September 15 – Will Corn React to La Nina Threat?

On the day of quadruple witching, global markets were keeping a close eye on developments in North Korea and feeling the impact of a rising U.S. dollar. The CBOE Volatility Index (VIX) shed 2.2%, while September futures contracts expired in Chicago.

Traders have been watching the weather, particularly for news about the potential of a La Nina event this year. The National Weather Service’s Climate Prediction Center hiked its probability for the weather pattern to hit in the northern hemisphere later this year to a range of 55% to 60%. [1]

With this news in focus, here’s our daily recap of grain markets from the Chicago Board of Trade.

Mild Gains in Corn Prices

On Friday, the September corn futures contract added half a penny to finish the day a tick below $3.55. The March contract added 0.75 cents to close above $3.67.

Traders are trying to make sense of the USDA’s production and yield figures from earlier this week.

The agency expects that the U.S. will see its third-largest corn crop on record. All told, we’re looking at roughly 14.2 billion bushels.

In addition, we have to pay attention to the possibility of warm, wet weather through the late fall and early winter months. As the Brugler Report highlighted Friday, the possibility of such weather would accelerate maturity, but it would also lead to “sluggish” progress come harvest time. [2]

Soybean Prices Go in Reverse

Soybean prices fell Friday after traders took some profits off the table as September contracts expired and markets looked at China figures.

The November soybean futures contract shed 7.25 cents to close below $9.69. The January contract dropped 7 cents to close at $9.79.

Markets are concerned about bearish import numbers from China, the world’s largest importer of the oilseed.

On Thursday, Oil World kept its projection for 2017-18 imports at 93 million tonnes. Demand has been surpressed by large inventories that have been built by the recent buying spree we witnessed this summer. (The USDA projected 95 million tonnes for Chinese imports.)

But the other factor impacting muted demand is the uptick in Chinese production.

China has largely been subsidizing soybean production in order to bolster national inventory levels. This has fueled a large shift from corn to soybeans among Chinese farmers. Total production for the upcoming marketing year is expected to increase from 4 million tonnes to more than 16 million tonnes. (The USDA projects Chinese production levels of 14 million tonnes.)

Spring Wheat Prices Crater Again

It was another down day for spring wheat prices. In Minneapolis, the December contract shed 11.25 cents to close the day a tick above $6.21. The March 2018 contract finished the day down 11 cents to close above $6.34.

One has to look at surprise protein levels in the United Kingdom as the headline of the wheat market. Average protein levels of the British crop came in at 13.2%, according to AHDB. That figure crushes the five year average of about 11.8%. Of course, it’s not all good news, since falling numbers were not very good. So, here you have a lot of high quality wheat that might not have much use for millers because of weaker specifications.

It’s a good reminder of the importance of getting your grain tested so that you know not just the quality of your crops, but also to get the best price possible. If you’re based in the United States, we’ll be talking more about the fastest and easiest ways to get your grains tested without having to put any money into any expensive home equipment later toward the end of the month.

In Chicago, SRW prices for December added 6 cents to close the day at $4.49. The March contract added 5.5 cents to finish at $4.68.

Down in Kansas City, HRW contracts were ticking higher. The December futures contract finished up 4 cents to end at $4.46. The March contract added 4.5 cents to close at $4.635.

Informa released its forecast for 2018 wheat acreage. Expectations call for total area of 45.875 million acres. That figure is higher 2017 acreage figures.

Canola Prices Show Gains

Canola prices were up marginally Friday. The November contract hit 489.10s, while the January contract rounded out at 495.70s. Prices have been trying to come back to life after bouncing off eleven-week lows. As AgCheive explains in their November contract chart listed below, increased expectations for yields and strength in the Canadian dollar have weighed on prices.

November canola prices finding a bounce?

Achieve

Oil Prices Continue to Rise

Geopolitical tensions continue to rattle the global commodity markets in the wake of North Korea’s missile launch over Japan. Crude prices were on the move and nearly hit a four-month high due to the combination of fear and supply and demand balancing.

While OPEC has held most of its commitments to cap excessive production, prices have found support thanks to increased optimism for increased demand on the global front. Both OPEC and the International Energy Agency bolstered demand expectations this week.

What’s on Tap Next?

Tomorrow, we’re going to talk about an important factor in the agricultural sector: Distance.

You might be far away from your nearest grain elevator. You might be miles away from millers or companies that purchase specialty crops. You might even have seen local buyers move out of your area…

But there’s good news. It doesn’t matter.

Wherever you are, whatever you farm, you now have the best suite of grain marketing tools available to sell your grain. We’ll show you how, starting tomorrow.

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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