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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. 18, 2019

A quiet week at USDA wasn’t so bad for commodities.

Audio

A quiet grain market overnight roared back to life shortly before 4 a.m. this morning. These early pops are not unusual, sometimes indicating a move by a fund or reaction to a news headline. Today’s jump happened after reports Russia plans to regulate grain prices, triggering worries that could lead to lower exports, a concern that’s surfaced from time to time over the fall and winter but never materialized.

Risk is a four-letter word as U.S. markets get ready to open this morning. Weak trade data out of China, including a huge drop in soybean imports, showed how U.S. tariffs are pinching growth there, while the fate of Brexit hangs in the balance this week over in Britain. Stocks and commodities suffered around the world as a result, with Wall Street and La Salle Street headed for losses in futures trading.

What’s Britain’s exit from the European Union got to do with the grain market? Maybe not much, but the vote looming in Parliament today on the Brexit plan of Prime Minister Theresa May should go down to resounding defeat later today, and the uncertainty is keeping money managers uncertain. Futures are a little higher but fading overnight gains following mixed trade on Monday.

Though many key markets are lower this morning, including stocks, crude oil and copper, grain futures are trying to extend the mostly better tone from Wednesday. Ongoing concerns about dry conditions in Brazil appear to be the main factor among traders otherwise facing fatigue after dealing with everything from trade wars to battles in Washington, London and beyond. The best news for many: U.S. markets close Monday to observe the Martin Luther King Jr. holiday.

 

Exports

Corn, soybean and wheat export inspections moved moderately higher from a week ago, but a bullish round of data wasn’t enough to move grain prices higher this morning, according to Farm Futures senior grain market analyst Bryce Knorr.

 

Drought

Drought’s foothold this fall and winter has been meager at best – especially in the Midwest and parts of the Plains, according to the latest updates to the U.S. Drought Monitor, released January 17. For the week ending January 15, drought is only covering 31.5% of the country.

 

Friday’s market news

Grain futures are higher across the board this morning, putting 50-day moving averages in play in corn, soybeans and wheat. Concerns about dry conditions in Brazil and hopes for a breakthrough in trade talks spurred mostly short-covering ahead of a three-day weekend. Markets close Monday in observance of the Martin Luther King Jr. holiday.

Lack of USDA reports had traders headed for the exits at the start of the week. But by the time they hung it up for a three-day weekend today, no news from the agency turned out to be a good thing.

 

Outlooks

Fertilizer Outlook - Adages from the worlds of finance and real estate are the best way to describe a fertilizer market with wide price disparities: “Time is money” and “Location, location, location.” Where you farm and when you plan to buy products could mean a differential of hundreds of dollars a ton in a market that could see key developments internationally this week.

Basis outlook - Corn basis was steady on average last week. That may not seem like much, but it was something of an accomplishment considering the challenges faced by 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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