July 14 – Corn Prices Bounce Back on Weaker U.S. Dollar

Corn prices made up ground Friday as the U.S. dollar hit a 10-month low.

Most Americans would argue that a strong dollar is very important and beneficial to consumers. But that’s not always a great thing. Exporting industries like agriculture can benefit from growing demand for products. What drove today’s decline in the greenback?

The Federal Reserve indicated this week that it will only increase interest rates gradually. Over at CME Group, the probability of a rate hike in December fell below 50%.

Markets were a bit spooked today by data indicating that consumer spending was flat in June, retail spending fell for the second month in a row, and inflation levels went nowhere.

Inflation continues to frustrate the Federal Reserve (it’s too low for their liking). While the jobs market continues to show positive momentum, a lack of inflation has driven them to take a wait-and-see approach on rates.

Here’s what else you need to know about the grain market today.

Corn Prices Push Higher

Following Thursday’s profit taking, corn prices ticked higher. The CBOE September corn futures finished added 6.5 cents to finish at $3.76. December corn futures added 6.5 cents and closed a touch above $3.89.

The July contract expired today but finished up 4.25 cents to close a touch above $3.65.

Markets are still reacting to Wednesday’s crop report that saw the USDA hold its average yield figures in place. It seems that Planalytics isn’t buying it. The firm decreased its average U.S. corn yield by 1.3 bushels to 165.2 bushels per acre. [1].That’s a rather large drop from the USDA’s current estimate of 170.7 bpa.

Down in Argentina, the Buenos Aires Grain Exchange reported that 55.5% of the country’s corn crop has been harvested, just 2.5% higher than the previous week. Exportable supplies are still adequate.

New Soybean Crop Tops $10 Per Bushel

With the world on the verge of a massive soybean crop, the markets largely ignored yesterday’s purchase of roughly 460 million bushels of soy by China from American producers. But we did hear some optimism after the USDA reported that exporters sold roughly 47.8 million bushels to China.

It appears that today’s trade showed a bit of stabilization after a slight overreaction during Thursday’s trade.

As we’ve said recently, there is still a lot of uncertainty about crop quality and acreage in the months ahead.

With July expiration behind us, we turn our attention to the August soybean futures contract, which added 13.5 cents and closed at $9.89. In Chicago, the November soybean futures contract gained 14 cents and closed at $10.01.

On Monday, we’ll turn our attention to the monthly crush report from the National Oilseed Processors Association (NOPA).

Wheat Worries

Wheat prices lost some momentum today.

The September wheat contract dipped a penny to close a touch below $5.11 in Chicago. Kansas City Hard Red Swheat contracts for September dropped two cents on the day. Minneapolis spring wheat was the exception, adding 8.5 cents at the end of the trading session to the September futures contract.

Most of the chatter today centered around weather events around the globe. Dry weather is hammering the U.S. northern plains, Australia, Europe, and Ukraine. As I referenced yesterday, significant rains across Germany is raising concerns about protein quality. Brennan said this morning that he is taking the German reports with a grain of salt.

In the U.S., however, the drought conditions in North Dakota may require a shot of tequila.

Recent data from the United States Drought Monitor indicates that extreme drought is not affecting 36% of North Dakota. This morning, we heard members of our FarmLead team discuss that crop failures are increasingly problematic. We’re also hearing those producers are selling off their livestock because of associated feed costs and other input challenges.

The weather today near Bismarck, North Dakota, hit highs of 102 degrees. That’s very close to the 104 degrees that set a record way back in 1910. The region has only received about a tenth of an inch of rain this month, according to Weather Underground.

Less than five inches of rain has fallen this year in a region with a historical average by this time of 9.84 inches.

What’s Up in Washington?

While traders were snapping up contracts, news broke in Washington that President Donald Trump will nominate Steve Censky, the CEO of the American Soybean Association, for the role of deputy secretary of agriculture.

Censky has led the ASA for 21 years. Censky has a reputation for being an aggressive advocate of U.S. farmers with a deep academic and policy background to complement his operational strengths.

The nomination comes at a critical time for the Trump administration, which is facing increased political pressure from farming groups. With NAFTA negotiations on tap for August, rural advocates are pressing the Trump administration to leave agricultural trade out of any deal. More than 26% of all U.S. farming exports travel to Mexico and Canada.

But farmers have worried about two issues surrounding NAFTA. First, that any new tariffs on exports would significantly hurt exports at a time that corn prices are sluggish.

Second, they worry that agricultural trade will be used as a bargaining chip to help the more politically entrenched manufacturing interests with this administration receive a better deal.

As we’ve noted, Mexico isn’t going to just roll over in negotiations. They’ve already begun working with other suppliers in South America to secure corn crop.

Coming Up Next Week

We’re ramping up our content in the weeks ahead, bringing readers more in-depth insight into what producers and buyers can expect. Starting next week, we’ll be diving into the metrics surrounding today’s wheat markets.

Keep your eye out for Monday’s Breakfast Brief with Brennan, and check back to our insights section where we’ll be talking about winter wheat conditions, spring wheat conditions, and crop insurance.

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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