March 20: Grain Prices Mixed after Monday Selloff

It was a flat day of trading across most grain complexes as traders digested yesterday’s sharp selloff in grain prices and took a wait-and-see approach to tomorrow’s announcement on U.S. interest rates.

The Fed Open Market Committee will conclude its two-day meeting on monetary policy and will likely raise interest rates for the first time in 2018.

Let’s look at today’s recap from the Chicago Board of Trade.

Soybean Prices Get Small Bump  

A day after a brutal selloff in the complex, soybean prices earned a small bump. The May 2018 soybean contract added 5.75 cents to close the day at $10.2825. The July contract added 5.5 cents to finish at $10.39 per bushel.

Markets are turning their attention to the next update on soybean acreage. According to a private estimate, soybean acreage is likely to increase to 90.5 million next Thursday. That figure would top the 90.0 million acres last reported at the USDA Forum. However, it would be below the roughly 92.0 million acres reported last week in the recent Allendale Survey

Rains in Argentina were a large factor in Monday’s sharp downturn in soybean prices. The rains came after four months of significant drought affecting the nation.

Today, Dr. Michael Cordonnier set his Argentine production figure at 42.0 MMT.

That’s a 1 MMT decline from his previous projection. [1] The ag economist also added 1 MMT to his Brazilian production outlook. His new figure is 115 MMT.

Corn Prices Can’t Hold Up in Chicago

Corn prices fell thanks to some technical selling in Chicago.

May corn contracts dipped 0.5 cents to close the day at $3.745.

The July futures contract shed 0.75 cents and ended at $3.825.

However, a large export sale did provide some support to the complex. The USDA announced a 110,000 MT order from Peru for the 2017/18 calendar. This was the third big corn sale to come across the USDA wire this week.

Meanwhile, markets are wondering if the rains in Argentina will end the continued downturn in production estimates over the last few months. Today, Dr. Michael Cordonnier left his forecast for Argentina’s corn crop unchanged at 34 MMT. He did the same with Brazil, leaving his number unchanged at 86 MMT.

Tomorrow, markets will turn their attention to the weekly ethanol report.

Ethanol is back in focus this week due to statements from Agricultural Secretary Sonny Perdue, who said he hopes that the Trump administration can avoid RIN price caps. We’ll be talking more about the ethanol debate over at GrainCents on Wednesday morning.

Be sure to sign up for a free trial, and get your insight on ethanol production and how it affects your corn sales, right here.

Wheat Prices Find Short Covering Gains

Short-covering in Chicago provided some support to wheat prices, which were fresh off a near-two-month low. Chicago SRW contracts for May added 2.25 cents to close the day at $4.53. The July contract added 1 cents to close just under $4.87 per bushel.

HRW contracts in Kansas City dipped 0.25 cents to finish the day at $4.70 per bushel.

The July contract in KC also shed 0.25 cents and ended the day under $4.88.

In Minneapolis, spring wheat prices also saw losses.

The MGEX May contract fell 3.25 cents and closed a tick above $5.93. The July contract dipped 2.5 cents and ended the day at $6.025 per bushel.

Prices were mixed largely due to numbers on the global market. Buyers and sellers in the Black Sea have about a $5 spread on what they are willing to deal at right now for 12.5% protein.

Meanwhile, the nation of Jordan is back looking for wheat. Their eighth tender of 2018 is seeking 100,000 MT of million wheat. Japan also announced that it is seeking 127,338 MT of wheat from Australia, the U.S., or Canada.

Finally, as Brennan noted this morning in the Breakfast Brief, stronger-than-expected sentiment on European wheat quality is putting pressure on that market’s prices.

However, the contrast between recent rains and deteriorating crop quality in the Midwest is quite striking. Yesterday, the USDA reported poor metrics on wheat quality for HRW producers in Kansas and Texas.

On Monday, the agency said that 55% of the Kansas HRW crop is now rated “poor to very poor.”

That figure represented a 2% jump from last week. Just 11% is rated “good to excellent.”

In Texas, a 7-percentage point jump now has 60% of the state’s HRW crop rated “poor or very poor.” The amount rated G-E is just a sad 10%.

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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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