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Afternoon Market Recap for Aug. 20, 2019

Rains make grain, cause pain

Agreeable Midwestern weather has corn prices on the ropes again

Soybean futures saw a small rebound in a technical reversal Tuesday after suffering double-digit losses yesterday. Corn and wheat futures weren’t as fortunate, with both landing in the red today. Wheat continues to receive scrutiny over ample domestic and global stocks, while timely rains this week will likely help yield potential for this year’s late-planted corn crop.

Some severe weather is raking across parts of the Central Plains and Midwest today and tomorrow. Per the latest 72-hour precipitation map from NOAA, areas that could see the highest rain totals through Thursday include Nebraska, eastern Kansas, southern Iowa, Missouri and southern Illinois, which could gather another 1” to 2” during this time. Today and tomorrow will also see plenty of above-average daytime highs across the central U.S., but cooler weather should arrive later this week into the weekend.

On Wall St., bank and technology stocks stumbled, with the Dow dropping 101 points in afternoon trading to 26,034. Energy futures were mixed, with crude oil down fractionally while gasoline and diesel firmed by more than 1% apiece. The U.S. Dollar softened slightly.

Corn prices continued to decline Tuesday as yield-improving weather is likely for much of this week for most of the Midwest. September futures fell 5.5 cents to $3.5950, with December futures down 5.75 cents to $3.6875.

USDA marked 56% of the U.S. corn crop in good-to-excellent condition in its latest weekly crop progress report, down a point from the agency’s August 11 report. Another 30% of the crop is rated fair (unchanged from a week ago), with the remaining 14% rated poor or very poor (up a point from a week ago). The latest modeling suggests average yields are at 168.6 bushels per acre.

Physiologically, the crop remains well behind average for this time of year. Ninety-five percent of the crop is now silking, 55% is at dough stage and 15% is dented. All maturity levels remain significantly slow compared to 2018’s pace as well as the prior five-year average.

Yield potential and total acres remain two huge question marks for this year’s corn crop. Is there hope for a price rebound later this summer? Click here to learn what factors are currently in play with the latest Corn Outlook column from Farm Futures senior grain market analyst Bryce Knorr.

Earlier this week, President Donald Trump held a two-hour meeting with cabinet members, instructing them to address farmer criticism over his administration’s biofuel policy. In particular, 31 hardship waivers have been issued to refineries earlier in August, which in turn have a direct negative effect on ethanol demand. September ethanol futures were up nearly 1% this afternoon on the news.

Preliminary volume estimates were for 353,250 contracts, trending 34% above Monday’s final count of 264,630.

Soybean prices recaptured a small percentage of Monday’s losses with some technical buying today, although gains were capped by continued concerns over the general lack of progress in ongoing U.S.-China trade negotiations. September and November futures each picked up 1.75 cents to close at $8.5575 and $8.6825, respectively.

Soybean crop condition tilted downward last week, with 53% of the crop now in good-to-excellent condition as of August 18. Another 33% of the crop is rated fair (unchanged from last week), with the remaining 14% rated poor or very poor (up a point from last week). The latest modeling based on these ratings suggests average yields are at 49.7 bushels per acre.

Physiologically, 90% of the crop is now blooming, versus 2018’s pace of 99% and the prior five-year average of 96%. And 68% of the crop is now setting pods, versus 2018’s pace of 90% and the prior five-year average of 85%.

As the U.S.-China trade war drags on, research from JPMorgan Chase suggests the average American household could face $1,000 per year in additional costs as long as current tariffs remain in place. Negotiations are ongoing, but with few signs of progress in recent weeks.

Preliminary volume estimates were for 109,811 contracts, inching slightly ahead of Monday’s final count of 103,931.

Wheat prices dropped by as much as 1.45% Tuesday on technical selling spurred by continued worries over large global stockpiles, with harvest pressure in the U.S. creating additional headwinds. September Chicago SRW futures lost 5.5 cents to $4.60, September Kansas City HRW futures dropped 5 cents to $3.8675, and September MGEX spring wheat futures slipped 1.5 cents to $5.04.

Spring wheat crop conditions firmed last week, with 70% of the crop now in good-to-excellent condition after improving a point from a week ago. The latest modeling suggest average yields are now at 50.75 bushels per acre. Harvest is also underway, reaching 16% completion as of August 18.

The winter wheat harvest, meantime, is nearly complete after reaching progress of 93% last week, versus 2018’s pace of 97% and the prior five-year average of 98%.

A Ukrainian grain traders union expects the country’s 2019 wheat production to increase 11.6% from last year, reaching 1.019 billion bushels. The country’s 2019/20 wheat exports are also expected to climb moderately, reaching 771.6 million bushels.

Jordan again cancelled its international tender to buy 4.4 million bushels of milling wheat, though two offers were presented. The country has struggled to close similar tenders in recent months but plans to issue a new one next week.

Preliminary volume estimates were for 106,205 CBOT contracts, slipping below Monday’s final count of 110,537.


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