Need to catch up on the market news of the week? We’ve got you covered. Check out what you missed from the continuing trade dispute with China to Friday’s release of the Sept. 1 grain stocks data.

Morning audio by Bryce Knorr

Markets closed in China today for a holiday, but that didn’t keep the trade dispute with the U.S. out of the headlines. Soybeans pulled back from last week’s rally after China cancelled the next round of trade talks as new tariffs begin to take effect today. Wheat overcame the negative attitude due to dry forecasts in Europe and the Plains, helping corn hold to minor changes overnight.

Bearish trading in soybeans didn’t last long overnight, when follow-through selling from Monday’s downturn dried up quickly. November futures are trying to hold a reversal higher, despite improving crop ratings last week. Farmers continue to make progress harvesting 2018 crops; to do that they’re burning more fuel, helping Midwest cash wholesale diesel prices surge to their highest level in nearly four years. 

Grain markets are higher this morning, paced by gains in wheat and soybeans as farmers focus on bringing in big fall harvests. Stock index futures rebounded from selling Tuesday, as Wall Street waits for today’s statement on monetary policy from the Federal Reserve that’s widely expected to include another quarter-point increase in the central bank’s benchmark short-term interest rate. 

The stock market sold off late on Wednesday, despite an upbeat assessment of the economy and no surprises from the central bank’s latest statement on monetary policy. The Fed did raise interest rates, but that was seen as a done deal before the meeting this week. Investors may just be taking profits ahead of nervous moments in Washington and the end of the third quarter Friday. Grain traders may have a similar mentality today, waiting for release of Friday’s Sept. 1 grain stocks data and today’s export numbers. 

Quarterly grain stocks reports from USDA are sometimes difficult to interpret. But this morning’s numbers, due out at 11 a.m. CDT, represent final ending stocks for the 2017 marketing years in corn and soybeans. While corn could see a small reduction due to strong exports and usage for ethanol, soybean carryout could be higher that USDA’s Sept. 12 forecast if the 2017 crop was bigger than previously reported.

Deep Dive

The quarterly USDA grain stocks report is one of many reports the agency regularly releases that can have a big impact on grain prices. This report is sometimes hard to predict, although they tend to have a bottom line that is easy to understand. In the latest episode of the Deep Dive podcast, we take a closer look and cut through some of the data to come to some helpful conclusions, including learning more about what surprises sometimes pop up in these reports. 

Feedback from the Field

With more growers getting in the field to harvest, corn and soybean yield reported to Feedback From The Field last week improved. But a producer from southern Kentucky summed up what many producers have noted this year: highly variable yields. “Corn yields go from 80 to 200 depending on the spot in the field,” was the post. “Best yields are happening on well drained ground that usually is the poorest performers.”

Exports

Corn export inspections for the week ending Sept. 20 continue to forge ahead with solid results, while soybeans retreated slightly from the prior week’s results and wheat posted an identical tally from a week ago.

Chinese tariffs on imports of U.S. soybeans knocked prices for a loop. But data on shipments since the trade dispute ratcheted higher in July show the market adjusting to what amounts to the new normal. Both Brazil and the U.S. sold more soybeans. 

For the week ending Sept. 20, corn, soybean and wheat export sales all posted healthy totals, which helped futures prices gain a little traction Thursday morning. “The corn numbers were especially encouraging and suggest we may be seeing a role reversal this year,” says Farm Futures senior grain market analyst Bryce Knorr. 

USDA data

USDA updates estimates of grain stocks on a quarterly basis, numbers that sometimes are deep, inside-baseball stuff. But reports out Sept. 28 for corn and soybeans, though hard to predict, have a bottom line that’s easy to understand. Friday’s estimates will show how much corn and soybeans were left over at the end of the 2017 marketing year. This Sept. 1 number becomes the beginning stocks for the government’s projection of 2018 crop supply and demand. Coupled with imports and 2018 production, this is the amount available over the coming year. 

USDA put Sept. 1 corn supplies at 2.14 billion bushels, 138 million more than its last estimate of old crop carryout on Sept. 12. Today’s larger than expected total suggests feed usage during the summer was smaller than expected, helping shrink the amount walking off the farm for the 2017 crop by some 200 million bushels below USDA’s last estimate. The government also raised its forecast of soybean supplies leftover at the end of the marketing year. At 438 million, Sept. 1 inventories were up 43 million from USDA’s Sept. 12 report. While part of the increase likely is due to sampling error from previous reports, the agency also said the 2017 crop was 19 million bushels larger than reported in January, raising the yield by two-tenths of a bushel per acre to 49.3 bpa nationwide. Total production was put at 4.411 billion bushels.

If combines aren’t already rolling near you, chances are they will be soon, according to the latest USDA Crop Progress report. USDA has the 2018 U.S. corn harvest at 16% complete for the week ending Sept. 23, moving ahead from 9% the prior week. Soybean harvest reached 14% complete as of Sept. 23, up from 6% the week prior and ahead of 2017’s pace of 9% and the five-year average of 8%.

Friday’s market reports

Grain futures are narrowly mixed this morning as a choppy overnight session comes to a close ahead of USDA’s wheat production and Sept. 1 grain stocks due out at 11 a.m. CDT. While today’s data may not provide huge surprises, end of the month and quarter position and prehedging ahead of the weekend’s harvest could keep futures grinding.

USDA’s quarterly stocks report was the main driver in grain markets today, delivering mostly bearish news. Corn futures tumbled more than 2% by Friday’s close, with soybeans down more than 1%. The agency’s stock report had more bullish news for wheat, but those futures also ended around 0.5% lower amid some quarter-end liquidation. 

CFTC

Corn and soybeans rallied to multi-week highs earlier this week. But that rally was built on short-covering, not new buying from speculators according to today’s update from the Commodity Futures Trading Commission. Here’s what funds were up to through Tuesday, Sept. 25, when the CFTC collected data for its latest Commitment of Traders.

Outlooks

Basis Outlook- While growers are trying to figure out the direction of futures prices, the cash market was also a puzzle last week. Highly variable bids for corn and soybeans resulted in basis overall that was steady to firmer despite weak bids in parts of the country.

Soybean Outlook- USDA’s September reports were about as bearish for soybeans as you can get. A bigger than expected increase in yields could more than double the amount of soybeans left over a year from now when harvest 2019 begins.

Wheat Outlook- The wheat market can point fingers at plenty of reasons why prices struggled over the past month, from seasonal trends to the negative mood in corn and soybeans. But charts and perhaps fundamentals too suggest hopes for a modest rebound.

Corn Outlook- The first half of September wasn’t good for the corn market, and that’s putting it mildly. After showing signs of life to start the month, futures ran into a bearish USDA report, and the negative news flow hasn’t let up much. While there may be light at the end of the tunnel, for now it’s pretty hard to see.

Energy/Ethanol Outlook- Growers needing fuel to harvest and dry big crops this year face higher costs, and fuel bills likely won’t get any cheaper in 2019. In fact, the only cheap fuel these days is the one farmers produce: ethanol. Prices for the biofuel remain near the lowest level since the corn-into-energy boom began more than a decade ago. 

Financial Outlook– Bears may own the grain market right now. But on Wall Street, bulls are running. Both the S&P 500 and Dow Jones indexes soared to record levels on Thursday. Strong corporate profits and a 48-year low in jobless claims propelled Wall Street, despite angst over trade disputes, high energy prices, emerging market troubles and all-but certain interest rate hikes from the Federal Reserve. 

Fertilizer Outlook- While fertilizer costs continued to edge mostly higher this week, the strong summer rally showed signs of cooling as fall begins. But growers still trying to book products for fall application – or hoping for a pullback this winter for spring needs – may see limited reductions if recent seasonal patterns prevail. Lower production of corn and wheat over the past year could support demand, even if U.S. crop prices are weak.