Missed some market news this week? Here’s a look back.

Monday, July 2, 2018

Financial markets are in a tailspin this morning after selling across Asia and Europe. The trade dispute between the U.S. and China faces a Friday deadline when tariffs could go into effect, and more worries emerged in Europe as well. Despite the gloom, grain futures are trying to hold on to gains after a hot weekend, with wheat leading the back again Monday.

Despite challenging conditions for crops last week, growers reporting Feedback From The Field report corn and soybeans mostly stood up to the challenge of too much heat and too much or too little rainfall. Though conditions for both crops eased slightly, overall deterioration wasn’t much.

USDA’s weekly export inspections report tshows what was. Numbers reported today for last week were good for corn and soybeans. But the grain market remains focused on what will be, especially on Friday when U.S. tariffs are set to go into effect that could trigger Chinese retaliation, effectively blocking U.S. crops from the world’s largest country.

Searing temperatures and torrential rains took a toll on crops last week. Still, ratings remain very strong despite the setback, according to Monday’s Crop Progress report.

Tuesday, July 3, 2018

After taking another beating on Monday, futures prices are trying to hold a welcome rebound today. A week of hot and in some places too wet weather hurt crop ratings for corn and soybeans, helping prices recover overnight. Wheat is bouncing back from its drubbing on expectations of lower world production. 

Thursday, July 5, 2018

All the factors to rally the grain market would seem to be in alignment when trading resumes this morning: Forecasts for warmer and drier Midwest weather, lower global production, a weaker dollar, Wall Street gains and rising crude oil prices. But the dark cloud of a trade war with China could limit buying enthusiasm. Tariffs against U.S. soybeans are due to go into effect overnight, with no letup yet in the rhetoric between the two countries.

Friday, July 6, 2018

The trade dispute between the U.S. and China has seemed like a slow-motion car crash since tensions surfaced in February, but the two powers finally collided for real today after U.S. sanctions formally went into effect Thursday night.

Grain futures are mixed this morning, showing little effect so far from tit-for-tat tariffs that went into effect between the U.S. and China overnight. Whether that mood lasts through the morning open from Chicago to Wall Street is uncertain, because an initial attempt to rally is fighting to avoid softening. 

China had announced some weeks earlier that July 6 would be the date it began to impose 25% tariffs on U.S. soybeans in retaliation to various U.S. tariffs aimed back at China. That left U.S. export sales reported between June 22 and 28 as one of the last full weeks to do so ahead of these geopolitical moves. And traders expecting a flurry of soybean export sales leading up to today’s date were not left disappointed – although China did not end up being a major part of that mix.

Staring down freshly imposed Chinese tariffs, soybeans rocketed ahead more than 4.5% to close a holiday-shortened week. Corn and wheat prices also gained about 2% to finish the week strong.

Market outlooks

Basis Outlook— Lots of factors go into a decision by grain traders to make or seek deliveries on futures contracts. Spreads between futures contracts that are big enough to pay for the cost of storage can keep grain off the market. Sometimes it’s profitable to accept delivery and move grain down the river system to the Gulf.

Corn Outlook- Some years the corn market puts in highs around Independence Day. Other years the holiday marks a bottom, with prices taking off on hot, dry forecasts. But in other, more bearish climates, the holiday is only a brief lull before selling resumes, taking futures for another leg lower. That’s the risk for growers waiting for the market to finally regain its legs.

Soybean Outlook- It’s not impossible to imagine a world where soybean prices rally. After falling to the lowest level since 2008, the market could be ripe for a “sell the rumor, buy the fact” trade. But accomplishing that turnaround would either be drawing to an inside straight or pulling a rabbit out of a hat. That is, either a low probability event or a feat of outright magic.

Wheat Outlook- In a world without noise, the wheat market would be ready to rally. Even in today’s climate filled with trade war fears, futures are showing the strength we’ve expected for a while. Whether this rally will last or fall victim to the same type of selling seen before is the make-or-break question, and likely not only for wheat. 

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. 

Fertilizer Outlook– Growers who didn’t move fast to secure fertilizer for 2019 likely will pay more for not seizing the day. Price increases rumbled through the market last week just as retailers started posting prices again 

Energy/Ethanol Outlook- For a day or two, at least, it looked like President Trump’s attempt to tweet energy prices lower might work. “REDUCE PRICING NOW!” was his all-caps Twitter message to OPEC on Independence Day. Prices indeed dropped on Thursday, aided by a surprise increase in crude oil supplies caused by stronger imports. But today’s reversal higher by crude suggests the President may need a stick bigger than social media to lower prices. While Saudi Arabia and Russia appear ready to increase production, it’s unclear whether that will be enough to offset ongoing losses from Venezuela and Libya, and reduced exports from Iran caused by renewed U.S. sanctions.