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Afternoon Market Recap for October 18, 2017

Grain prices take small step back.

Favorable weather, weak exports and strong dollar all in play.

A combination of several factors weighed on the grain markets Wednesday, slightly pushing down prices. Wheat saw the biggest losses, thanks to continued sluggish export sales. Corn and soybean prices lost just a sliver of their value, meantime – as little as 0.13% in some cases.

Rain is back in the forecast this weekend for much of the Midwest, but the region should have plenty of cooperative harvest weather at least through Friday. Temperatures will remain above normal for the next several days, with areas in the upper Midwest hitting daytime highs in the upper 70s and even low 80s through Friday. The weekend will bring relatively cooler weather along with more precipitation, however. 

On Wall Street, tech stocks – with IBM leading the charge – helped push the Dow past 23,000 points as it surged more than 150 points by midafternoon trading. For much of 2017, stocks have traded higher over stable economic growth and continued hope of tax reform. The Federal Reserve, in its latest updates about the U.S. economy, was encouraged by economic growth in September, despite dealing with two major hurricanes, Harvey and Irma. Still, the Fed is cautiously eyeing some signs of inflation. In other markets, energy prices were mixed (crude oil and gasoline were higher, but diesel prices were lower), and the U.S. Dollar was slightly weaker in midafternoon trading.

 

Corn prices were lower for a third straight day, as cooperative fall weather could jumpstart the sluggish 2017 corn harvest. December prices dropped 1.5 cents to close at $3.4850, and March 2018 prices also fell 1.5 cents to close at $3.6225. 

Ahead of Thursday’s USDA weekly export sales report, trade estimates for corn range between 31.5 million bushels and 39.4 million bushels. A week ago, corn exports came in unexpectedly high, at 63.3 million bushels.

Ethanol prices slipped this week, with average corn belt ethanol plant margins also tightening to near zero. Current ethanol prices are hovering around $1.41 and have failed to top $1.60 in 2017. Meanwhile, will the EPA lower 2018 biodiesel blending requirements, as it indicated in September? It’s too early to tell at this time, although pro-biodiesel pressure seems to be mounting, with Iowa Senator Chuck Grassley telling EPA administrator that supporting biofuels is good policy and “also what President Trump promised.” Trump met with Iowa governor Kim Reynolds on Wednesday about the same topic. The call was described by a Reynolds spokeswoman as “very positive and productive.” 

What will corn prices look like between now and 2021? Two University of Illinois economists compiled projections from several sources and posted their findings in farmdocdaily. For 2018, each source suggests corn prices in the mid-$3 range. USDA offers the lowest estimate, at $3.35 per bushel, with CME Futures delivering a more bullish projection of $3.76 per bushel. Then, for 2019, corn price estimates inch ahead to the mid-to-high $3 range. Once again, USDA offers the lowest estimate, at $3.35 per bushel, and CME Futures comes in on the high end of the range, at $3.89 per bushel. Further out, corn price estimates range between $3.45 and $3.96 per bushel in 2020, and between $3.50 and $3.93 per bushel in 2021. The economists note that weather wildcards could boost prices well past these projections but do not recommend budgeting based on as-yet-unpredictable events. 

This week, some 21,930 carloads of grain were shipped on U.S. railways, down 19.7% from this time a year ago. Cumulative year-to-date grain shipped by rail is up to 906,360 carloads, down slightly (-0.6%) from 2016 year-to-date.

Preliminary volume estimates were lower than Tuesday’s totals, with 205,277 contracts.

 

Soybean prices found enough harvest pressure and technical selling to slip slightly in Wednesday trading. November futures fell 0.5 cents to close at $9.8425, while March 2018 soybeans dropped just a quarter-penny, closing at $9.95. 

Ahead of Thursday’s USDA weekly export sales report, trade estimates for soybeans ranged between 47.8 million bushels and 62.5 million bushels. If top-end estimates are correct, that puts the pace even with a week ago, when soybean export totals hit 62.4 million bushels. Soymeal and soyoil exports are expected to surpass totals from a week ago.

According to several sources (USDA, CBO, FAPRI, etc.), soybean price projections will fall within a fairly narrow range between now and 2021. For 2018, that includes a range of guesses between $9.40 and $9.82 per bushel. For 2019, the range tightens slightly to $9.40 and $9.76 per bushel. Further out, soybean price estimates range between $9.45 and $9.85 per bushel in 2020, and between $9.45 and $9.87 in 2021. 

A $20 million port hub in southern Brazil, which will be able to move more than 31 bushels of grain per year, has been delayed in the shadow of various financial setbacks from the Chinese commodity trader funding it 

Preliminary volume estimates were for 177,382 contracts, lower than Tuesday’s totals of around 196,000.

 

Wheat prices moved approximately 1% lower Wednesday, belabored by a slow export sales pace and ongoing pressure from large global stocks. December Chicago SRW futures were down 4.75 cents to close at $4.30, while December Kansas City HRW futures fell 5.25 cents to close at $4.28. December MGEX Spring Wheat prices were down a penny, at $6.1025. 

Ahead of Thursday’s USDA weekly export sales report, trade estimates for wheat ranged between 9.2 million bushels and 16.5 million bushels. That would be moderately higher than last week’s total of 6.4 million bushels of old crop sales.

Algeria bought 24.2 million bushels of wheat, mostly from France, in a tender that closed Tuesday. Algeria is one of the world’s top wheat importers, and the volume was moderately higher than its usual month imports of around 16.5 million bushels. 

In Egypt, U.S. Wheat Associates expects to close its offices there by December 1. Between the 2012/13 marketing year and 2016/17, Egypt fell from the No. 5 market overall for U.S. wheat down to No. 37. Egypt has turned to Black Sea suppliers in recent years, who have relatively lower freight costs. U.S. Wheat Associates says high-value markets in Latin America and Asia will present “our best ability to sell U.S. wheat.”

Preliminary volume estimates were for 67,317 CBOT contracts, down slightly from Tuesday’s total of 74,408.

More from Farm Futures:

Corn Outlook
Soybean Outlook
Wheat Outlook

 

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