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Afternoon Market Recap for May 23, 2018

Weather, trade push grain prices higher.

Easing tensions with China plus dry forecasts was a recipe for gains today

Two market factors continue to award premiums to grain prices this week. The first is generally cooling trade tensions between the U.S. and China, which continues to give soybeans a lift. And relatively dry forecasts for the U.S. Plains are pushing wheat prices even higher. 

The latest seven-day precipitation outlook from NOAA shows an area of low pressure in the Gulf of Mexico that will likely deliver significant rainfall to the Southeast this weekend. Some parts of Nebraska and the Dakotas could also see 2” or more rainfall between now and May 30. Above-normal temperatures are likely across most of the central U.S. for the next several days.

It was a quiet Wednesday on Wall St., with the Dow adding just 2 points in early afternoon trading to reach 24,836. Crude oil and gasoline prices were down slightly Wednesday afternoon, with diesel taking small gains. The U.S. Dollar continued to firm.

 

Corn prices saw July futures climb to their highest levels since the summer of 2016, as wet weather in the northern Midwest is slowing planting progress there. Prices are also getting some spillover strength from soybeans, as U.S.-China trade optimism strengthens. July and September futures each added 3.75 cents to close at $4.0850 and $4.1725, respectively.

Corn basis bids remained unchanged across Midwestern ethanol plants and elevators but weakened slightly at several processors and river terminals Wednesday.

A meeting Thursday is likely among EPA, USDA and Department of Energy officials to address details regarding proposed changes to biofuel laws. One possible benefit to ethanol producers is if lawmakers allow the sale of E15 fuel year-round.

Private exporters reported to USDA the sale of 5.5 million bushels of corn for delivery to Saudi Arabia – half for the 2017/18 marketing, with the remaining half in 2018/19. 

Ahead of USDA’s Thursday export sales report, industry analysts expect corn exports for the week ending May 17 will total between 31.5 million and 53.1 million bushels.

Between January and April, Chinese corn imports totaled 37.0 million bushels. During the same time period, China imported an additional 37.1 million bushels of wheat and 91.7 million bushels of sorghum. 

Preliminary volume estimates were for 280,131 contracts, falling moderately behind Tuesday’s final count of 317,061.

 

Soybean prices were rewarded again Wednesday for trade optimism between the U.S. and China, closing at the highest levels in nearly three weeks. July futures rose 8.75 cents to $10.3925, while August futures gained 9 cents to $10.4325. 

Soybean basis bids remained steady across most Midwestern elevators and processors but firmed 2 to 4 cents at two Illinois river terminals. 

Ahead of USDA’s Thursday export sales report, industry analysts expect soybean exports for the week ending May 17 will total between zero and 29.4 million bushels. In a worst-case scenario, analysts would expect reductions of 7.3 million bushels for the 2017/18 marketing year would be offset by sales of approximately the same amount for 2018/19. 

China’s state-run Sinograin has asked about U.S. soybean prices for the first time in a month, a signal that Chinese purchases could soon resume.

The Brazilian government is hoping to end current trucker protests over high fuel costs (which have risen about 50% in less than a year) by considering reduced diesel taxes and other negotiations. 

Preliminary volume estimates were for 162,048 contracts, slipping slightly below Tuesday’s final count of 169,570.

 

Wheat prices rallied again Wednesday, with grain markets paying additional premiums for dry weather forecasts in parts of the U.S. Plains, Canada, Australia and Russia. July Chicago SRW prices rose 9.5 cents to $5.31, July Kansas City HRW prices gained 12.25 cents to $5.5275 (finishing above $5.50 for the first time since July 2017), and July MGEX spring wheat prices added 9 cents to $6.43. 

Ahead of USDA’s Thursday export sales report, industry analysts expect wheat exports for the week ending May 17 will total between zero and 18.4 million bushels. (If zero, analysts expect reductions of 3.7 million bushels in the 2017/18 marketing year to offset similar sales in 2018/19.)

Russia posted record-breaking crops last season but is unlikely to repeat that feat this coming year, with abnormally dry weather popping up in some production regions. Two Russian consultancies are expecting total grain production to drop between 6% and 11% this season.

India has raised its wheat import tax from 20% to 30%.

China sold nearly 6.3 million bushels of its state reserves of wheat at auction Wednesday, which was 8.3% of the total available for sale.

Pakistan has sold an additional 5.9 million bushels of wheat for export by the end of June. Total government-approved exports this year could reach 69.8 million bushels.

Jordan made no purchases in its tender for 4.4 million bushels of milling wheat but expects to issue a new tender soon.

Preliminary volume estimates were reached 160,409 CBOT contracts, falling 20% below Tuesday’s final count of 201,499.

Corn Outlook

Soybean Outlook

Wheat Outlook

 

 

 

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