Ongoing weakness in the U.S. dollar continued to buffer corn prices and soy prices, while wheat prices retreated again on Wednesday. Weakening quality ratings and hot, dry forecasts continue to push prices higher, while speculative money managers pour back into the markets.
There were rumors of short-sellers calling for a rain dance outside of the Chicago Board of Trade. However, it may be too late at this point in the pollination cycle. Here is FarmLead’s grain markets review and what lies ahead for commodity prices.
Weather Props Up Corn Prices
At the close, the September corn futures finished 5.5 cents higher at $3.82.
The December futures contract added 5.5 cents to close at $3.96.
Prices pushed higher thanks to a heat wave crossing the Midwest. Temperatures topped 100 degrees in Kansas and Missouri, and they’re up in the 90s across key corn growing regions. With pollination in focus this week and next – and falling crop conditions in the USDA report – traders pushed prices higher.
It was another light day of data. Tomorrow, we’ll receive an update on exports. But today’s calendar featured the USDA weekly ethanol production report, and we saw an increase overall by about 19,000 barrels per day. With the U.S. producing about 1.026 million barrels per day, that is also driving up inventory levels.
On the global front, more bearish news for corn prices arrived from below the equator. Argentina’s agricultural minister forecasted that total corn output would reach 49 million metric tonnes this year. Not only is this a 1.5MMT increase from its most recent forecast, but it also blows the USDA’s output figure out of the water.
“I want to announce that we are going to have the largest corn harvest in history, 49 million tonnes,” Agriculture Minister Ricardo Buryaile wrote on Twitter.
The USDA set its Argentinian forecast by 41MMT. That’s a 19.5% difference and makes me wonder what it is that the USDA sees down in Argentina that its government doesn’t. 
August Soybean Prices Near $10.00
The August soybean futures contract jumped 10.25 cents and finished at $9.99-3/4 per bushel. Prices are just on the edge of $10.00. You couldn’t get any closer.
Meanwhile, the November contract added 10.75 cents and finished the day at $10.12.
Today’s trading continued the same weather chatter that we’ve grown accustomed to over the last week.
On the international front, we did receive some bearish news for soybeans in the Malaysian Palm production is set to top average annual output by about 10% in 2017. Total production is expected to reach about 19.5 million metric tonnes compared to the typical year of 18.7 million metric tonnes. 
Wheat Prices Slide in Chicago
September wheat futures closed the day down slightly. The September futures contract finished at $5.03 after dropping by less than a penny.
With traders anticipating tighter stocks in high-protein spring wheat, it was a bit surprising to see today’s downturn. But rain has appeared in the forecast.
That said, Future Directions International sounded the alarm Wednesday over the quality of grain. Caleb Gorton argued that rising prices could undermine food security. He cites a few of the issues that we’ve discussed recently here at Grain Markets Today. 
One has to wonder if they’ve been monitoring our work already over in Australia.
- Global wheat output is declining for the first time in five seasons.
- Lower US spring wheat growth expectations.
- The drought conditions in the Northern Plains.
- And, most important – the declines in yields and lower quality proteins.
At the center of the argument is the reminder that rising grain prices were a major factor in the 2010-2011 Arab Spring (which there is plenty of other evidence to counter that point.)
The issue isn’t the amount of food available in the world.
Here in the U.S., we burn a lot of it. The USDA has noted that we have lots of wheat around the world… it’s just the quality that isn’t there. We’re forecasted to have 260.6 million tonnes in wheat stocks by the end of the 2017/2018 marketing year.
What we are hearing is the lack of hope for enough 14% protein content in the spring wheat crop here in the United States to meet demand. Current USDA production forecasts for spring wheat that isn’t durum is set at 423 million bushels. That’s the smallest figure since 2002.
Julie Ingwersen and Colin Packham at FarmIreland see an opening for high-protein producers like German to poach some of this year’s market share from U.S. producers. They see potential in the Nigerian and Northern African markets. Still, they do note the possible impact of rains on German production and the impact on grain quality. 
This broader narrative about demand and high-quality grain matters to farmers, even though there’s very little time to study the global markets on a daily basis.
This narrative is why grain testing and shopping around is going to be very important in the months ahead.
We will discuss both topics in our Insights tomorrow.
The Risks to Rebalancing Trade
As Powerline Group explained in a simple image, the stakes are quite high if the Trump administration aims to rebalance the U.S. trade deficit to China or Mexico or Canada.
The share of agriculture exports between those three nations all ranged between 14% and 17% last year. No wonder agricultural trade groups are rightly concerned that the Trump administration might use them as a bargaining chip to get a better deal with large-scale manufacturers.
We’ll touch more on NAFTA and future trade deals with China tomorrow and what it means to farmers across the United States.