January 29: Grain Prices Push Higher on Weather Woes

It was a wild day on Wall Street, but an even wilder morning at the Chicago Board of Trade.

Today, grain prices popped higher as traders eyed another expansion of drought conditions across the United States. The ongoing dryness has been a boon for wheat prices.

Meanwhile, the weather was again the subject in South America, where ongoing dryness continues to batter corn and soybean crops.

Let’s kick off the week with our recap of grain prices from the Chicago Board of Trade.

Wheat Leads Grain Prices Higher

It was another big day in the wheat complex.

Prices popped on news that drought conditions expanded yet again last week. According to Drought Monitor, about 80% of the High Plains is experiencing drought conditions.

We still remain uncertain if how the recent Polar Vortex will affect crops.

The March SRW contract in Chicago added 8.25 cents and closed a tick above $4.49.

The Kansas City HRW contract gained 9.75 cents and closed at $4.5275. This is the highest price for the front-month contract since October.

However, spring wheat prices in Minneapolis didn’t follow suit. March MGEX futures fell 0.75 cents to close the day at $6.13.

In addition to drought concerns, export numbers received a big boost on the back of a weaker dollar. With the greenback hovering near a three-year low, total wheat inspections came in a 579,875 MT (21.3 million bushels.)

That figure blew away trade expectations that ranged between 9 million and 16 million bushels.

Total volume now for the 2017/18 marketing is now around 16.19 million metric tonnes, about 3.8% behind last year’s pace of 16.82 million.

Corn Prices See Small Gains

The March corn contract added 2.25 cents to finish the day just below $3.59 per bushel. The May contract added 2 cents to hit $3.67.

Thank Argentina for the gains. With corn prices now on the verge of topping $3.60, it could be a very good time to start thinking about posting your grain on FarmLead’s marketplace.

The weather outshined corn inspection numbers. For the week, the trade number came in at 993,506 MT (39.1 million bushels) for the week. That figure was above the high-end of trade expectations. It was also about a 37.5% increase from last week.

Soybean Prices Pop Again

March soybean prices popped above $9.91 today after a 6-cent gain.

The May contract gained 5.75 cents and closed at $10.0275.

Again, the story was about the weather in South America. More hot, dry weather is expected to pummel the soy-producing regions. That has fueled several downgrades of crop quality, production, and yield expectations. Naturally, the USDA has not chimed in yet on the impact of the weather on the region.

Its attaché is holding out, as I’ve mentioned in GrainCents. This has created a lot of speculation over the last two weeks. As a result, it has presented our readers with a recent recommendation that captured a short-term peak in price and set up the potential for bigger gains in the year ahead.

But expect a lot of chatter ahead of the February WASDE report. And, consider taking profits with price back around the $10 mark.

We recently shifted our position to take some gains and position ourselves ahead of the February report.

Meanwhile, Brazil is facing heavy rains as its harvest season picks up. Any concerns about harvest delays had abated over the weekend on news that the Brazilian crop harvest is at 3.8% completion.

That’s ahead of the 2.9% average, but still behind last year’s pace of 4.3%. Mato Grosso’s harvest is at 13.5% complete, a big jump from the 2.8% reported last week.

For the week of Jan. 25, soybean shipments came in at 1.105 MMT. That was the lowest shipment total since September 2017 and a 22.3% decline from last week.

Still, it is about one-third more than the same period last year.

NAFTA Talks Conclude Round 6

The other key news today came out of Montreal.

Negotiators concluded the sixth round of talks to reposition the North American Free Trade Agreement.

It appears that everyone was trying to put a positive spin on the latest developments. Despite U.S. threats to pull out of the treaty, Mexican officials said that we are at a “much better point” after this latest round of discussions. Trade officials will meet in Mexico City for nine days of additional negotiations on Feb. 26.

“For the next round, we will still have substantial challenges to overcome. Yet the progress made so far puts us on the right track to create landing zones to conclude the negotiation soon,” Mexico’s Economy Minister Ildefonso Guajardo told Reuters. [1]

As we’ve discussed at FarmLead Insights, any significant change to or elimination of NAFTA would have a profound impact on farmers in all three countries.

Be sure to sign up for the Breakfast Brief each morning, and start making your grain marketing more profitable.

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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