January 22: Soybean Prices Push Higher on South American Weather News

In Chicago, the weather is clearing. The snow has melted. And soybean prices are red hot.

Today, Congress announced it has reached a deal to reopen the government. But the news had little effect on U.S. grain prices. In fact, the USDA’s inspections report wasn’t affected by the temporary shutdown.

Instead, markets were focused on weather in South America.

Now, I know that a lot of people like to skip passed the weather reports.

But dryness in Argentina has pushed July soybean contracts back above $10.00.

Meanwhile, a massive winter storm had dumped more than a foot of snow across the Midwest. That certainly played a role in today’s fluctuations in wheat trading.

Here’s what else you need to know from the Chicago Board of Trade.

Soybean Prices Pop Again

Following the December WASDE report, the promise of $10.00 soybeans didn’t look too good in the short term.

But Brennan noted this morning in the Breakfast Brief – South American weather premiums will play a significant factor this year for soybean prices.

We are looking for the opportunity to sell our soybeans at a profit, and the weather in the Southern Hemisphere is cooperating.

Dry forecasts across Argentina continue to reduce expectations for crop yields. The July soybean contract in Chicago pushed back above $10.00, creating a nice opportunity to make some gains.

The March soybean prices gained 7 cents to finish the day a tick above $9.84. May soybean prices gained 7.25 cents and finished just under $9.96.

The weather over the next week in Argentina is expected to continue to display dryness. We’ll continue to monitor the situation.

Readers of GrainCents should look for our specific recommendation on when it’s time to sell your crop.

Meanwhile, U.S. export numbers are looking good again. Weekly exports ending January 18 totaled  1.419 MMT. The figure topped the high-end of trade estimates. Exports were also 9.5% higher than the same period last year, and 14% higher than the previous week’s shipments.

The big bump came on behalf of China, which purchased more than half of the soybean exports.

As we noted recently, the USDA implemented new rules on soybean shipments to China. Shipments with less than 1% foreign material will receive priority, while any that exceed the threshold will be subject to additional cleaning.

A lot of people suggested that this was an unfair burden on the soybean supply chain. Afterall, Argentina and Brazil aren’t subject to these requirements, which were demanded by China.

But, I think we’re going to see greater cooperation between China and the U.S.

This could quickly institute best practices to reduce foreign materials, and – if China is pleased with the quality – they’re going to keep coming back.

Winter Wheat Prices Hold Their Ground

In Chicago, SRW prices added 3 cents and closed the day a tick below $4.26. The May 2018 contract added 3 cents to close the day at $4.385.

Down in Kansas City, HRW pushed higher. The March 2018 contract added 1 cent and closed the day at $4.285. The May 2018 contract added 1.25 cents and closed at $4.425.

Finally, in Minneapolis, the March 2018 spring wheat contract shed 1.5 cents and closed at $6.07 per bushel. The May contract dipped a penny to close at $6.165. per bushel.

The word of the day is short-covering for wheat traders. The Commitment of Traders report from Friday showed that funds reduced their short positions on Kansas City wheat by 5,214 contracts. That was nearly a 30% cut from the previous week’s short position.

Continued dryness across the U.S. Plains offset concerns about the global supply glut.

With one eye on the weather, we turned the other to export figures.

Monday, the USDA’s export numbers showed that the U.S. shipped 337,980 MT for the week ending January 18. It’s nothing really to celebrate. This number was 8.6% lower than the same point last year.

Corn Prices Slightly in the Red

It was another dull day in the corn markets.

The March 2018 corn contract shed 0.5 cents to close at $3.52 per bushel. May contracts dipped 0.25 cents and finished the day at $3.605 per bushel.

Today’s export figure was pretty lackluster. For the week of January 18, the corn shipments totaled 668,948 MT. While that was a 13.6% jump from the previous week, it was still well below the report from the same period last year.

In fact, it was 32.1% lower than the same week in 2017.

With that in mind, Japan was the top buyer for the week. Other buyers include Guatemala, South Korea, Mexico, Costa Rica, Colombia, and Peru.

Oil Prices Stronger

Oil prices pushed higher Monday thanks to increased optimism about OPEC’s deal to cap excessive production.

This weekend, Saudi Arabia hailed the success of OPEC’s deal and said the oil cartel participants like Russia would likely extend this deal beyond 2018.

The news comes as the United States prepares to surpass 10 million barrels per day in production.

The U.S. will surpass both Russia and Saudi Arabia as the world’s largest producer of crude oil should it continue to push output higher at this pace.

On Tap Tuesday

Tomorrow, be sure to check in with FarmLead CEO and President Brennan Turner.

In his Breakfast Brief tomorrow, he’ll offer you additional clarity on weather events down in South America, and provide some perspective on grain trading north of the U.S. border.

Sign up for the Breakfast Brief each morning, and start making your grain marketing more profitable.

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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