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Image of grain bins with words Grain market week in review with Bryce Knorr and Ben Potter in white. Entire image has red tint.

Grain market week in review - Jan. 11, 2019

Trade talks in China conclude with progress reported, USDA reports on hold and Bryce Knorr's forecast for year ahead.

Missed some market news this week? Catch up on what Bryce Knorr and Ben Potter have reported this week.

Morning audio

Negotiators from the U.S. and China began two days of talks today and while resolution to the trade war is far from a done deal there’s at least some optimism progress is being made. That gave another boost to soybean futures overnight though U.S. stock indexes failed to hang on to early gains.

Negotiators at trade talks between the U.S. and China report progress, but just what that means for farmers is still unclear, in part because much of USDA is shut down over the border wall stalemate. China began buying U.S. soybeans again in December, but export sales numbers are one of many agency reports suspended due to lack of funding. The data vacuum also has traders wondering about the size of crops in the U.S. and around the world as analysts estimates hit the wires.

Negotiators from the U.S. and China completed a third day of trade talks today with progress reportedly made on energy and agriculture, though no details were released. The news helped buoy markets across the board overnight, with ag contracts paced by export news in wheat. A flurry of deals are in the market today, keeping traders from noticing lack of data from furloughed USDA statisticians.

USDA’s Jan. 11 supply and demand report is on hold, leaving traders still uncertain about the final size of 2018 corn and soybean crops in the U.S. But the agency’s counterpart in Brazil, CONAB, lowered its forecast of soybean production there after dry weather in December took the top end off a big crop. The news limited profit taking overnight as the market digests its two-week rally.

After taking a beating on Thursday grain markets bounced back overnight. Besides some bargain hunting and short covering, futures also found support from a weaker dollar on rumors Britain’s exit from the EU could be delayed. Parliament votes on a plan for Brexit next week but is likely to reject the measure.

Market recaps

Farmers have a love-hate relationship with USDA reports, which they blame for sending prices sharply lower when bearish surprises roil the market. But lack of that data kept traders from extending bullish bets Thursday, one reason futures sold off yesterday after running in to chart resistance this week.

Grain markets rebounded on some technical buying that was aided by concerns over the size of South American crops due to hot, dry weather there as harvest nears. Corn, soybeans and wheat all moved higher in Friday’s session. Grain markets concluded the session without regard to USDA’s World Agricultural Supply and Demand Estimates (WASDE) report, which has been delayed due to the ongoing government shutdown.

Exports

Corn export inspections last week reached 19.7 million bushels, which was nearly half of the prior week’s tally of 37.5 million bushels and below the average trade guess. Japan was the runaway No. 1 destination. Soybean export inspections last week reached 24.7 million bushels, easing slightly below the prior week’s total. The top destination for U.S. soybean inspections last week was the Netherlands. Wheat export inspections last week landed at 9.6 million bushels, which was moderately below the prior week’s total. The Philippines topped all destinations for U.S. wheat export inspections last week.

Outlooks

Basis outlook - There are three reasons why farmers sell grain: When prices are good, when they need cash and when it plays into their strategy for minimizing taxes. None of these was a factor as 2019 began, helping firm basis on average in the cash market.

Energy/ethanol outlook - Growers who watch grain market basis know that strong basis is the time to lock in the cash portion of their price. Flip that perspective 180-degrees when buying inputs, which means it’s time to lock in diesel costs for spring, and if possible, fall.

Corn outlook - January’s USDA reports on production, grain stocks and demand are usually key turning points in the marketing year that make the first weeks of the new year a watershed. With this annual data dump postponed by the government shutdown, traders are trying to figure out if they dare risk moving on without the official metrics provided by USDA.

Soybean outlook - Officials from the U.S. and China decided to add a third day of trade negotiations to their meetings this week. But while the two sides are talking, silence from USDA could keep the soybean market on hold.

Year ahead

The government shutdown delayed big USDA January reports, but Farm Futures senior grain market analyst Bryce Knorr is plowing ahead with his outlook for 2019. Knorr presents his take on what prices could do in the year ahead in this webinar conduced Jan. 10 with the University of Arkansas Extension. In addition to estimates of 2018 production, his presentation included acreage and price forecasts for 2019.

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