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Grain markets finish week mostly higher

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Derecho, export sales influence grain markets this week.

Missed some grain market news this week? Here's what you need to catch you up.

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I took my own crop tour this past weekend, driving through parts of Central Iowa.  “Shock” is probably the best way to describe seeing the fields damaged by the Derecho storm. Central and Eastern Iowa were garden spots going into the month of August, helping to make up for the drought damage accumulating in Western Iowa. That is why this storm is so frustrating, because for much of these areas impacted by the storm, farmers were expecting at or above trendline yields before the storm hit.

When it comes to grain marketing, sometimes a bird in the hand is worth two in the bush. That was particularly true for the flood-ravaged 2019 corn and soybean crops. Selling off the combine– the bird in hand – proved more profitable than trying to add to gains by using storage or most other post-harvest marketing strategies.

Thanks to a government cheese buying program in the aftermath of COVID-19, milk futures enjoyed an astonishing $10 price rally from mid-April until mid-July. Front month Class III futures prices tested $25.40 contract highs not seen since 2014. That triumphant rally has stopped as the government support mechanisms are on pause for the moment. Because of this, lower cheese demand has become an issue, and we’ve seen a large amount of inventory flood the market over the past few weeks. The block/barrel average now stands at just $1.630/lb. after trading near $2.70/lb. about a month ago.

The USDA report released earlier this month was the first time we’ve seen an August report not include observations from the field. The data consisted mainly of producer surveys along with some satellite imagery, but don’t forget these reports are reflecting the situation as of the first of the month-- in this case, August 1st. Many came into the report, including myself, expecting big yields. Fast-forward three weeks and my how things have changed. While many outside of the state of Iowa had enough moisture to get by coming into the month, a good chunk of the corn belt has been dry for the bulk of August.

Crops

Storms last week brought hurricane-force winds through the Midwest in an unusual system called a “derecho,” and analysts expected crop quality to take a spill because of it. Corn quality saw a two-point decline, with 69% of the crop now rated in good-to-excellent condition. Soybean crop quality also saw a two-point drop last week, with 72% of the crop rated in good-to-excellent condition. USDA found improving spring wheat crop conditions, with 70% of the crop rated good-to-excellent.

Grain prices have gone through quite the balancing act in August. Prices were on a downward trend until last Monday, when a deadly round of Midwestern storms tore through millions of acres of farmland, putting the previous consensus of record or near-record crops in doubt. Crop quality has suffered, but some feel as though USDA hasn’t docked crop conditions enough. Listen to the latest Midweek Markets podcast for August 19, 2020:

Exports

The latest batch of grain export inspection data from USDA, covering the week through August 13, held solid – but not spectacular – numbers for corn, soybeans and wheat. All three grains saw a small week-over-week decline but stayed on the higher end of analyst expectations.

USDA’s latest weekly export sales report, covering the week through August 13, mainly met trade expectations. That included a big batch of new crop soybean sales, plus a solid round of corn and wheat sales. Old crop sales for both corn and soybeans dwindled as the 2019/20 marketing year draws to a close.

Export sales were reported on four days this week. China and unknown destinations were the purchasers. Unknown took wheat and soybeans. China took corn and soybeans. See the details in here. Data goes back a year so you can compare sales at this time last year.

Recaps

Corn prices inched up this morning as concerns about crop damages in Iowa rattled the markets overnight. Concerns about trade relations between the U.S. and China sent soybean futures falling this morning, though dry weather concerns helped limit losses. Increasingly dry conditions in Argentina weighed global wheat supplies slightly lower this morning despite improving prospects for a larger Russian crop. Gains were capped by a rising dollar as the ICE Dollar Index rose 0.49% to $93.235.

Grain prices were mixed but mostly higher to close out the week. Winter wheat prices continue to recover, climbing to three-week highs on overall export opti-mism. Corn prices also firmed moderately today, anchored by a large sale to China announced this morning. But rains returning to the midrange forecasts were det-rimental to soybean prices, which slid about 0.3% lower in a somewhat choppy session. Two new large sales, destined for China and unknown destinations, limited losses.

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