September 7 – Corn and Soy Markets Retreat In Anticipation of Bullish WASDE

Grain prices at the Chicago Board of Trade were in the red Thursday as markets begin preparation for next week’s WASDE report. The USDA will release the September report on Tuesday, and more bullish data is expected from the agency.

Our team is still traveling in Ottawa this week, which has opened up discussions on our expectations for Tuesday. On Monday, you can anticipate greater insight from Brennan and me as we explore analysts’ expectations and factor in our analysis from the last month.

But first, let’s dive into what we saw today at exchanges around the country. Here is our daily recap from Chicago, Kansas City, and Minneapolis.

Corn Prices Face Choppy Trading

Corn prices moved lower as analysts across the country start to place their bets on September WASDE numbers. The December corn futures contract shed 3 cents to close the day at $3.58. The March contract closed 3 cents lower to close at $3.705.

Bloomberg reported analyst expectations for Tuesday’s report. Consensus yield expectations came in at 167.9 bushels per acre. That would be closer to Brennan’s estimate of 167.1 bushels than the August USDA figure of 169.5 bu/ac.

Digging into the data, the consensus is an expected decline of 1.6 bu/ac. Dig deeper into the data, and the variance is about 5.7 bu/ac. This swing across all of these estimates is a testament to what our Doug Kirk told us while he was out on the 2017 Farm Journal crop tour.

There is a significant amount of variability in the fields. Though the Farm Journal final numbers expected a similar decline in yield, we’ve seen wild swings on a state-to-state basis. We’ve also noted that the USDA based its smaller-than-expected August number on states that were outside of the primary producing regions.

Consensus expectations for old crop corn sit at 2.35 billion bushels. That figure represents less than a 1% decline from the August figure of 2.37 billion bushels. Forecasts for new corn inventories came in at 2.125 billion bushels. The 148 million bushels disappearing from last month’s NASS figure would represent about a 6.9% decline.

Markets weren’t reacting to any ethanol numbers…

There wasn’t a report today.

The shortened trading week will push the EIA’s weekly update to tomorrow. Be sure to check back for our insight on the update.

In the bullish news, we did see a surprising forecast from AgroConsult earlier today. The firm estimated that the first season corn crop in Brazil for the new marketing year would come in at 26.1 million metric tonnes. Compared to last year, that’s about a 14% decline.

Soybean Prices Can’t Maintain Rally

Weaker U.S. dollar, stronger Brazilian Real?

Who cares?!?

That seemed to be the sentiment as the soybean rally from yesterday ran into a roadblock.

While every other nation on the planet appears poised to reign in their monetary policy, the U.S. dollar is sliding on news that President Donald Trump and Democrats might permanently end the debt ceiling.

Also, fewer people anticipate that Congress will get anything done this year while the Federal Reserve is wishy-washy on the timing of the next rate hike… and the details on how they will tighten a $4.5 trillion balance sheet.

In Chicago, the Soybean futures contract for November slipped 0.25 cents to close the day at $9.71. The January contract shed the same amount to close at $9.805.

It’s been a good ride for soybeans since they hit mid-August lows. The question is whether we’re going to get any additional bullish data on Tuesday… the kind that could push them back above $10.00?

Bloomberg consensus forecasts called for new crop ending stocks to come in 8.2% lower than last month’s report. The consensus came in at 439 million bushels, which required a 36-million-bushel decline.

Analysts offered a second helping of bullish expectations by dropped old crop expectations down 2.4% to 361 million bushels.

One factor that could drive optimism is the steady stream of Hurricane weather that keeps popping up on the map. Last week we saw no change in the overall good-to-excellent number for soybeans. However, we did see big declines in states impacted by heavy rains from Hurricane Harvey.

Buckle up, because we may be looking at not one, but two additional Hurricanes over the next two weeks that could impact the Gulf Coast and the Carolina region. We saw a big decline last week in North Carolina G-E quality. Also, CWG has estimated that we could see Hurricane Irma damage between 4 to 6 million bushels of soybeans in South Carolina.

That’s before Hurricane Jose makes its way toward the Atlantic Coast.

We also saw two estimates today from prominent ag firms on their expectations for the new year soybean crop in Brazil. Abiove projected a production figure of 108.5 million metric tonnes.

AgroConsult set its number at 111.1 million metric tonnes.

Spring Wheat Prices Continue to Climb

Wheat markets saw a bit more variety in outcomes. In Chicago, SRW contracts for December shed 8 cents to close the day below $4.38. The March 2018 SRW contract shed 8 cents to close above $4.59.

Hard Red Wheat contracts faced a similar downturn Thursday.

The December HRW contract slipped 7 cents to close a tick under $4.42. The March HRW contract slipped 7.25 cents to close the day at $4.59.

Down in Kansas City, the December contract dropped 7 cents to close at $4.41-6. The March contract dropped 7 cents to close at $4.595.

But we saw positive momentum up in Minneapolis. The December Spring Wheat contract added 4.5 cents to close the day at $6.49. The March contract added 5 cents to hit $6.59.

Markets have been reacting negatively to the big number released Wednesday by Stats Canada. The July 31 ending stocks figure for Canadian wheat came in at 6.685 million metric tonnes, a number that was 32% higher than last year’s figure.

Below is a recap of who is holding Canadian grain this year compared to their five-year average.

 

2016-17-Canadian-Grain-Stocks-On-Farm-Commercial-Ownership
Significant Changes in Canadian Grain Ownership to end 2016/17

The WASDE report will be important next week. Canadian yields for hard red wheat are coming in higher than expected. The USDA may have to revise its production figure of 26.5 million metric tonnes. [1]

Finally, Bloomberg reported that analysts expect the USDA figure to decline next week for new crop wheat inventories. Overall, analysts expect a 2.0% decline to 933 million bushels.

Looking Ahead to Friday

On Friday, we’ll be digging deeper into the ethanol figures and getting a better sense of what we can expect from WASDE on Tuesday. In addition, look out for some additional insight later next week into the impact of Russia on the global wheat markets…

More importantly… you’ll learn about one bearish factor in the corn markets that many people simply aren’t taking into account right now.

 

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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