes. That would be a bump from the 5.8 million metric tonnes on July 31, 2016.

Trying to Reason with Hurricane Season

Oil markets were pushing higher Tuesday after a large chunk of the shuttered refinery network along the Gulf Coast was brought back online. Roughly 20% of U.S. refinery capacity was shut down in the wake of Hurricane Harvey.

That said, we’re looking ahead to this weekend, and Hurricane Irma is gearing up to be a significant threat to the Florida Coast and possibly the Gulf Coast once again.

We anticipate that we’ll hear a lot of concern about the health of cotton fields down in Florida as the week progresses. Be sure to check back tomorrow for more on Hurricane Irma and what we can expect as the storm progresses.

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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