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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 - March 22, 2019

Farm Futures surveys growers to find out what they're planting in 2019 and early look at ARC payments.

Missed some grain market news this week? Here’s what Bryce Knorr and Ben Potter have been following this week.

Audio

Grain futures tried to extend last week’s gains Sunday night but the effort largely failed, with markets threatening bearish reversals this morning. A cautious mood in other assets appeared to spill over to agriculture, despite major flooding devastating communities and disrupting movement of grain. Problems could last into April as warmer temperature melt the record snowpack covering the upper Midwest, with rains returning as well.

High water closed the mid-Mississippi River this week and flooded fields from South Dakota to Kansas and beyond. But so far the trouble has barely registered on a grain market that looks like it needs a spring break after a long winter. Futures are fighting to hold recent chart strength with very low volume noted in soybeans Monday. Wall Street, meanwhile, is on a roll, despite plenty of question markets about the economy as the Federal Reserve begins a two-day meeting to ponder whether to hike interest rates.

Grain markets are little changed this morning following a quiet overnight session. Reasons for caution abound in many circles today. The Federal Reserve ends a two-day meeting on monetary policy, while U.S. and Chinese negotiators get ready for more talks next week. More storms are headed to flood-ravaged areas over the next week or more, keeping weather an issue as well.

Grain markets are mixed this morning as attempts to rally started to fade around 5 a.m. CDT. Floodwaters continue to snarl both rail and river transportation, raising more concerns about delays to spring planting. Negotiations on trade with China appear to be inching towards some type of end game ahead of today’s new export sales numbers. Financial markets are also on hold, wondering about Brexit and the impact from yesterday’s forecast from the Federal Reserve for no more increases in interest rates this year.

Grain futures are steady to higher this morning, keeping their March rally going while trying to absorb a lot of news to end the week. Trade talks with China heat up again next week, but no quick fix is expected with Chinese buying of U.S. soybeans easing recently. More storms are due over the weekend, and forecasts through spring call for above normal precipitation as well.

USDA data

Recent flooding has created various negative impacts to the central U.S. in recent days – loss of property, loss of livestock and even loss of life, to name a few. The latest batch of export inspection data from USDA indicates logistics may be hampering the movement of grain as well. Export inspections disappointed all around last week with plenty of competition and transportation problems limiting shipments, according to Farm Futures senior grain market analyst Bryce Knorr.

For the week ending March 14, soybean export sales posted disappointing totals, and while corn and wheat fared somewhat better, both grains landed below analyst expectations. In the case of soybeans, however, those trade guesses were unrealistic because some figured the large purchase by China reported March 11 would be figured in the total reported.

One large export sale was reported this week. China bought 11.8 million bushels of corn.

Farm program payments to corn and soybean growers in the final year of the 2014 bill won’t provide as much support to growers already stressed by weather, low prices and faltering farm income.

Projections

After planting more soybeans than corn in 2018 for the first time in 35 years, farmers want to return to more normal rotations this spring, according to Farm Futures latest survey of growers. But weather and economics likely mean final crop decisions are still in flux, with many operators looking for alternatives to traditional choices.

Flooding

The latest bout of flooding across large portions of the Midwest and Plains have already cost life, livestock and infrastructure damage. Now, experts are worried about another victim – stored grain in the affected areas.

Market recaps

Grain futures are mostly higher this morning with many contracts making new highs for the month in a market buffeted by a heavy flow of news about weather, trade and economics. Floods remain at the top of that list as reports emerged that 10% to 15% of U.S. ethanol production may be closed by high water already, with no end in sight to wet conditions. Official forecasts for spring call for above normal precipitation over much of the U.S.

Friday’s session featured mixed performances for grain prices. Corn was the day’s clear winner, rising more than 0.5% on the heels of a large China purchase announced this morning. But soybeans and wheat slipped lower today, as general worries over large supplies and low exports persist.

Outlooks

Basis outlook - An already harsh winter went from bad to worse across much of the Plains and Midwest last week, sparking blizzards, floods, tornadoes and hurricane force winds. With transportation snarling movement of grain, there were winners and losers among farmers trying to get rid of old crop inventories.

Fertilizer outlook - Murphy’s Law is alive and well in the fertilizer market. A wet fall and late harvest compounded by blizzards and floods lasting into spring is a reminder that if something can go wrong in the supply chain at just the worst time it probably will. “A bird in the hand is worth two in the bush” has never been more true. Growers with on-farm storage who bought last summer on seasonal lows have the products they need to get going when weather permits. Other producers will be either rolling the dice or paying expensive pre-pay charges.

Corn outlook - Farmers making final choices on what crops to plant this spring face a classic dilemma of risk vs reward. My analysis of rally potential based on supply and demand suggests corn has better chances than soybeans of offering a profit in 2019. But putting in corn requires far more cash flow in a year of tightening working capital. And when corn losses money it tends to lose a lot.

Soybean outlook - It’s hardly unusual for soybeans to play a waiting game in March. Seasonal trends for both old and new crop futures even in bullish years show the market has a tendency to trade in choppy, sideways ranges.

Wheat outlook - It was high time for the wheat market to move and it finally did on Tuesday. But bearish logic remains unchanged for this market unless fundamentals of supply and demand change radically in coming weeks. Make no mistake: The turnaround from contract lows is driven by short covering from funds that are bearish wheat.

Financial outlook - Anxieties are growing in financial markets as well, and not only on Wall Street. Nonetheless, stock prices are rallying, getting close to a breakout that could trigger a test of last fall’s all-time highs. So what do investors know that the rest of the world is missing?

Energy/ethanol outlook - Diesel costs are following their normal seasonal pattern of tightening, extending a rally off December lows. While the cash market is taking a breather at the moment round $2 a gallon at wholesale Midwest benchmarks, don’t plan for any bargains unless crude oil heads south first.

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