July 7 – Soybean Futures Prices Pop Above $10

 Corn futures held above $4.00, while grain markets in Chicago and Kansas City saw a downturn in wheat futures prices. Soybean futures prices topped $10.00 thanks to weather concerns… but could the tide soon turn against the momentum?

Here’s our daily grain prices review for July 7, 2017.  

Soybean Prices Push Higher

A double-digit gain for soybean futures prices highlighted another warm day in Chicago at the Chicago Mercantile Exchange. The ongoing dry spell in the Midwest continues to raise concerns about crop conditions after the USDA announced a decline in crop acreage last week.

August soybeans futures added 1.6% and topped out at $10.01. We’re sitting at a four-month high for the crop futures contracts.

With the six-to-10-day weather outlook hinting more of the same hot, dry conditions, soybeans capped off their strongest weekly rally since October 2014.

Karl Setzer, an analyst at MaxYield Cooperative, told Fox Business that “June 2017 is going to go down as one of the driest in history in some regions of the United States.’ [1]

Looking ahead, farmers are likely expecting crop prices to continue to rise. The older crop has been moving out of storage, while farmers have lofty aspirations for the price of their fresh oilseeds.

Supply matters at this stage. But even with crop yields expected to be more than 7% off from last year’s 52.1 bushel/acre figure, this is going to be a very large crop year. We’ve already read quite a bit about Brazil’s crop and the ongoing supply and logistical challenges.

We need to pay attention to the buying behavior in China, where chaos is ensuing at its ports. The country has been loading up on soy purchases over the first half of the year, but stockpiles are building up and boats are waiting up to a week to discharge grain.

On Monday, we’ll talk a little bit more about hedging strategies at current levels.

Wheat Futures Prices Dip on Profit Taking

U.S. wheat prices continued a selloff as speculators appeared to be taking more profits from their long positions. CBOT September soft red winter wheat futures fell by four cents to $5.35 per bushel. September contracts in Kansas City for hard red winter wheat dipped 3.5 cents to $5.43 a bushel.

Up in Minneapolis at the MGEX, September spring wheat contracts fell 2.25 cents, ending the day a little higher than $7.76 per bushel.

No single headline or piece of data appeared to shakeup trader sentiment on Friday. However, the ongoing hot weather across the Dakotas and concern about crop deteroration (from USDA reports) remains fresh in everyone’s mind. Over the weekend, weather forecasts call for dry weather and higher temperatures across the Great Plains and Canada.

Protein premiums are holding at high levels and will likely continue to do so.

One of the places we heard a lot of chatter about on Friday is Kansas. It appears fewer acres and quality issues are mimicking much of what we’ve seen to the north.  The USDA said last week that 73% of the state’s harvest has been harvested. However, just 47% is rated good-to-excellent, a figure that is a large decline from the 66% we saw last year at this time.

That said, things appear to be looking up in eastern Colorado. [2]

On the global front, Russia has really stepped up its export levels in the wheat markets this year. Over the first five months of the year, Russian wheat exports are up 21%.

Meanwhile, Iraq is looking to buy 50,000 metric tons of hard wheat. The three candidates to fill the order are the United States, Canada, and Australia, all of which are suffering from drought conditions and supply concerns.

Corn Rises, Japan Surprises

America has a new champion when it comes to the recipient of its corn exports.

Japan is now the top buyer of U.S. corn, but it isn’t driven by good news on rising demand or changes in diet. The problems are squarely the result of Mexico falling behind.

With President Trump seeking changes to the North American Free Trade Agreement (NAFTA), Mexico has been purchasing fewer bushels from neighbors to the north. The winner out of this has been South American producers who have quietly filled the gap.

And it’s quite a gap. According to numbers from Bloomberg, Mexican grain purchases declined by 7% through May compared to the first five months of 2016 [3].

But it’s not just NAFTA that is the issue. The U.S. dollar has been pushing higher compared to the peso over the last year. With the Federal Reserve implementing three interest rate hikes in seven months, it’s been more expensive for Mexican buyers. It appears that some recent weakness in the U.S. dollar has spurred more buying. But we’ll have to wait until at least August before the Trump administration tackles NAFTA and addresses agricultural exports.

Friday’s corn futures held above $4.00.  Concerns about pollination are starting to accelerate. With quality in focus, we’re going to cover the importance of grain testing on Monday. 

The USDA reported that weekly corn exports were down from last week by a wide margin. The U.S. exported 8.5 million bushels compared to levels nearly twice that last week. It’s not a good report, but it’s not the end of the world.

The figure will still allow the U.S. market to exceed the annual forecast from the USDA. That is… of course… until the USDA changes its forecast again.

Oil Prices Slump Again 

Crude oil prices fell Friday on news of rising OPEC production.

A monthly OPEC production report showed that member nations saw higher production for the second straight month. Traders turned bearish about OPEC’s goals to cap excessive production in order to prop up the price.

The other factor pressing oil prices lower came from analysts at Baker Hughes. The company said that the number U.S. production rigs increased on the week ending June 30. The U.S. now has the most rigs in operation since April 2015.

The WTI crude oil price today dipped 2.7%, and Brent crude dropped 2.8%.

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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