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How does La Nina impact grain prices? Is the market high already in? Who's buying soybeans?

Compiled by staff

July 17, 2020

5 Min Read
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Missed some market news this week? Here's everything you need to get catch up.

Ag Marketing IQ

As the rest of the world (Ukraine-Russia-South America-and others) increases production, the U.S. producer is again tasked with “finding a way” to store excess world production until domestic end users require it or until the rest of the world needs it.

U.S. forecasters last week issued a La Niña watch, predicting the cooling of the equatorial Pacific could develop this fall and last well into winter. The event, however, isn’t expected to hang around into the 2021 summer, when it might threaten U.S. corn and soybean crops, since La Niña is associated with some of the biggest droughts historically. And odds are only a little better than 50-50 the episode will occur at all.

Looking at the rain forecast in the next seven to 10 days across the Corn Belt, one could make the argument that the high is in, although I think this is premature.  Forecasts can change and we have a long way to go before the crop is in the bin. Nevertheless, we have to face the reality that we are approaching the halfway point to the season. 

Balancing current market fundamentals and preparing for any scenario is key for success in marketing. Keep a simple notebook with a daily checklist of the above information. When you make time to check the markets, you now have a better focus of what to monitor. Putting on paper in black and white is helpful, and can help remove some of the emotional pains of marketing. USDA reports, COVID-19 concerns, Chinese demand, various potential wild weather scenarios and a presidential election ensure the remaining weeks of summer will offer many twists and turns regarding the above fundamentals. Be ready!

Exports

USDA’s latest batch of grain export inspection data, out Monday morning and covering the week through July 9, showed a mixed bag of results, as it often does. The latest report was most favorable for wheat after volume trended significantly higher week-over-week. Corn volume eased slightly while staying on the higher end of trade estimates, and soybeans logged a lackluster round of results this past week.

Global soy consumption is expected to increase in India and remain steady in China as the Chinese swine herd continues to recover. Traditional soy powers China, Argentina, Brazil, and the U.S. are expected to supply this forecasted demand while also increasing domestic consumption. Recovering restaurant and biodiesel demand will also help to boost 2020/21 usage rates in the U.S. following this spring’s COVID-19 pandemic disruptions.

The 2020/21 wheat marketing year is only a few weeks old, but last week’s volume was the best so far, according to USDA’s latest batch of export sales data, covering the week through July 9. Old crop corn sales were also up noticeably from a week ago. Old crop soybean sales were lackluster, but a healthy batch of new crop sales were more encouraging.

Four export sales were reported this week, the last time four sales in a row was reported was mid-January 2020. China bought 69.4 million bushels of corn this week in addition to 43.3 million bushels of soybeans. Unknown destinations also purchased 17.5 million bushels of soybeans.

Crop progress

USDA’s latest crop progress report, covering the week ending July 12, had a few minor surprises – notably, corn and soybean conditions eroded more than analysts anticipated. The 2019/20 winter wheat harvest also rolling a bit more slowly than expected this past week. How are your crops doing? Click here to give Farm Futures your Feedback from Your Field.

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The onset of summer brings with it the prospects for a weather rally. That was the case in early July, when a bout of hot, dry weather prompted grain prices to move moderately higher. But in recent days, the rally’s momentum has sputtered. Traders largely shrugged off two rounds of large corn and soybean sales to China on Tuesday and Wednesday as they look at rainy weather and milder temperatures for much of the Midwest moving forward. Last Friday’s World Agricultural Supply and Demand Estimates (WASDE) report from USDA hasn’t done any favors for grain prices lately, either.

Recaps

Corn prices rose this morning on a toasty weekend forecast amid the early pollination stages of crop development and strong export demand from China. Gains in the soy complex this morning were underpinned by brisk soybean export demand from China in recent days. August soybean futures prices were up $0.0225/bushel to $8.9575. August soyoil futures added $0.38/lb to $29.65. September soymeal futures prices dipped $0.4/ton lower to $286.6 as cash demand from livestock and poultry processors remained routine. Strong Chinese wheat demand and ongoing concerns about yield potential in the Northern Hemisphere lent strength to futures prices in the wheat complex this morning.

Export optimism, underpinned by another large grain sale announced this morning, kept soybeans in the green Friday. Corn also boosted moderately higher on a round of technical selling, but yield-replenishing rains in the forecast kept prices from moving even higher. CBOT wheat prices moved lower for a second consecutive session, meantime, as another round of technical selling and profit-taking further trimmed prices that reached the highest levels since April earlier in the week.

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