October 3 – Wheat Prices Rebound after USDA Progress Report

A rainy day in Chicago couldn’t dampen wheat prices, which recovered after Monday’s sell-off. Today featured a light day of agricultural data, forcing traders to focus more on weather and recent USDA data.

Corn Prices Dip on Quality Uptick

The USDA added one more bearish factor into the equation Monday afternoon following the close of Open Outcry. The agency reported that corn rated good-to-excellent (G-E) increased from 61% to 63% over the last week. Why not…

In Chicago, the December corn contract dipped 2 cents to close the day at $3.495. The March contract dropped another 2 cents to finish the day at $3.6225.

The USDA report indicated a big jump in quality in Illinois. G-E rated corn in the Illini state increased from 52% to 58% over the last week. We saw other noticeable gains in Iowa, Indiana, and Colorado.

While the quality report indicated that uptick, it also showed a sharp delay in the broader harvest. With farmers across the country cutting soybeans, corn stalks are going untouched. The harvest was 17% as of Sunday, a figure that is a sharp decline from the five-year average of 26%.

The other key piece of data came from the USDA Grain Crush Report. Last month, we saw a 5.8% gain in monthly crushing for ethanol use. The agency said that the U.S. used a little more than 481 million bushels for the fuel. That is nearly 5% higher than the amount crushed during August 2016.

Soybeans Slide Again

Another down day hit the soybean complex. Though Friday’s stocks report indicated that the US had fewer soybeans in inventory than previously forecasted, the nation is still awash in the oilseed. November soybean contracts shed 2 cents to finish the day at $9.5525.

The January contract dropped 1.75 cents to finish at $9.66.

The downturn came after the USDA reported no change in crops rated G-E. The US soy crop is now rated 60% G-E. The only change worth noting is that crops rated excellent increased from 11% to 12% (while crops rated good fell from 49% to 48%).

It appears that the markets are expecting that USDA to either increase or hold its soybean yield estimate next week. FC Stone has forecasted that the agency will pin yields at 49.9 bushels per acre, the same number released by the USDA last month.

In other related data, the agency reported that the U.S. crushed roughly 151.6 million bushels in August. That figure was about 7.8% higher than last year, but the total lagged crushing output in July.

Wheat Rises After Weak Progress Report

The weather conditions in the northern plains have delayed wheat planting. Yesterday, the USDA reported that the winter wheat crop was 36% planted. This is the smallest progress figure since 2000 when the USDA reported 34% completed for the week.

The 36% estimate also lags the five-year average of 43%. While South Dakota’s harvest was 65% complete (and in-line with the five-year average), progress has been very slow in Montana. At 53% complete, the Montana crop lags the 70% average. Other delays have been witnessed in Kansas and Nebraska so far this year.

Elsewhere, Idaho’s crop is 65% planted, well ahead of the five-year figure of 49%.

The report had an impact on the futures contracts Tuesday. In Chicago, the SRW December contract added 3.25 cents to close at $4.48. The March contract added 2.25 cents to finish the day at $4.655.

Down in Kansas City, December and March contracts experienced similar gains. The HRW December contract added 2.5 cents to finished the day just below $4.42 per bushel. The March contract was up 2.5 cents to close at $4.5925.

Finally, up in Minneapolis, spring wheat contracts showed some gains after a dismal day of trading Monday. The December contract added 0.75 cents to close the day at $6.1225. The March contract added one penny and closed the day at $6.26.

December spring wheat contracts are hovering near their lowest levels since June 12. Selling accelerated Monday after the Small Grains Report indicated that spring wheat production would come in around 416 million bushels. That figure was well above the estimates of 350 million and 380 million that we’ve seen from the USDA and other analysts around the country. 

Oil Prices Dip Again

Oil prices continued to dip as traders took profits off the table. WTI crude fell 0.38%, while Brent crude was off 0.32% at 2:15 CDT. Traders have taken profits after the market saw its best third-quarter since last decade. There have been rumors that global demand could slip this quarter as the summer driving season comes to a close.

However, there is a possibility that we see a downturn in production in the North Sea at a time that many wonder if OPEC will be able to keep its production deal together throughout the balance of 2018.

Meanwhile, oil prices continue to shed their geopolitical premiums at a time that the VIX remains under 10. Although Turkey has threatened to invade Iraqi Kurdistan and shut off pipelines from the region, no follow through has been witnessed. Markets are also largely dismissing concerns about Venezuela’s economic crisis and Spain’s turmoil over a vote for Catalonia’s independence.

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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