July 13 – Crop Prices Hit By Another Selloff

It was another hot and sticky day in Chicago.

But around the country, wet weather has appeared in the forecast and stopped a lot of the momentum in the grain markets. The simple arrival of rain in a weather market has caused the recent rallies on trading floors to cool off.

Here’s FarmLead’s daily grain price review and recap from the Chicago Board of Trade. 

Corn Prices Slump

Yesterday’s news that corn crop carryout surpassed expectations by 3.6 metric tons hit prices in today’s trading session. The July corn futures contract in Chicago dropped 15.2 cents to hit $3.61. Both the September and December corn futures contract fell 15.6 cents to $3.69 and $3.83 per bushel, respectively.

Despite the downturn, the next three weeks will be critical, and there’s a good chance for another pop as crop enters its key pollination phase. The USDA has reported that drought conditions have hit 16.2% of Iowa, a 7.3-point jump from last week. [1]

While the safety net of corn stocks pushed higher here in the United States, rising demand around the globe is the factor at play. The USDA has reported that global stocks-to-use ratio is on the verge of a five-year low. Should the number sit at 16% at the end of August, as Mark Weinraub explains, that figure would represent demand for about two months.

When looking at what has corn stocks tight – Reuters points to rising animal feed demand – as a key reason why corn usage has increased by 22% over the last five years. [2]

The USDA also reported old crop corn export sales for the week ending July 6. The U.S. exported 161,048 metric tons, a 14.8% increase from last week. However, this figure represents about a 76% decline from the same period last year.

Turning our attention to Argentina, where corn crop is booming, the Buenos Aires Grain Exchange said that about 55% of the nation’s crop has been harvested. That figure is about a 2.5% increase from last week.

That news comes a day after Brazilian agency Conab announced that the corn crop for the 2016-17 cycle was on pace for 96.03 million metric tons. That was an upward revision of more than two million metric tons from its June estimates.

Soybeans Slide Again

Soybean prices slumped Thursday as traders looking to improving weather reports and bearish figures from the USDA. The July soybeans futures contract fell 44 cents to hit $9.72. The August contract fell 45 cents to $9.75, while the new-crop November futures fell 46 cents to $9.87.

The bright spot in the day came from Chinese buyers, who agreed in principle to purchase 12.53 million metric tons of American soybeans. The signing was largely done as a photo opportunity, but it is the second largest agreement on record for U.S. soy producers.

April Hemmes, an Iowa farmer shared her joy and mathematical rounding skills with the KCCI in Des Moines. “They basically bought the entire production that we have in the state of Iowa,” she said. [3]

Naturally, the soybean deal is being overshadowed by other agricultural products, particularly in the animal protein market.

China is also going to buy about 371 metric tons of beef and pork from American farmers. This is important because China just reopened its markets to these products for the first time in 14 years.

The other important factor today: South America. Even though the USDA didn’t alter the yield figures in its monthly crop progress report, data from Brazil and Argentina have shown that the globe will be awash in soybeans. We’ll talk more about this tomorrow as we get more information from exchanges below the equator.

Wheat Prices Tumble

Wheat prices dipped again as markets reacted to weather events and yesterday’s crop report.

  • The September SRW Wheat contract finished the day off 25 cents to fall just below $5.11.
  • In Kansas City, the September hard red winter wheat contract fell 28 cents to hit $5.15.
  • In Minneapolis, the MGEX wheat contract for September dropped 33 cents to hit $7.49.

One of the more intriguing commentaries today came from Benjamin Bodart at CRM AgriCommodities. He explained that there may have been too much attention paid to the global stocks figure, and less focus on the global wheat production estimate, which fell back down to the forecast laid out in May. He also foresees a potential decline of 40 million tons across the top eight largest exporting producer nations. [4]

While drought is increasingly becoming a problem in Iowa for soy and corn farmers, wheat producers in the Dakotas are literally praying for rain.

The heat has been relentless. This week, North Dakota was rated 72.8% in drought. That figure represents a 6-point increase from last week. But the real sweltering is happening in South Dakota, where we saw drought conditions increase by 14.7 percentage points to hit 72.4% week-over-week. Weather reports don’t indicate that any relief is coming soon.

Farm Bureau says that 62% of spring wheat in Montana is in poor or very poor condition. That number jumps to 72% in South Dakota (and 35% in North Dakota). But it’s not just this region that is seeing an uptick in a damaged crop. We’ve seen double digits now in Wyoming (10%), Oregon (12%) and Washington (17%). [5]

This is important because the USDA’s yield average for spring wheat sits at 40.3 bushels per acre. In conversation with Brennan Turner today, he projects that the yield will certainly be revised downward in August and September to below 40 bushels per acre.

We’re not exactly ready to join Societe Generale, whose analyst Rajesh Singla said that U.S. spring wheat yields could hit an average of 35 bushels. [6]

On the global front, Paris-based Strategie Grains again slashed its forecasts for wheat, barley, and maize production in the European Union. The consulting firm cut its soft wheat forecast by one million tons to 140.7 million.

Strategie Grains largely blamed yield loss in Spain and France for its downward projection. Blistering heat across southern Europe continues to drive projections downward, and France’s harvest is getting dangerously close to last year’s poor production figure that was the worst in about 30 years.

The firm did hike its production forecasts in Poland, Hungary, Romania and Bulgaria.

They may be very hard to find on a map, but all four countries combined produce more wheat than Canada.

The warning comes at the same time that German growers are increasingly concerned about the roll that heavy rains are playing on their crops. Heavy rains are damaging protein levels in the region and delaying harvesting. That’s bad news for Germany, which tends to have higher protein levels than its neighbors in France and the Ukraine. [7]

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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