October 6 – Grain Markets Today: Weather Rally Hits Grain Prices

Grain markets were in the green Friday as rains battered the Midwest and fueled increased expectations for harvest delays around the region. Still, traders appeared to be taking a “wait-and-see” approach ahead of next week’s double whammy of USDA data.

The agency will release its next USDA Crop Progress report on Tuesday and the October WASDE report on Thursday. The market will be closed in Chicago on Monday in observance of Columbus Day. Ahead of the long weekend, let’s take a look at grain prices at the Chicago Board of Trade.

Corn Prices See Minor Gains

Corn prices showed some small gains, while the December contract inched to $3.50 per bushel. The December contract added 0.5 cents, while the March contract finished at $3.6325 after gaining 0.75 cents.

There wasn’t a lot of data that moved the market as traders appear to be in a holding pattern ahead of next week’s WASDE report. The USDA did announce a big private export sale to unknown destinations. The daily reporting system indicated that the order was for 195,000 metric tonnes.

The USDA’s September numbers are not very inspiring. Total exports through the 28 of September indicate that corn exports are lagging last year’s total. September’s export number is less than 66% of the total from the same period last year.

Blame Brazil.

Ahead of Thursday’s WASDE report, we’ve seen average trade expectations come in at 169.8 bushels per acres. That is a tenth-of-a-bushel dip from the agency’s September estimate. Analysts also expect that the agency will cut its production estimate of 14.184 billion bushels down to 14.171 billion bushels.

Markets are also keeping an eye on what is happening in Washington as the EPA begins to review the ethanol standard. Ethanol producers pitted against oil producers in a battle over how the government should calculate renewable fuel credits.

Lost in the debate is the impact of China’s recent announcement that it will introduce its own standard in an effort to reduce emissions and its massive corn reserves. Though China’s decision is doubtful to bolster U.S. corn exports, it could offer ethanol producers the opportunity to bolster their innovation and capture market share in a nation that will face challenges with its standards.

In addition, industry advocates and opponents are missing the bigger picture about the value of corn-based ethanol today compared to 10 years ago. We dove deeper into the RFS standard and to explain why this debate in Washington is just noise.  Read more right here. 

Rains Push Soybeans Higher

Rains across the Midwest are expected to offer a small delay to current harvest progress. With farmers cutting soybeans and ignoring their corn, we’ve seen an acceleration in the soy harvest over the last two weeks. But rain… rain… won’t go away.

The November contract added 4 cents and finished above $9.72. The January contract gained 4 cents as well and finished at $9.83. The May 2018 contract is back above $10.00 after similar gains. As our friends at AgChieve explain in the chart below, the January 2018 contract is looking to retest the $9.95 level.

AgCHIEVE

Ahead of the October WASDE report, analysts do not expect any changes to yield estimates. The average yield estimate is sitting at 49.90 bushels per acre, which is the same as the USDA’s September reading. Analysts have also projected that the USDA will increase its production estimate from 4.431 billion bushels to 4.437 billion bushels.

Rains offset bearish news out of Brazil. SAFRAS and Mercado hiked their Brazilian soybean production forecast for production. The new projection came in at 114.7 million metric tonnes. That 1.5 million-metric-tonne increase accompanied a forecast that Brazilian farmers would plant 87.82 million acres for the 2017/2018 calendar.

We’ll dive deeper into analysts’ expectations for Brazilian production on Tuesday ahead of the October WASDE report.

Spring Wheat Prices Press Higher

Global weather woes and U.S. export figures pushed wheat prices higher Friday. A large Chinese order bolstered confidence, while spring wheat exports beat expectations. U.S. seeding is a bit behind schedule due to more substantial rains across the northern plains. Meanwhile, dryness is affecting farmers in Oregon and Washington.

The Buenos Aires Grain Exchange also reported that more than half of Argentina’s wheat acreage is facing excess water problems [1]. Rains across southern Brazil and northern Argentina continue to weaken expectations for the crop.

The December SRW contract added 2.75 cents to close the day at $4.435. The March SRW contract added 3.25 cents to finish the day at $4.6275.

Down in Kansas City, HRW contracts fared just as well. The December HRW contract added 2.5 cents to close at $4.3675. The March contract closed at $4.54 after gaining 2.75 cents.

But the significant gains came up in Minneapolis where spring wheat contracts gained more than 1% on the day. The December spring wheat contract at MGEX added 8.25 cents to close the day a tick below $6.24. The March contract added 7.75 cents to finish just below $6.37. 

Delays in Saskatchewan

Thursday, Saskatchewan Agriculture released their crop progress report. Ongoing rains have delayed harvest over the last week. All told, the crop is 89% complete. This is an 11-point increase from the previous week. That number is ahead of the five-year average of 82%.

Here’s the progress on the combine:

  • Chickpeas: 99%
  • Durum: 97%
  • Canary Seed: 93%
  • Spring Wheat/Barley: 92%
  • Mustard: 89%
  • Canola: 84%
  • Oats: 81%
  • Flax: 64%
  • Soybeans: 46%

Macroeconomic Factors

The S&P 500 and the Dow Jones were down Friday after the U.S. Labor Department announced the first monthly decline in U.S. jobs since November 2010. The U.S. economy lost 33,000 jobs in September, although economists appear more than happy to excuse this report. Analysts anticipate that as many as 150,000 new positions did not open as a result of Hurricane Harvey and Irma. The S&P 500 snapped an eight-day winning streak.

The price of WTI oil was off nearly 3% Friday as markets prepare for a glut of crude oil to hit the U.S. market next week. Refiners along the Gulf Coast are shutting down their operations ahead of Tropical Storm Nate.

 

 

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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