September 26 – Grain Prices Dip as the U.S. Dollar Hits 2-Month High

Federal Reserve Chair Janet Yellen’s statements on Tuesday pushed the U.S. dollar to a two-month high. The central bank’s plan to begin tapering its massive balance sheet is giving a boost to the greenback.

The dollar’s strength aided another downturn in grain prices at the Chicago Board of Trade. Here’s our daily recap of the grain trade from the Windy City

Corns Dips Slightly

The December corn futures contract shed 1.5 cents to fall below $3.53. The March futures contract shed 1.25 cents to finish just above $3.65.

Hot temperatures across the Midwest are expected to give way to rains in the coming 24 hours. That should make it a little more comfortable for farmers to get out on their farms and accelerate their corn and soybean harvesting.

Farmers have been making progress with the harvest in North Carolina, Texas, and Tennessee. The three states showed the highest progress percentage in Monday’s USDA report. That said, the total crop progress for the nation sits at just 11%. That figure is a big drop from the 17% average over the last five years.

Tuesdays are always the driest day for news in the corn space. With no major reports here in the U.S., we had to look abroad for additional factors impacting global supply and demand metrics.

The number that stood out the most today came from South Africa. Reuters reported that the nation expects that it will double last year’s corn crop… and maybe toss in a massive amount of extra ears to boot. [1]

In 2016, an El-Nino event created a massive drought across the region. The South African Crop Estimates Committee (CEC) will offer its final estimate for total production this Thursday.

Analysts expect the harvest to come in around 16.5 million metric tonnes. That would be a 112% jump from the 7.78 million tonnes harvested in the year prior. While it’s good to see the drought has ended, Reuters notes that farmers now face a new pain: Low prices.

Bumber crops in neighboring countries like Zambia and Zimbabwe are weighing on local prices. The December contract for white maize is down 65% since it hit its yearly high last January.

Soybeans Hit By Harvest Pressures

In a conversation with our Doug Kirk this morning, we learned that variability in soybean yields is starting to affect broader sentiment in the market. With higher than expected yields in focus, soybean contracts for November fell by finished 7.75 cents to close at $9.635. The January soybean futures contract dropped 7.75 cents and finished just under $9.75.

The USDA didn’t help on Monday. The agency increased the amount of soybeans rated good-to-excellent from 59% to 60%. Just 12% of the total crop is rated poor.

The weather was also a factor today… in Brazil. Rains in the northern regions of Brazil is aiding the expectations that soy farmers will be able to expedite their soybean and crop planting, which had been delayed by dryness in recent weeks.

Many analysts, including  Karl Setzer at MaxYield Cooperative, credit last year’s huge soybean crop in Brazil to farmers’ capacity to rapidly plant their crops. [2]

We saw some interesting numbers today. China imported a whopping 8.45 million metric tonnes in August. That figure is more than 10% higher than the imports for the same month last year.

But here’s the kicker. Just 2.12% of that figure came from the United States. [3] China has been aggressive buyers of U.S. soybeans during the first month of the new marketing year. That trend will likely slow down as holidays approach in China.

It was the second straight day that the markets didn’t witness a large export sale. Many were hoping to see some momentum after the 12 big orders that have dominated the headlines this month. We’ll have to wait until Thursday for some insight into whether we are seeing strong demand to kick off the marketing year.

Wheat Weakness  

The September SRW contract dipped 0.25 cents to close at $4.5375.

Down in Kansas City, the HRW contract for December shed 1.75 cents to close just above $4.52. The March contract dipped 2 cents to close at $4.70.

Finally, in Minneapolis, the spring wheat contract dropped 2.75 cents to close the day at $6.485. The March contract dipped 2 cents to finish the day just under $6.59.

A slight pullback in oil prices today offered some weakness to the Russian Ruble. Naturally, a weaker Russian currency makes their exports more attractive on the global market. Richard Feltes at RJ O’Brien said that wheat prices in the U.S. could have seen bigger declines today.

He cited “shrinking Australian crop forecasts, lower-than-expected Canadian wheat protein levels and increasing US hard red winter wheat protein bids” as reasons why prices remained somewhat steady, according to a conversation with Agrimoney. [4]

UkrAgroConsult has reported that Russian grain inventories hit an all-time high on September 1. Russia’s Statistics Service said that wheat stocks are up 23.7% compared to last year. They pegged that figure at 14.49 million metric tonnes. This figure includes about 9.76 million metric tonnes of milling wheat. [5]

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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