February 5: Grain Prices Avoid Epic Rout on the Dow Jones

Grain prices were lower across the board Monday.

That said, it was a better day at the Chicago Board of Trade than at the New York Stock Exchange.

Today, the Dow Jones plunged more than 1,100 points (down 4.60%) and futures prices continued to slump in post-market trading. The Dow was off as many as 1,600 points during the day.

In the grain complex, the focus today was again on the weather forecast.

Both Argentina and the United States will be getting some moisture in the next few days

Here’s what else you need to know from the Chicago Board of Trade.

Why Wheat Prices Fell Monday

Wheat prices retreated in Chicago as traders eyed the weather forecast. U.S. winter wheat crops have been facing significant drought conditions over the winter. Forecasts show that rain and snow are coming. In addition, the U.S. dollar has strengthened in the wake of Friday’s positive jobs report. Markets largely expect that the Federal Reserve will raise interest rates at least three times in 2018, and that will weigh on crop prices.

In Chicago, the March SRW contract slipped 6.5 cents to finish just a tick above $4.40. In Kansas City, March HRW contracts eked out a 0.25-cent gain to close just above $4.63.

Meanwhile, March MGEX Spring Wheat contracts dropped 2 cents to finish under $6.02.

On the export front, U.S. wheat inspections finished the February 1 week at a little more than 428,500 MT. It’s a big slump from the previous week (down 26.3%) and the same period last year (down 37.5%).

Brennan was up early this morning writing the Breakfast Brief. Like other Canadian farmers, he was waiting for the release of the grain stocks report from Statistics Canada.

In the wheat complex, Stats Can says that wheat stocks slipped 2.2% year over year.

Total inventory levels came in at 23.555 million metric tonnes. Durum stocks fell 21.4% to 4.825 MT.

China Pings U.S. Farmers with Trade Dispute

March corn contracts shed 2.75 cents to finish the day under $3.59 per bushel. The May contract dropped 3.5 cents to close under $3.74.

Today, traders were digesting export totals from the week ending February 1. Export inspections came in at 1.074 MMT. While that figure was about 6.2% higher than the previous week, it was 4.4% lower than the same period last year.

There was one big deal that went through the private export reporting system Monday. A private sale of old crop corn totaling 130,000 MT is en route to South Korea.

While export figures were mixed, it was China that stole the headlines.

The nation’s Ministry of Commerce has launched an investigation into the impact of U.S. sorghum imports on Chinese farmers. The anti-dumping probe appears to be a response to the recent decision by the Trump administration to place tariffs on Chinese washing machines and solar panels.

The U.S. is the leading exporter of sorghum to China. However, China could turn to its massive corn stocks (larger than 200 million MT) to address its feed market. We’ll be diving deeper into the expected impact of higher corn demand in the Chinese feed market on Tuesday at GrainCents.

Soybean Prices Slide on Argentina Forecast

Cash soybean prices fell 6 cents to close the day at $9.44 per bushel.

March soybean contracts dropped 9 cents to close under $9.70, while May contracts shed 9 cents to finish just above $9.81.

Today, export numbers were mixed based on your expectations.

The USDA said that weekly inspections came in at 1.30 MMT for the week ending February 1. That number was a 15.3% increase from the previous week, but its almost 21% lower than the same period in 2017.

Stats Canada announced a huge bump in canola stocks. For 2017, the group said that stocks hit a record 14.1 MMT, a figure that represents about a 5.7% jump from 2016. We can blame the nation’s record output of 21.3 MMT in canola.

The country also reported a more than 29% jump in soybean stocks as well.

On-farm stocks jumped by a staggering 58.8% year-over-year.

The Canadian canola report didn’t stop prices from staying in the green today. The March canola contract in Winnipeg closed up CAD $1.50 to close at CAD $494.90. The May contract added CAD $1.30 to finish the day at $500.50.

Despite the record stocks, trade analysts actually expected a higher final number.

Finally, as Brennan noted this morning, analysts are expecting a big drop in Argentine soybean production in the WASDE report this week.

Informa slashed its Argentine corn production forecast by 5 million tonnes to 37 million. For soybeans, they are currently estimating a 51 million tonne crop in Argentina. In January, the USDA estimated 42 million tonnes of corn and 56 million tonnes of soybeans.

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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