August 4, 2018
Missed some market news this week? Here’s a look back.
Monday, July 30, 2018
For the week ending July 26, corn and soybean export inspections all posted moderately healthy numbers, as each grain narrowly topped analyst estimates for last week, with wheat coming in just below trade expectations. And despite tariffs discouraging sales from China, that country logged some modest movement, too.
For a second straight week, analysts anticipated USDA would lower its corn and soybean crop quality ratings, but the agency held steady in its weekly Crop Progress report. Spring wheat quality ratings did fall incrementally, however.
Wednesday, Aug. 1, 2018
Grain markets rallied Tuesday on hopes the U.S. and China could start talking about trade. Those expectations were quickly doused, with the Trump administration threatening to raise proposed new tariffs on $200 billion of Chinese imports from 10% to 25%. Though soybeans pulled back, wheat held on to gains due to worries about lower global production that also supported corn.
Thursday, Aug. 2, 2018
Trade tensions between the U.S. and China ratcheted higher on Wednesday, with the mood on financial markets also soured by U.S. sanctions on NATO-ally Turkey. Stock markets around the world sold off as a result today, with soybeans also losing ground overnight. But corn and wheat remain higher, supported by concerns about falling global production.
Most USDA export reports offer a mix of bullish and bearish data, and the week ending July 26 was par for the course. Last week, corn and wheat sales notched another round of better-than-expected export sales. Soybean sales, on the other hand, turned in about half of the prior week’s total and fell moderately below trade expectations.
Friday, Aug. 3, 2018
Wheat lost most of its gains Thursday after a big rally took out May highs and is fighting to get back in the black this morning. Weather problems around the world continue to offer support to corn and wheat as traders continue the countdown to next week’s USDA report. Soybeans moved off session lows but still face resistance due to slowing exports complicated by the trade dispute with China.
Grain futures are mixed this morning, trying to hold on to gains after selling earlier in the overnight session. Weather woes around the world are putting supply in focus as USDA’s Aug. 10 report is just one week away.
Corn and soybean crops so far survived a widely varied growing season in the U.S. and are on track for good, but not great yields, according to Farm Futures August crop production survey. Still, above average yields for the sixth straight year could leave prices foundering.
There were two large export sales reported this week. Unknown destinations took 10.6 million bushels of corn and 5.7 million bushels of soybeans and Vietnam took 5.1 million bushels of corn.
Friday featured some choppy sessions for some grain prices but ended with no significant changes as traders squared their positions to end the week. Corn, soybean and spring wheat futures finished with moderate gains, while winter wheat contracts dropped slightly.
Despite anxiety over trade disputes, grain markets rallied in the second half of July. A round of furious short covering by these hedge funds helped fuel the gains. Here’s what funds were up to through Tuesday, July 31, when the CFTC collected data for its latest Commitment of Traders.
Fertilizer Outlook- While fertilizer markets showed signs of easing last week, the latest tender from India could throw down a marker to see whether or not prices can continue their summer rally. The jury is still very much out on that trend due to ongoing turmoil in crop markets and trade.
Wheat Outlook- For hedge fund managers in ivory towers around the world, wheat is wheat. But on the ground it’s a much different story. Diversity likely demands different marketing strategies this year depending on where you farm and the quality of your crop.
Basis Outlook— Summer grain market rallies sometime cause wide swings in basis depending on what’s driving prices higher. July gains this year weren’t terribly large by historical standards. But buyers reacted differently to the move as concerns about trade and new crop production muddy the waters even more.
Fertilizer Outlook– Futures markets trading near contract lows make acreage choices for the year ahead hard to figure. Fertilizer prices could wind up the deciding factor in some areas as suppliers start to make deals for fall, with different products headed in different directions.
Energy/Ethanol Outlook- Fundamentals of supply and demand continue to suggest petroleum markets have plenty of downside potential. But farmers can’t dry corn or run harvest machinery on hope. A 15-cent pullback in diesel costs is an opportunity to lock in some of fall needs to guard against supply chain disruptions, either local or around the world.
Soybean Outlook- In early July before China’s tariffs on soybeans went into effect I wrote that hoping for a rally was akin to drawing to an inside straight or pulling a rabbit out of a hat. Indeed, the aftermath of the first weeks of the trade war shows beans’ hand a bust, with no magic to stop the steady drop in prices.
Corn Outlook- It’s tempting to blame the corn market’s troubles on the trade dispute between the U.S. and China. But even without that noise, prices might be struggling. The crop is pollinating without an obvious weather threat. To be sure, there are some trouble spots. The Palmer stress index flashed warning signs statewide in June from too much rain in Iowa and Indiana. Other states from Missouri to Michigan have dry conditions that are worrying farmers too.
Financial Outlook- News out of the June meeting on monetary policy at the Federal Reserve quickly was lost in the avalanche of headlines on the U.S.-China trade dispute. But the central bank’s decision to raise interest rates – and a promise for more of the same – deserves a longer look from farmers.
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