Missed some market news this week? Check out our grain market week in review to catch up.

Morning audio

Grain markets traded mixed overnight in fairly quiet trade, with questions about weather and exports dominating the discussion. Basis popped in exports markets last week thanks to strong shipments of corn and soybeans, while wheat found support from wet conditions hampering seeding in Kansas. A shift warmer and drier over the next 10 days could get farmers back into the field before precipitation returns.

After months of frustration over Chinese tariffs on soybeans, growers got a little good news about trade overnight. U.S. Treasury Secretary Mnuchin and China’s Vice Premier Liu discussed trade on Friday over the phone. The two could sit down for talks ahead of an expected meeting between President Trump and Chinese President Xi at the G-20 summit at the end of the month. The news gave soybeans a lift overnight, though wheat prices gave back some of Monday’s gains after a strong short-covering rally.

Grain futures are starting to gain some traction today, posting modest gains in what’s been a fairly quiet overnight session so far. Corn, soybeans and wheat battled support levels on price charts Tuesday, with the market attracting a little buying today after USDA Crop Progress report showed slower than expected harvest and winter wheat seeding. 

A double-digit rally in soybeans overnight spread cheer to corn and wheat markets as well. With no new developments breaking on the trade front, the rally in beans appears to be chart-driven short covering featuring buying from funds heading to the sidelines on bearish bets. January soybean futures rallied up to long-term resistance levels overnight, taking the market to a potential turning point. Higher trade in corn and wheat came despite gains by the dollar, which rose on turmoil associated with Britain’s exit from the European Union.

Attempts to rally the grain market overnight fell flat as trading shifted from Asia to Europe, reflecting an uncertain mood headed into the weekend. Conflicting news on trade talks with China continue to roil stock markets around the world with the Brexit drama testing the government of British Prime Minister Theresa May. 

Exports

Grain export inspections posted mostly positive results for the week ending Nov. 8, according to the latest round of USDA data. That’s despite continued suppressed soybean sales to China, notes Farm Futures senior grain market analyst Bryce Knorr.

Export sales were reported on three days this week. Unknown picked up 19.3 million bushels soybeans and Mexico purchased 8.3 million bushels of corn. 

The latest export report from USDA, covering sales for the week ending Nov. 8, showed a mixed bag of results, as corn and soybean sales moved ahead of analyst expectations, while wheat sales failed to match a relatively healthy round of exports from the prior week. 

Crop progress

Snow is currently covering large swaths of the Midwest and Plains, but the 2018 corn and soybean harvests march onward, according to the latest USDA crop progress report, out Tuesday afternoon. For the week ending Nov. 11, corn harvest reached 84% completion, up from 76% the week prior but behind analyst expectations of 87%. This year’s progress remains slightly ahead of 2017’s pace of 81% but slightly behind the five-year average of 87%. Soybean harvest progress reached 88% completion last week, up from 83% the prior week and behind analyst expectations of 91%. Progress also remains behind 2017’s pace and the five-year average, both at 93%. 

Feedback from the Field

The average corn yield reported by farmers to Feedback From The Field for October and November, when most of the crop was harvested, was 176.6 bpa. Farmers put average October/November soybean yields at 52.2 bushels per acre, suggesting little change from USDA in January. The wild card for both crops could be harvested acreage, after a harvest season that’s seen heavy rains followed by snow in some areas. Growers hopes for bin-busting yields were reined in from one end of the Corn Belt to the other. 

Friday’s market news

Grain futures are steady to a little lower after a back-and-forth overnight session left prices mostly drifting. With conflicting statements on tariff discussions with China coming from Trump administration officials and Brexit turning into a cliffhanger, markets are going their separate ways.

Some technical maneuvering left grain prices narrowly mixed on Friday, with corn and spring wheat futures down moderately, while soybean and winter wheat futures picked up modest gains. Soybean futures also cashed in on some fresh optimism about U.S.-China trade negotiations today. 

CFTC

Big speculators in the commodity market are often accused of having a herd mentality. That certainly was the case this week. These hedge funds sold just about everything during a very nervous week of trading. Here’s what funds were up to through Tuesday, November 13, when the CFTC collected data for its latest Commitment of Traders.

Outlooks

Basis Outlook- Basis in the cash market for corn and soybeans continued to strengthen last week, getting support from a triple-play of factors. 

Soybean Outlook- Forecasting grain prices is relatively easy in normal times. Most models assume the future will be like the past. When it isn’t, weather usually is the blame. Bad weather cuts production, increasing prices. More recently, benign conditions six years in a row caused inevitable building of supplies, crushing prices lower. But predictions are hard, if not nearly impossible when assumptions about the future turn out to be anybody’s guess.

Corn Outlook- News in the corn market hasn’t been all bad lately. If anything, fundamentals of supply and demand look more promising. But that attitude is hardly reflected on price charts, which are on the verge of breaking down after nearly breaking out to the upside only last week.

Energy/Ethanol Outlook- After spending most of the last three-and-a-half years moving higher, crude oil prices finally came back to earth, losing nearly 30% of their value in little more than a month. That decline may or may not be over, but it’s taking a breather as the market enters a crucial period.

Fertilizer Outlook: When India talks in the fertilizer market, the world listens. The large importer of urea and other products stoked the fall rally that took prices to three-year highs. But prices could be headed in the other direction following news today of lower prices and plentiful offers from suppliers in India’s latest big purchase.

Wheat Outlook- I advised growers holding 2018 winter wheat inventory to store much of it hedged as far out as possible, to take advantage of strong carries created by the variable storage rate system used at the CME Group. The VSR increases storage costs if carries on deliverable wheat widen enough to encourage the type of hedging I recommended when December-May spreads rose to seven and eight cents a bushel a month. The idea behind the VSR is to get that wheat into strong hands, forcing end users to bid up the basis, and in theory getting cash and futures closer to convergence at delivery.

Financial Outlook– Interest rates are rising, that much is clear. But how far and how fast the cost of money goes up is a bit more uncertain headed into the next policy meeting at the Federal Reserve.