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Week in review: Most grains finish volatile week in the red

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Winter wheat is the exception as contracts scratched out small gains.

Missed some market news this week? Check out what's been driving the grain markets.

Ag Marketing IQ

As a farmer having to make a pricing decision, all too often your focus is only on bullish news. Despite the recent price retreat, it seems most farmers expect higher prices to continue for many of the same reasons mentioned above. I believe farmers do a better job of marketing when they avoid this price bias. It’s okay to root for prices to move the direction that is best for your operation. But it’s not okay to find yourself on the wrong side of a price move because you choose to believe price can only move in your favor.

U.S. corn growers enjoyed an unexpected counter-seasonal rally in August and September. The 79.25-cent jump off Aug. 12 lows was one of the largest on record following release of USDA’s first monthly production estimate, topped only by December futures gains in 2006 and 2010. Futures kept up the bullish momentum into the following winters in both those years. But a look back through the data shows the hurdles corn faces in the months ahead if it expects to lift prices. Without a sharp cut in USDA’s production estimates, end users may be unwilling to pay higher prices due to burdensome U.S. supplies. 

USDA released its quarterly stocks report Wednesday, sparking a rally in soybeans, corn and wheat. There was something good for everyone in this report, which rarely seems to happen. Perhaps most surprisingly, corn stocks were pegged at 1.995 billion bushels, well below the trade average. This caught many traders by surprise because it came in roughly 125 million bushels below the lowest trade estimate.  This was 10% below where we were last year at this time. 

After nearly twenty years as a commodity broker, one truth nugget remains: you can’t outguess USDA reports, nor can you outguess how the market responds to the data.  USDA’s Sept. 30th quarterly stocks report was extremely friendly for corn and soybean futures. Demand for grain was stronger than expected, drawing stocks lower and setting the stage for continued steady to higher grain prices in the months ahead.

September’s Quarterly stocks report of U.S agricultural inventory at marketing year end fell well below trader expectations. As a result, soybeans were up 40 cents and corn jumped nearly 20 cents at one point. Soybean stocks at 523 million bushels were well below trader expectations and 42% below last year. Corn stocks just shy of 2.0 billion bushels were 200 million bushels below last year and the lowest stock since 2015. These numbers still represent a comfortable supply for old crop but have potential game changer implications when carried into the new crop.

Crops

In the latest crop progress report from USDA, out Monday afternoon and covering the week through September 27, the agency reports stable corn quality, along with a slower-than-expected harvest pace. In contrast, soybean quality improved by a point, with a harvest that is progressing faster than expected.

USDA’s September 1 Quarterly Stocks report bucked historical norms, finding fewer than expected grain bushels and sparking rallies in the corn, soy, and wheat complexes. The report came as a surprise as many were expecting higher ending stocks based on reduced demand due in large part to the pandemic. But the ag economy appears to be weathering coronavirus conditions better than expected, as usage rates soared in the third quarter.

Exports

USDA’s latest weekly grain export inspection report, out Monday morning and covering the week through September 24, held a mixed bag of data – as it often does. Corn and wheat volume increased moderately week-over-week, while soybeans slid slightly lower. All three crops landed in the range of trade estimates.

The latest round of grain export data from USDA, out Thursday morning and covering the week through September 24, had plenty of bullish bites to digest. The bottom line: corn, soybeans and wheat each climbed above the range of trade estimates put out earlier this week.

An export sale was reported every day this week. Buyers took corn and soybeans. Countries in the market included Japan, China, Mexico and unknown destinations.

Recaps

President Donald Trump isn’t a farmer, but his wellbeing is certainly a matter of national concern, so news that he and the first lady tested positive for COVID-19 sent some shockwaves through a wide variety of sectors in overnight trading, and that included grain prices. Corn, soybeans and wheat followed a broad range of other commodities (including the stock markets and energy sectors) lower as investors head into Friday with some general anxiety until news continues to develop and unfold.

Grain markets capped off a volatile week with a choppy session Friday that left most prices in the red today. Corn closed down around 0.8% today, despite testing small gains earlier in the session. The same was true for soybeans, which ultimately lost around 0.3%. Spring wheat contracts also closed moderately lower. Winter wheat contracts scratched out small gains, meantime, on lingering concerns about overly dry conditions for some key overseas competitors (most notably Russia). Investors were also generally cautious today after President Donald Trump announced last night that he had tested positive for COVID-19.

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